Australian Daily Deals Insiders See Daily Deals Pizazz Fading

Has the shiny new-ness worn off the daily deal industry? According to former Cudo Chief Executive Billy Tucker, yes.

Daily Deal Media received a press release about a new report form Telsyte, covered by Preetam Kaushik, which stated that Australian group buying revenue hit almost $500 million in 2011, is slated to top $600 million in 2012, and will most likely reach $1 billion by 2015.

In an interview with SmartCompany, Tucker talks about how Groupon’s IPO “opened the hood” as to how the industry really works.  He also points out LivingSocial local head Colin Fabig, who confirmed to the Australian Financial Review the company spent $10 million on marketing in the second half of last year.

“We’re seeing a lot of crazy in the market. We’re seeing the international guys spending a ton of money, and there’s been this willingness to acquire customers or to sell stuff with a bit of a disregard for the brand.”

An important point made, was how Tucker believes brands get watered down by selling products across a wide variety of categories.

“…In that sense, I feel like the gloss has come off. I think before the Groupon IPO people saw the industry as very grand. But it’s a tough industry, like retail, and you have to start from scratch every day. The explosion of group buying sites caused many to believe it was a very profitable business. But now, people are much more aware and less willing to invest such significant marketing dollars.”

Under Pressure?

Tucker suggests major sites may not be as liquid as they let on.

“If what I understand about staff numbers is anything to go by, these sites may be losing significant money.”

According to the Telsyte report, the best performing category was physical products, which now account for 30% of the market. Sam Yip, Telsyte senior research manager, this represents a shift in the core of the daily deals business.

“This means group buying industries are now competing against other parts of the commerce world, and general online shopping environments. As the industry grows, it’s going to be much harder to compete and gain customers. Especially in 2012, as we believe the group buying sites will maintain a lot of the customers gained through 2011 due to loyalty.”

Gabby Leibovich is the Chief Executive of Australia’s Scoopon, agrees that going forward, the competition of daily deal sites selling physical products, will present challenges.

“Everyone is selling products and fewer services. But at the end of the day, we’ve already been sourcing great deals through Catch of the Day and that’s how we supply through the Scoopon site. The other side of the industry is really struggling with that. They rely on third party suppliers, many of which are based overseas, and shipping takes quite a long time.”

On a side note, Leibovich has also been known to be critical of the American daily deal giants, saying that they’re “just stupid kids with a rich parent running the business“. Wow.

Source: SmartCompany