TELSYTE Australian Online Group Buying Merchant Study 2011A research report on the usage, attitudes and intentions of group buying merchants in Australia

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22%GROUP BUYING IS THE FIRST FORM OF MASS MARKETING THAT 22% OF MERCHANTS HAVE EVER USED

Businesses ride booming $400M group buying marketAustralian businesses are increasingly using group buying as a way to attract customers. The industry is growing 72% every quarter, and will be worth about $400 million by the end of the year.

With some 4,000 published deals and 1 million vouchers sold every month from 70 group buying sites across Australia, the uptake of group buying amongst merchants has never been stronger, but as many 90% of local business are yet to try the new form of online marketing and sales.

Businesses which have run group buying deals are generally satisfied with 85% saying it was successful. The top reason for merchants to run a group buying campaign was to increase overall customers, closely followed by an increased awareness of their business. As an added incentive, more than one-third of businesses that use group buying say it can be used to generate more sales during quiet periods.

Telsyte’s Australian Online Group Buying Merchant Study 2011 is a representative survey of Australian merchants. Telsyte has gathered insights and statistics on the attitudes, usage, satisfaction and intentions of merchants towards group buying.

94%OF MERCHANTS

ARE SATISFIED WITH

THEIR GROUP BUYING

PROMOTIONS

90%OF THE MARKET HAS YET TO TRY GROUP BUYING, PRESENTING AN OPPORTUNITY FOR THE INDUSTRY

85%OF MERCHANTS WILL

MOST LIKELY RUN

ANOTHER GROUP

BUYING CAMPAIGN

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6%POOR 8%

MODERATE

19%GOOD

28%VERY GOOD

39%EXCELLENT

How satisfied are merchants with group buying?

KEY POINTS › Merchants were asked to rate their overall satisfaction

with their group buying campaign.

› Only 6% of merchants rated their overall satisfaction as poor. This is an exceptional performance when compared to other forms of marketing.

› Over two-thirds of merchants regarded their group buying experience as either very good or excellent.

94%OF MERCHANTS

ARE SATISFIED WITH THEIR GROUP BUYING

PROMOTIONS

Source: Telsyte Australian Online Group Buying Merchant Study 2011Q: Rate your overall satisfaction with running your group buying campaign – Base: 359 respondents

3Q: Would you like to run another group buying campaign in the future? – Base: 359 respondents Source: Telsyte Australian Online Group Buying Merchant Study 2011

› 85% of businesses that have engaged in a group buying promotion indicated that they would likely run another group buying campaign in the future.

› Many merchants that expressed interest in running another group buying campaign have already organised another deal and are waiting for confirmation from the group buying site to run it.

› It is also important to note that a few merchants have indicated that they might run another deal, but it might not necessarily be with the same group buying site.

› Many merchants that did not want to run another group buying campaign stated the main reason why they are not interested in another deal is because of trading terms.

› The merchants that were tentative about running more group buying deals said that if they were to run another deal, it would have to be carefully planned out, including putting restrictions on vouchers, capping the amount of vouchers sold or limiting availability of time when deals can be booked in.

KEY FINDINGS

How many merchants would run another group buying campaign?

85%OF MERCHANTS WILL

MOST LIKELY RUN ANOTHER GROUP

BUYING CAMPAIGN

85%MOST LIKELY

15%NO

4Source: Telsyte estimates using ABS report number 1321.0 - Small Business in Australia, 2001 and Telsyte Australian Online Group Buying Database 2010-2011

What percentage of merchants in Australia have run a group buying campaign?

13% SYDNEY

% PENETRATION PER CITY

7% ADELAIDE

10% BRISBANE & GOLD COAST

8% MELBOURNE

5% PERTH

CITY

NO. OF SMALL BUSINESS THAT

HAVE RUN DEALS

ESTIMATED NO. OF BUSINESSES THAT COULD POTENTIALLY RUN

A GB CAMPAIGN PENETRATION

SYDNEY 2,624 20,850 13%

MELBOURNE 1,408 17,980 8%

BRISBANE & GOLD COAST 1,283 12,995 10%

NATIONAL 1,036

PERTH 780 14,845 5%

ADELAIDE 683 9,535 7%

GRAND TOTAL 7,814 76,205 10%

90%OF THE MARKET HAS YET TO TRY GROUP

BUYING, PRESENTING AN OPPORTUNITY FOR THE

INDUSTRY

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Why are merchants running group buying deals?

Source: Telsyte Australian Online Group Buying Merchant Study 2011Q: What goals did you have when running your group buying promotion? – Base: 359 respondents

INCREASING OVERALL CUSTOMER NUMBERS AND AWARENESS ARE THE TOP REASONS TO RUN A GROUP BUYING

CAMPAIGN

KEY POINTS › The top reason for merchants to run a group buying

campaign is to increase overall customer numbers (65%).

› Merchants are not focussed on goals that are highly strategic and require planning such as up-selling and cross-selling.

› Merchants have a mixed preference to group buying goals (sales focus, marketing focus or a mix of both).

INCREASE OVERALL CUSTOMERS

INCREASED AWARENESS OF BUSINESS

MORE BUSINESS DURING QUIET TIMES

INCREASED REVENUES

ACQUIRE NEW CUSTOMERS

GENERATE REPEAT CUSTOMERS

INCREASE WORD OF MOUTH

INCREASE FOOT TRAFFIC

SPEND MORE (UP-SELL)

SPEND MORE (CROSS-SELL)

MEASURE PERFORMANCE OF MARKETING

% OF RESPONDENTS 0 10 20 30 40 50 60 70

6Q: Which of these goals were you able to achieve? (multiple allowed) – Base: 359 respondents

What do merchants get out of group buying?

NO. MERCHANTS WHO SET THE GOAL

GOALS % ACHIEVED THE GOAL

ACQUIRE NEW CUSTOMERS 99 98%

INCREASE FOOT TRAFFIC 75 87%

INCREASE OVERALL CUSTOMERS 233 83%

SPEND MORE (CROSS-SELL) 60 70%

INCREASE REVENUES 108 69%

INCREASED AWARENESS OF BUSINESS 192 63%

SPEND MORE (UP-SELL) 72 60%

MORE BUSINESS DURING QUIET TIMES 123 53%

REPEAT CUSTOMERS 83 40%

INCREASE WORD OF MOUTH 80 39%

MORE THAN TWO-THIRDS OF MERCHANTS ACQUIRED NEW

CUSTOMERS, INCREASED FOOT TRAFFIC, INCREASED OVERALL

CUSTOMERS

KEY POINTS › Merchants that seek to achieve new customers by and large

achieved their goals (almost entirely achieved this goal - 98%). Group buying almost always brings in new customers.

› More than two-thirds of merchants acquired new customers, increased foot traffic and increased overall customers.

› The industry needs to better help merchants set the right goals for their particular circumstance. Critical to this is follow-up calls and post deal services.

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78%USED OTHER MARKETING

CHANNELS BEFORE

22%NEVER USED ANY OTHER MARKETING CHANNELS (EXCL. DIRECTORIES)

What other marketing channels do merchants use?

KEY POINTS › Merchants were asked if they had ever used any other forms

of marketing (excluding directories) apart from group buying.

› Group buying is the first form of marketing that 22% of merchants ever used.

› The industry needs to recognise that there is a significant number of merchants that are inexperienced when it comes to running marketing campaigns. This has probably impacted the overall success rates of merchants running group buying campaigns and might have contributed to negative coverage in the past 12 months. Group buying sites need to reconsider ways to service these types of merchants. Providing more time to educate, clarify and follow up on goals.

22%GROUP BUYING IS THE FIRST FORM OF MASS MARKETING THAT 22% OF MERCHANTS HAVE

EVER USED

Source: Telsyte Australian Online Group Buying Merchant Study 2011Q: What other forms of marketing other than group buying have you used to promote your business? (multiple allowed) – Base: 359 respondents

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28%USED OTHER MARKETING

CHANNELS BEFORE

KEY POINTS › Merchants were asked if they saw any value

in combining other forms of marketing with group buying.

› 79% of merchants see value in combining group buying with other forms of marketing thus creating an opportunity for group buying sites to move into and combine with other marketing channels.

Do merchants see value in combining group buying with other marketing channels?

OFFLINE MARKETING CONTINUES TO BE AN IMPORTANT MARKETING CHANNEL FOR MERCHANTS

Source: Telsyte Australian Online Group Buying Merchant Study 2011Q: Do you see any value in combining group buying with any other forms of marketing? – Base: 359 respondents

KEY POINTS › 54% of merchants see value in offline

marketing – more specifically the use of flyers.

› Group buying sites can develop, or connect with merchants social media presence to further enhance a group buying deal.

OF MERCHANTS BELIEVE GROUP BUYING CAN BE FURTHER ENHANCED WITH OTHER MARKETING CHANNELS

79%

79%YES

21%NO

54%OFFLINE MARKETING FLYERS

35%ONLINE SOCIAL MARKETING (FACEBOOK & TWITTER)

11%ONLINE TRADITIONAL MARKETING (EDITORIAL & BANNER ADS)

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KEY POINTS › Sales support and customer service are the most important

factors for merchants when choosing to run a group buying promotion. Merchants highly value the relationships they have with group buying sites and the best performing sites are likely to have the most engaging sales agents.

› Ability to have input into the design and text of a deal ranks highly. Merchants want a level of control over the messaging that gets published about them on group buying sites.

What are the most important factors when choosing to run a group buying campaign?

SALES SUPPORT AND CUSTOMER

SERVICE ARE MOST IMPORTANT FACTORS

FOR MERCHANTS WHEN CHOOSING TO

RUN A GROUP BUYING PROMOTION

Q: Rate the following importance factors when choosing to run a group buying promotion on a scale of 1 to 5. 1: Not important, 2: Moderately important, 3: Important, 4: Very important and 5: Critical. – Base: 359 respondents

Source: Telsyte Australian Online Group Buying Merchant Study 2011

SALES SUPPORT & CUSTOMER SERVICES

CLEARER & EASIER PAYMENT TERMS

LOWER COMMISSIONS

INPUT INTO DESIGN AND DEAL TEXT

NUMBER OF SUBSCRIBERS ON THE SITE

ABILITY TO TARGET A LOCAL AREA

PAY NOTHING UP FRONT

4.06

4.01

4.01

3.59

3.57

3.54

3.44

1 2 3 4 5CRITIC

ALVER

Y IMPORTAN

T

IMPORTANT

MODERATELY I

MPORTANT

NOT IMPORTAN

T

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Three types of merchants have emerged in the past 12 months

85%

15%

SUCCESSFUL

NEW USERS OF GROUP BUYING

UNSUCCESSFUL/TRIAL MERCHANTS

Seek better deal structures

Using different marketing channels

Running deals across various sites

Varying levels of loyalty to sites

Profitability ramifications

% OF MERCHANTS MERCHANT TYPE RELATIONSHIP WITH THE GROUP BUYING INDUSTRY

1

2

3

THE MARKET BEING RELATIVELY YOUNG,

3 TYPES OF MERCHANT OUTCOMES HAVE

EMERGED

Q: Would you like to run another group buying campaign in the future? – Base: 359 respondents Source: Telsyte Australian Online Group Buying Merchant Study 2011

Nearly 4000 deals published and 1 million vouchers sold every month

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41

1,000,000

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

MAY

201

0

JUN

2010

JUL 2

010

AUG

2010

SEP

2010

OCT 2

010

NOV

2010

DEC

2010

JAN

2011

FEB

2011

MAR

201

1

APR

2011

MAY

201

1

JUN

2011

18,814 42,840

79

67,005

145

105,596

242

171,830

360

224,590

407

353,587

526

464,568

837

394,275

1,488

513,658

1,912

619,915

2,353

716,775

2,896

911,700

3,664

900,310

3,826

PUBLISHED DEALSVOUCHERS SOLD

Source: Telsyte Australian Online Group Buying Q2 Update

Methodology and Acknowledgments

ABOUT TELSYTETelsyte was established as an independent telecoms research company in 1997. Since then, we have become a leading telecoms, media and ICT analyst firm. We take pride in providing accurate, reliable and actionable market insights and advisory services. Telsyte is a business unit of a UXC Limited (ASX:UXC).

Telsyte has developed the most comprehensive database of group buying deals in Australia, with over 22,000 deals captured and growing daily.

Data is captured for all of existing and emerging sites and aggregated to form a view on the market. Information is available by Site, City, Location, Category, Price, Discount, National vs Local, Vouchers sold, etc. These data points produce a time series, derived ratios and other statistics available to clients. Telsyte has been auditing site data through a series of interviews with merchants, confirming deals closed and capturing other information such as average breakage rates and margins. Information and insights are reported Quarterly (Apr, July, Oct) and a full year (retrospective) report is delivered in February to clients

ABOUT THE AUTHORSam Yip is Telsyte’s Senior Research Manager responsible for ICT and Digital Marketing programs. Sam is an experienced industry analyst having held senior positions with Frost & Sullivan and UXC consulting group.

His research and insights have been quoted in major publications such as the AFR, SMH, B&T, BRW, Sky News, Channel 7, Australian IT, ZDnet, Computerworld and other business publications.

Sam is an accomplished speaker and presenter having spoken at business and industry conferences in Australia and Asia Pac. Prior to Telsyte, Sam was a Marketing Manager for Sony Pictures Home Entertainment Australia & New Zealand where he headed up trade and customer marketing across retail channels.

METHODOLOGYThe Telsyte Australian Online Group Buying Merchant Study is based on a survey of 359 Merchants conducted over 4 weeks in July and August 2011.

The sample was stratified to the Australian group buying market. The survey had a confidence interval of +/- 5.06 with a confidence level of 95%. The survey was conducted by Telsyte analyst teams and adheres to industry best practice.

The survey took 6 to 8 minutes to complete. All care was taken to remove invalid ratings and importance responses based on detecting a single response across all factors. Interviews were conducted via telephone. Telsyte acknowledges and is comfortable with any bias’ that may have arisen as a result of telephone survey. All care has been taken and after comparing key findings to industry statistics and other industry bodies Telsyte is confident with the sample representativeness.

The Telsyte Australian Online Group Buying Merchant study is a multi-client closed report for Spreets, Scoopon, Living Social / Jump On It, Ouffer, and Our Deal. It was executed and completed independent of any vendor or client organisation. Factors were asked in random order by the survey teams to minimise skew to any particular result. Alternative wording for ‘up sell and cross sell’ was used if the merchant didn't understand the terms. (“Getting people to buy other things, and getting people to spend more than the voucher amount”).

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