The Surging Popularity of Group Buying Sites

Groupon was founded in Chicago in November 2008 and claims to have been profitable since June 2009. That in of itself is a staggering accomplishment. But there’s much, much more. In October, Comscore data show that 6.4 million people visited Groupon.com, up 657% from a level of 849,000 a year ago. On a worldwide basis, Comscore reports that groupon.com attracted 21.4 million unique visitors, with 34% coming from the U.S., 14.5% from Germany and 11.4% from the U.K. The amazing growth in visitors in such a short period of time clearly reflects the popularity of the group buying business model.

Comscore data also reveal that Groupon’s visitors are skewed towards females (58% of all visitors), upper income households (with those earning over $100,000 being 22% more likely to visit the site than the average Internet user) and visitation from home computers (60% of traffic).

Groupon uses a database they’ve assembled of some 30 million global subscribers who are e-mailed its daily deal offers. About 17 million of these are located in the U.S. Groupon now covers 300 markets in 31 countries, which includes 130 North American markets. They run about 400 deals per day worldwide with 175 per day in North America. The Groupon business is supported by 3,000 employees.

According to Comscore data, the majority of Groupon transactions fall into the $10 to $30 range. Groupon says that they offer discounts of 50% to 90% off with an average deal being 60% off. They take about half of the revenue but say that this can vary depending on the size of the business and how many deals they anticipate selling. The most popular category of deals is restaurants, followed by health / beauty, activities, events, retail and services for home / auto. Groupon says that 16 million Groupons have been purchased since inception of the service and that this has saved consumers more than $730 million.

Not surprisingly, the success of Groupon has spawned a wide variety of competitors, the most notable of which is Living Social. Comscore data show that livingsocial.com attracted about 4 million unique visitors in October, up 812% from a year earlier. But, Living Social is only one of hundreds of group buying sites that have been launched. As has happened in other Internet businesses, we have also seen the emergence of “aggregators”, who sweep up all the deals that are being offered and summarize them in one neat e-mail that is sent to subscribers. Dealradar.com from Local Area Network in Chicago is one leading aggregator. They claim to collect and distribute approximately 500 offers per day across 86 markets in four countries.

It will be very interesting to see the impact of group buying on holiday shopping this season. As befits the industry leader, Groupon has invented its own holiday, Grouponicus, celebrated with the opening of the Grouponicus Holiday Store. The store will offer a host of deals in the top 20 Groupon markets – deals that are available for 3 – 5 days covering a mixture of new merchants and some of consumers’ favorite deals from the past year. That said, it’s important to note that the Groupon Daily Deals will be featuring some major national retailers on occasion but that the lion’s share of deals will be local merchants. This indicates that the big retailers still need to rely on other means to communicate their promotions. Fortunately, on the Internet there is no shortage of ways to accomplish this, from the use of display ads to social network communities on Facebook to the growing use of Twitter. With Groupon and the e-commerce market in general, it’s shaping up to be a very merry and busy Christmas season online.