By definition, a group buying site or deal site is one that offers highly discounted deals by attracting a minimum purchase threshold.

Last year, we saw a flurry of excitement over these types of sites, but this interest appears to have waned in recent months along with a decline in consumer confidence levels.

There are signs of rationalization, where in China, its 6000 group buying sites were reduced to almost half by February this year. However, specialized sites offering unique deals are on the rise along with an increased focus on services and travel.

So is it a fad or the real deal?

In Australia, audience and traffic numbers to these sites, as well as total gross sales, are actually still on the rise. Annual turnover for group buying was $498m in 2011 and is forecast to grow to $1b in 2016.

Group buying was the main driver behind a 64 per cent year-on-year increase in online shopping spends in 2011. On average, 5000 deals are published with one million vouchers sold each month. Here, we have over 170 sites including existing ecommerce sites like eBay and DealDirect as well as pure "deal sites" like Star Deals, Scoopon, Yahoo!7Spreets and Cudo. Larger sites with a travel focus include getawaylounge.com.au, ourdeal. com.au and wego.com.au (Dailydeals).

The majority of market revenue is generated by the top eight group buying sites, with the larger sites attracting close to 900,000 unique audiences each month.

Purchase models of these sites range from group buying, daily deals to consignment shopping.

Travel deals currently account for over 24 per cent of total revenue in the group buying/deals market.

This is expected to increase as the trend continues to shift from generic deals into specialized deals.

Australian travel deal sites consist largely of accommodation packages and this is expected to grow through increased merchant participation and maturing of the sub-category.

A recent study showed 12 per cent participation came from branded accommodation chains in the US, which contrasted with Australia, where the majority of listings were from independents. Group buying sites can be a clever way to manage inventory and yield as it offers the ability to generate cash flow by securing payment upfront and short sell excess inventory.

While this could represent an ideal opportunity for travel service providers some factors should be taken into consideration such as brand impact and product perception. For example, is the premium perception of your brand going to be affected by discounting?



And what about your objectives? Are you looking to target users with sharp price points and unique offers? Or, are you looking for ways to optimize inventory yield? And what about fulfillment of bookings – is that an issue that eeds to be
managed?

Right now, deal sites still capture a high level of consumer mindshare and attention, and should be a consideration in the marketing mix.

However, as many merchants have experienced, it's the careful planning and execution that makes it "the
real deal".

www.travelport.com