While Knowlton Thomas reports that LivingSocial bled losses of over half a billion, I happened to take in Albert S. Bitton's Group Buying in Canada session at DX3 last week who is helping reduce the negative spin towards the group deal industry that comes from the major original players GroupOn and LivingSocial enduring large losses.
Bitton, who helps represent the group deal industry in Canada says that the daily deal market is worth $350 million dollars and that there are over 150 group or daily deal sites with 50 aggregators. It's worth $2 billion in the US currently and is expected to grow to $4.2 billion by 2015 with over 400 sites there.
While we covered the major players in the group deal market last fall, Bitton says 50% of merchants turn a profit, 65-80% say it's successful and 20 to 25% of customers repeat.
Here are some more great statistics and points about the group deal industry in Canada:
• The top categories are travel, spa and beauty, restaurants, outdoor activities, and products.
• Group Deals are good if there are high fixed costs and low variable costs, have expiring inventory, have no online presence and if it's for promotion not future growth.
• It's not good to run a group deal if the goods are low margin or they are one time higher priced goods.
• If you're looking for cash flow, it might be a good idea to run a group deal as you usually get paid within a couple business days.
• Don't lose the hyperlocal model of group deal and don't offer low quality imports from countries like China (You'll never find that kind of product on FabFind).
• Do not be literal on 50% off a product .
• Remove friction, paper needs to go, and so does reward card linking.
• Teach merchants as there's too much selling and not enough explaining like Google AdWords.
• Have great customer service.
• Group Deal sites have a very flexible return policy versus traditional retail like Future Shop where you can't return a laptop after 2 to 3 weeks but you can return a group deal and get credit back with a three month return policy in some cases.
• Up to 80% of group deal customers are women. So if you're selling products, you might also want to include a "Pin It" social button from rapidly rising social networking site Pinterest which is also 80% women and has astonishingly become the number one source of retailer referral traffic.
• Finally, do not sell too much- cap the deal if you can and the average take home is 35 to 40% and 20 to 30% on low margin goods.