3 Predictions about the future of group buying

A recent TechCrunch article highlighted the enormous growth of group buying sites such as GroupOn and Living Social. According to the article, the group buying industry in the United States is estimated to grow by 138% to $2.7 billion in 2011. In fact, worldwide, GroupOn is expected to bring in between $3 and $4 billion this year.

Besides the enormous growth potential of these buying sites, is the enormous growth of the sites themselves. According to a report from Local Offer Network, a group buying aggregator, there were 90,000 deals across 322 group buying sites in the U.S. since January 2010. In the first quarter of 2011 alone, Local Offer Network tracked 117 new group buying sites.

I was astounded earlier this year when GroupOn declined a $6 billion offer from Google. Although seeing their estimated numbers for this year alone, I can now see why. Being the first high-profile mover in the market, they have the lion's share of the revenues and sales right now. And their expansion plans include buying deal sites in other countries. But how long can it last? How can any group buying site succeed when they have a business model that is easily duplicated?

Here is what I think will happen in the near future for group buying sites. 

Super focused & super local

In marketing, if you can't be first (the innovator) in your market, then create a market or niche, and be number one there instead. I think you'll see group buying sites starting to focus in on particular niches. Group buying for the outdoor enthusiast or for foodies. I think you'll start seeing a lot of segmentation to the market. 

In addition, focusing on particular niche industries, I think you'll start finding sites that are super local as well. For example, GroupOn has a Boston offer site, but they don't have a Dover, NH offer site. Companies could as well be focusing in on the super local markets.

Smaller margins

It has been reported that GroupOn makes about 50% off of every deal. This can't last. With GroupOn's business model being easily replicable and competition increasing at an incredible rate, group buying sites will have to start reducing their take in order to remain competitive. After all, with so many new players coming on line every day (again, 117 new sites in Q1 2011 alone), one of the easiest ways to gain more customers will be to cut your commission structure.

Location based

It seems that group buying sites could benefit from location-based services more than they already do. Imagine checking in at a downtown store and finding out that either that store or one close to it is offering a group buying deal. Or if you are traveling, and you check Yelp to help you find a good restaurant. It would be pretty cool (and pretty motivating) to find out that there is 50% off an Asian restaurant right down the road. I think location based group selling will be a big part of the future success of the industry.

What do you think the future of group buying holds? Can GroupOn remain the dominant company?

Kevin Duffy is the Creative Director for The Duffy Agency's Boston office.