2011 Forecast: Groupon Clones Poised to Fail

Signpost CEO Explains Why Companies Mimicking Groupon's Daily Deal Model Will be Forced to Differentiate, or Fail, in 2011

Dec 22, 2010, 09:00 ET from Signpost

NEW YORK, Dec. 22, 2010 /PRNewswire/ -- Groupon's growth from a little-known start-up peddling group-buying discounts to a shopping force that spawned countless clones and a rumored $6 billion bid from Google was one of the top tech stories in 2010. But Stuart Wall, CEO of community-powered deal site Signpost, says many of the companies trying to mimic Groupon will fail in 2011 unless they address the growing needs of the entire marketplace.

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Here is a sampling of Mr. Wall's predictions for the collective buying market in 2011:

Consumers Get Smarter

  • Relevance matters:  With more deal options available, quality deals that target consumers' practical needs will outweigh deal-a-day schemes. Companies that can offer a variety of deals and personalize to users' needs will win in 2011.
  • Increasing social influence:  As consumers seek deals that fit their preferences, they will increasingly rely on their social networks and friends to recommend truly high value deals over responding to a daily email blast. As such, Facebook and other social networks will become ever more important to the collective buying market in 2011.

Merchants Fight Back

  • The days of selling thousands of vouchers for a local deal will be over as merchants seek promotions that better meet their needs. Many local retailers have reported nearly going out of business from the steep discount required by the daily deal sites and the influx of disloyal "deal seekers." Groupon and its clones will increasingly need to look beyond local merchants to national brands in order to scale.
  • Merchants will keep "Groupon's cut" for themselves as they take matters into their own hands.  Margins in collective buying will be compressed as merchants look for alternatives and begin to negotiate.
  • Merchants will step away from the "shotgun approach" to offering deals and seek solutions that encourage repeat customers. According to reports, Groupon's model yields a low customer return rate of roughly 20 percent. To address this, targeting by location and demographics will be increasingly important.

Death of the Sales Force

  • Local sales forces have reached a saturation point. The market is now educated and merchants are tired of getting bombarded with sales calls. Product differentiation becomes more important in 2011 as sales efficiency has peaked.

To speak with Mr. Wall about his 2011 predictions, reach out to the contacts listed below.

About Signpost

New York based Signpost is a community-driven social website that connects shoppers with deals that matter to them and helps merchants create relevant deals that they can market to the community. With Signpost, neighbors, friends and family find and share deals that range from pop-up sample sales to Happy Hour gems from the neighborhood tavern. No games, check-ins or maniacal e-newsletter scouring required. The site has received funding from Spark Capital, Google Ventures and angel investors. Signpost launched in New York City and is now available in Boston, Chicago and San Francisco.

SOURCE Signpost