Groupon Clones Will Fail In 2011 Unless They Address The Growing Needs Of The Entire Marketplace

Groupon’s growth from a little-known start-up peddling group-buying discounts to a shopping force that spawned countless clones and a rumoured $6 billion bid from Google was one of the top tech stories in 2010.

So what’s in store for next year? I believe that many of the companies trying to mimic Groupon will fail in 2011 unless they address the growing needs of the entire marketplace.

There are three key areas where I think the collective buying market will change in 2011: consumers will get smarter, merchants will fight back and the role of the sales force will become less prominent. If the clones don’t differentiate in these areas, they’re unlikely to follow a Groupon-like trajectory.

First off, consumers are getting smarter and beginning to demand quality deals that target their practical needs, as opposed to deal-a-day schemes. The companies that can offer a variety of deals and personalise to the users’ needs will win in 2011.

Social networks and friend recommendations will become increasingly important to the collective buying market as consumers look for curated content. This is how the truly high value deals will separate from the pack of mundane daily email blasts.

Over the past year, many local retailers have noted huge losses from the influx of thousands of disloyal “deal seeker” customers. As more local retailers seek targeted promotions of smaller quantity to better meet their needs, Groupon and its clones may be forced to scale with larger national brands. Merchants may even begin taking matters into their own hands in an effort to keep “Groupon’s cut” for themselves. In New York, we’ve seen a number of merchants leveraging their customer base to distribute their own daily deal on their own homepages. Merchants will also be looking for solutions that encourage repeat customers. According to reports, Groupon’s model yields a customer return rate of roughly 20 per cent. Targeting by location and demographics will be increasingly important to finding high quality, repeat customers.

Finally, local sales forces have reached a saturation point. Merchants are tired of being bombarded with sales calls and the market is now educated on collective buying. Product differentiation will be crucial in 2011 as sales efficiency reaches its peak. Merchants are tired of getting 4-5 sales calls a day so collective buying firms that don’t figure out a new way to grab the merchant’s attention will be left behind.

What do you think will happen to the Groupon clones in 2011?

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.