Group buying to shrink in 2012 as marginal companies slip away, analyst forecasts

The group buying industry will finally speed bump next year when marginal operators fall out of the picture and more consolidation occurs, one analyst has predicted.

The prediction comes alongside separate forecasts from research houses such as Telsyte, which says the industry will turn over $400 million in 2011, with more growth to come in 2012.

Forrester Research analyst Steven Noble says consumers next year will start being affected by “deal fatigue”, with too many operators of various sizes offering too much different deals for them all to be a success.

“There will be a gap opening between the larger and the marginal operators,” Noble told SmartCompany this morning.

“This forecast is based around the observations of the incredibly large and growing volume of deals being offered to the Australian market.”

Noble says consumer research performed in the United States shows consumers are experiencing a high amount of fatigue around deals, resulting in a high number of complaints.

“You’re seeing that dissatisfaction here, with the New South Wales Fair Trading Commission already saying it’s had a higher number of complaints.”

“There’s prima facie evidence that the problems consumers have reported in surveys in the past are starting to play out.”

A number of businesses have exploded in Australia this year, including Groupon, LivingSocial, Spreets and Cudo, and Noble says these will continue to do well, but smaller operators will feel the pain.

“Not necessarily niche players, because targeting a niche can also be a strength. But marginal operators are the ones that struggle to source good deals and aren’t able to build a large database.”

“They’re struggling to get those key metrics of success around conversion. That pressure will continue to grow, and next year we’ll see some of these businesses quietly disappear.”