Group Buying and Social Commerce
Startups in Europe: A quick look at
some players and trends
Mike Butcher
Editor, TechCrunch Europe
eu.TechCrunch.com
@mikebutcher
mikebutcher@techchrunch.com
WARNING
I am *shit* at Powerpoint,
and prefer words to
pictures, sorry
You can complain to me
on @mikebutcher

Group buying. Isn’t it fun!
It’s a revolution
WHERE DID GROUP
BUYING COME FROM?
“group buying” or “store mobbing,”
tuangou is a shopping method that
originated in China. People would
swarm a store all at once and haggle
for a group discount on a particular
item. But people quickly realized that it
was a lot less painful to contact other
potential buyers and organize massive
group buys online.
Let's go! (your last picture for a while)
THE OLD MODEL
• Start a group dedicated to a specific
product and set a target price.
Alert your network and encourage them
to add in to your group. The more
people join, the lower the final price.
The group closes and vendors bid on
the sale; lowest bid wins. The group is
happy because they’ve just got a
substantial discount, and the vendor
just sold a lot of product
WHY DID IT FAIL IN THE
90s?
Sites like Mercata and Mobshop in the
90’s failed because:
• Buying groups could take days or
weeks to form
• No social networks so no word of
mouth
THIS TIME IT WORKS
• Social networks have made people
used to joining groups quickly
• Texting, Facebook and Twitter means
deals spread fast
• Groups fill faster creating larger
discounts, incentivising buyers
• Offers for specific products
BENEFITS
• Big discounts
• Discovery of unknown new services
• Often get ‘side deals’ in addition to
main deal
• Deal personalization potential
• Targeted by location (e.g. postcode)
WHO IS BUYING?
• Tend to be affluent with disposable
income
• 18 to late 30s
• Likely Facebook and Twitter users
ECONOMICS
• Merchant retains minimum 50% of the
deal
• High offer redemption rate, about 80%
• High spending
• Repeat customers (around 20%)
BEST FOR…
• High fixed cost businesses
• Business with high customer
acquisition cost, normally have to
advertise A LOT
• Business thriving on repeat
customers. e.g. spas, lifestyle,
restaurants
TOP CATEGORIES
City tours, Hair Removal, Spa days,
Facials, Massage, Yoga, Manicures,
Seafood, Pizza/Fast food, Hair Salon
FOLLOWED by Restaurants, Fitness,
Life Skill classes, Food and grocery,
Sporting events, Beer, Dance classes,
Home services, Bars and Clubs, Treats,
Wine tasting, Womens clothing,
Theater
(So probably more men than
women, then)
EUROPEAN EXAMPLES?
GERMAN GROUP OFFERS
Two main players
Groupon City Deal
(The former MyCityDeal
purchased by Groupon)
Active in: Aachen, Augsburg, Bergisch
Gladbach, Berlin, Bielefeld, Bochum,
Bonn, Bottrop, Braunschweig, Bregenz,
Bremen, Bremerhaven, Chemnitz,
Cottbus, Darmstadt, Germany,
Dornbirn, Dortmund, Dresden,
Duisburg, Düsseldorf, Erfurt, Erlangen,
Essen, Feldkirch, etc etc etc
DailyDeal
Arch competitor to competitor to
Groupon CityDeal
Active in: Aachen, Augsburg, Berlin,
Bielefeld, Bochum, Bonn,
Braunschweig, Bremen, Chemnitz,
Darmstadt, Dortmund, Dresden,
Duisburg, Düsseldorf, Erfurt, Essen,
Frankfurt / Main, etc etc etc
OTHERS
donandaDeal
Deal Ticket
Cooledeals
Promozebra
GetDeal
OecherDeal
Deals4
West Deal
(so at least 10 players in Germany)
A LITTLE BACKGROUND
• Samwer brothers/ European Founders
Fund backed Groupon bought
MyCityDeal for a rumoured €100m
• DailyDeal is backed by Team Europe
Ventures
They don’t get on.
UK GROUPON CLONES
Groupola, Groupon City Deal, Scrum
Buy, Wowcher, Deal Bunch, Viva
Voucher, KGB Deals, Wahanda, Snippa
(closed), Likebees, Deal Mob, London’s
Best
(11 in total)
UK MAIN PLAYERS
• Groupon City Deal
• Keynoir (merged with DealBunch)
have an experienced team, well known
backers and £1.3m funding from Index
Ventures and PROfounders Capital.
• Wahanda: Heath/Spa/Beauty niche.
• Groupola - Spun out of
MyVoucherCodes.co.uk - selling slowly,
lower end
OTHERS
Dealmob, Wowcher, Vivavoucher,
Mypiggyback - selling but in small
quantities. LikeBees and KGB deals
(part of the 118 118 group) are worth
watching
LET’S HAVE ANOTHER
• SPAIN: Spanish group buying site
Groupalia has raised €2.5 million
Groupalia, a Spanish Groupon clone
And let’s not forget the grand-daddy Vente-Privee in France passed €650m
in turnover last year.
I COULD GO ON
But in other words, they are
everywhere now
UK CASE STUDY
THERE ARE MASSIVE
CHALLENGES
1. The number of players means
commission levels are being eroded far
from the 40-50% that offers sites want
to achieve down to 0% just to get the
deal. This will continue until a clear
leader emerges. The same is likely to
happen in each Euro market
2. Market size
The UK does not have the volume of
high population cities (compared to the
US) so the competition is even more
focused on London as the top prize.
Europe has more scope, but requires
cash to acquire each city (Groupon has
it).
3. Starting with no list
You need an initial email list. Groupon
makes you enter your email address
before viewing the deals. Do you?
4. How To Win
• Product and distribution:
• Great product wins.
• No great products, distribution suffers
• Lesson: Build the distribution list first,
then use that as leverage to get and
offer the best products
4. How To Build distribution
Email sign ups via: Refer a friend,
Twitter, Adwords PPC, PR, affiliate
schemes, Facebook fan pages (built by
Facebook PPC) and loss leader deals.
• And a large customer acquisition
budget.
How did MyCityDeal win (so
far) in the UK?
The £1 film voucher sold over 27,000,
brought in a large customer base
(subsidy was £125k+).
• Plus a great team.
PREDICTION
The UK will have two dominant players,
at this point MyCityDeal and Keynoir
Again, this is a scenario likely to repeat
across each European market
LET’S LOOK AT TRENDS
- Group buying has had remarkable
success
- Easy to Launch
- Immediate generating revenue
- Trend towards for decentralization
- Clones everywhere!
- Media Publishers are now in on it
(Underlying deals are powered by
partners and aggregators)
TRENDS
- Advertising spend is shifting away
from other forms of media to group
buying (media, watch out)
- More and more fragmentation,
especially in publisher/white-label
partnerships
- High growth among users and
businesses
- Local advertising media owners
threatened
AND FINALLY
We will gradually see more and more
local businesses using group platforms
for filling excess inventory, smaller
deals, self service format (e.g. small
local hairdresser wants to fill 5 chairs)
PROBLEMS
- Consumer Retention is Difficult…
- You get deal driven consumers not
long term customers, you don’t own the
email and customer retention is low
- Limited network effect because the
deals are one-off
- Clones don’t require exclusivity on
deals
- Startups that solve those problems
will do well
AND
Retailers may go off the idea: Selling
any product at a loss at scale is
unsustainable. Why pay full price at any
restaurant - ever - if every morning 10
new restaurants put 'deals' in your box
offering you the chance to eat at 50%
off?
Duh!
MY HUMBLE SUGGESTIONS
- Incentivise the repeat deals
- Smart Groupon businesses offer
follow-on discounts
- Targetting people on the way from
their work to their homes works well
- Manage getting to many responses
- Watch redemption - coupon life time
can hurt some businesses
THE FUTURE
The Future lies in getting business to
accept offers as advertising, possibly
even replacing traditional online ads
which rarely don't generate foot traffic
to physical storefronts or services.
Group buying as widgets/buttons?
THREATS
- If Yelp is experimenting with deals in
the US then similar players in Europe
will, e.g. Qype in Europe
- Google has an advertising model
considered complementary to group
buying sites but there is a trend
towards using Groupon-clones instead
of search marketing and Adwords.
Google won’t like that…
A picture of Groupon after
Google got involved
Man the barricades!
Here come the group
buyers!
Thank You
Mike Butcher
Editor, TechCrunch Europe
eu.TechCrunch.com
Twitter.com/mikebutcher
Linkedin.com/in/mikebutcher