Survey shows only 5% of SMEs believe group buying a good idea, industry players say more education needed

Only 5% of businesses questioned in a Melbourne IT survey believe group buying sites present an attractive proposition for marketing and attracting new customers, in a move that suggests the industry isn’t making much progress into mainstream marketing.

The findings seemingly contradict the explosive growth of the industry, which is set to turnover $400 million by the end of the year, according to new research from market researcher Telsyte.

But Cudo chief executive Billy Tucker says the figure isn’t that surprising, given the number of businesses that have actually used group buying deals as a portion of SMEs in Australia isn’t that large.

“There are millions of small businesses in Australia, but there are only 5,000 businesses participating in group buying, and that’s a small percentage. There are only small numbers of businesses that have participated in the industry,” he says.

“That says to me there is a ton of headroom in this market and that a lot of education needs to be done.”

The Melbourne IT eBix Review 2011 survey, which questioned over 2,200 SMEs with an online presence, found that businesses are overwhelmingly planning to increase their participation in online.

Nearly 60% will increase their spending on website and internet tools, 53% on technology and 54% on marketing. But only 5% agree with the idea that group buying deals are a good marketing and sales choice for their business.

Melbourne IT SME eBusiness Solutions executive general manager Damon Fieldgate says the limited response “indicates caution”.

“While short-term promotions have their place, we would encourage small businesses to develop an integrated online marketing approach – including social media – to build long-term relationships with customers for long-term gain.”

These words echo the growing sentiment about both group buying sites and their clients that deals should only be seen as a catalyst for finding new customers and ensuring long-term growth. Last week group buying site OurDeal released a document listing a number of ways businesses can ensure group buying deals last as long as possible and how clients can ensure repeat business.

Tucker says the 5% figure isn’t much of a surprise.

“Any business that has a sale of any type we are able to help with a massively targeted sale on their behalf. And we target audiences we know are susceptible to price reduction and are willing to work with them.”

Tucker argues those businesses that have actually run deals in the past are more likely to run a second.

“We’ve probably dealt with a couple of thousand merchants since launch. We’ve surveyed a statistically valid sample, and almost 80% say they want to do it again.”

“By and large we’ve satisfied a lot of customer growth for them, and they’re able to have long-term customer growth. If we satisfy that, we don’t need to do the same deals time and time again.”

Scoopon general manager Jon Beros also says “we still need to educate a lot of SMEs about how the group buying process works”.

However, Telsyte senior research manager Sam Yip says the result “doesn’t seem right to me”.

He points to some of the industries which participated in the survey, which include farming, forestry and transportation industries, and argues these sectors aren’t suited to group buying. In contrast, sectors that make up the majority of group buying deals, such as cafes, restaurants and entertainment companies, were under-represented. 

“Cafes and restaurants make up a big part of the group buying pie, along with retail as well. There are key factors that can skew the response.”