The daily deals business is changing, as a transaction announced
shows. BRW Entrepreneur of the Year finalist catchoftheday.com.au is adding wine to its stable. It has taken a majority stake in premium wine deals site vinomofo.com.
Catch of the Day – best known for selling 650,000 Hungry Jack’s Whopper deals on one day in March – has sold wine before, but it was low-end stuff, not the sort serious wine drinkers would buy.
“We’ve been trying to sell wine for a couple of years, but have found that in order to sell wine you need to understand wine,” says Catch of the Day co-founder Gabby Leibovich.
The takeover – the value of which is not disclosed – illustrates what Sam Yip, of research consultancy Telsyte, describes as a convergence of two components in the Australian group-buying market.
The large group-buying sites, which started by offering discounts on services such as restaurant meals, are focusing more on products.
“It’s the evolution of the business, where specialisation is the way to go,” Yip says. “These sites have realised that because they have such large databases of users – in excess of millions of people – the opportunity for this year is to start segmenting your client base and offering deals that apply to them.”
Just eight companies account for 95 per cent of the group-buying market in Australia, which was worth $63 million in 2010, $498 million last year and is likely to grow to $600 million this year, Yip says. Catch of the Day’s Scoopon site is one, along with rivals Groupon, Living Social, Spreets, Cudo, OurDeal, Deals.com.au and Ouffer.
The five main categories in group buying are food and dining deals, health and beauty, leisure and recreation, travel and – in contrast to these four service categories – product. A year ago, product accounted for less than 10 per cent of the group-buying market, but will reach 40 per cent this year and is likely to rise to half of total expenditure, Yip says.
“It’s shifted. It was really about restaurants and health & beauty deals,” he says. “Product was nothing. Now it’s shifted. Product is the biggest category.”
Vinomofo chief executive Andre Eikmeier makes a similar point. “No one is going to launch a new group-buying site tomorrow.” That opportunity was taken by the original companies, he says. “The natural evolution is a vertical and specialised channel.”
Vinomofo, which started life as a group-buying site, has turned away from that model. It used to feature the visual gimmick on its site of a tipping point, triggered when sufficient people signed up for any particular deal.
The company no longer needs to rely on such tricks as it routinely gets enough customers to clear the threshold, Eikmeier says. Instead, it is now a pure daily deals site offering, on a once-off basis, a premium product at a discounted price that is only available for a limited time. Its monthly revenue is $400,000.
The temporary nature of the deals – with a one-off price that is not repeated – is crucial to convince suppliers to sell higher-end wine (as opposed to distressed inventory or low-end product) without fear of damage to the brand value, Eikmeier says. Cutting out the distributor’s margin means the supplier gets the same price for the product, even as consumers get a discount.
Catch of the Day, which got an $80 million injection in May last year – in exchange for a 40 per cent stake – from a consortium including Chase Coleman’s Tiger Global Management and James Packer, is on the lookout for other product ranges to bring under its wing.
“We are looking at a few other niche areas,” Leibovich says. “But we’re not going to build a site for every category under the sun.”
Catch of the Day itself is playing catch-up. In September, larger rival Groupon started offering its own product deals, mostly independent of third parties, through a venture called Groupon Goods. In February, Groupon Australia partnered with shopping centre manager Westfield to offer discounts on products from Westfield retailers in Australia.
Increasingly, this is the way goods will be sold. Vinomofo’s experience in wine can easily be replicated with a range such as electronic goods.
Both only need a few geeks who understand the product to explain it to customers, Eikmeier laughs. Customers, having learnt to trust the site, will come back for more.
Leibovich agrees. “No retailer out there is safe!” he says.