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‘I told you so’ – big player in group buying is to be sold off

August 16, 2011

In one of the clearest sign of congestion in the space, The Financial Review has declared that Nine Entertainment Group is intending to sell it’s group buying discount website for $60 Million.

What congestion, you ask? I’ve been saying it for a while now – SmartCompany reported last week that while  Groupon worldwide has more than 115 million subscribers on its database, there are now 51 different sites competing for the Aussie dollar in the group buying discount arena. 51!

So if Cudo’s 15% market share is still not enough for Nine to see this as a viable prospect, what is the future of group buying websites?

From an enterprise perspective, the lack of real and ongoing customer relationship gained from these types of deals is key. In an era of social commerce, retailers and even small businesses are quickly realising the value of capturing and owning various pieces of data about their customers – this in turn discourages the discount mentality (ie people only buy when things are heavily discounted), and instead fosters customer loyalty and a  genuine consumer relationships.

Word of mouth marketing is one thing – but with group buying websites, people only endorse certain offers to their friends because there’s a direct benefit to themselves (ie the deal is only activated when enough people jump on it). Thus, the selfish nature of endorsements negates the true sense of value a business would normally derive from this.

Getting a customer interested in your product because ‘someone just like you’  is also interested is an absolute advantage in this space. Just because I’m married to my wife doesn’t mean that I’ll also be interested in spa treatments and fancy haircuts for example. It’s for this reason that the social graph of Facebook is also flawed from a social commerce perspective. Why would I use this graph to buy things personally recommended by my grandmother / guy I went to school with 15 years ago?

In this space (Facebook etc), where I connect with a broad range of family, friends, acquaintances, colleagues and so on, the personal connections do not imply that I have interest in the same topics, passions, interests and shopping as they do.

So -with a flooded market of group buying discount websites, one of the big players finally gives way, but I am convinced that the existing social networks won’t be the winners out of the social commerce battle.

Deliriant Isti Romani – These Romans are Crazy!

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