Group buying hits tipping point

For 24 hours, the staff at WildPlay were glued to their computer screens.

In mid-October the West Shore aerial adventure course offered a one-day deal on admission tickets using the popular group-buying website Groupon.

"It was really exciting in the office, watching how many people went on there to buy our deal," recalled WildPlay CEO Tom Benson. "We didn't know what to expect. We keep our pricing low and don't usually offer discounts."

By midnight, 2,250 tickets sold for $15 each, and for the next several days the park was running at capacity. "It was amazing advertising for us, especially during our low-season," Benson said.

The tickets, which would usually sell for $40, don't expire for a year and Benson expects the park will see people trickle in with their vouchers for some time.

"We're trying to get on the site again for our other locations," said Benson. "In terms of one-off marketing, we were blown away by how effective it was."

Since Chigago-based Groupon launched a Victoria portal in September, local businesses have lined up to be featured on the site. Meanwhile numerous startups are looking for a piece of the pie.

In the past month Couvon, SwarmJam, WagJag and EthicalDeal have come online with Victoria websites. Each typically offers one bargain per day (50 to 90 per cent off a product or service), which is "tipped" when enough people buy it.

Businesses pay nothing to be featured, but give a cut of every sale to the site. Groupon, which gets considerably more traffic than the other startups, keeps half of every sales, while the others take smaller percentages.

The sites give users $10 when somebody buys from the site through their referral to encourage them to share the deals. The WildPlay deal, for example, was posted over 100 times by Facebook users.

"I liked the viral marketing component," Benson said. "It helps us reach a different audience."

Jean-Paul Thuot of Stillpoint Acupuncture and Craniosacral Therapy in Langford tried his luck on Couvon. He offered treatments for $29, which usually cost $70. Only 30 people bought the deal. He set the tipping point at five, and considers the sale a success.

"All but one of the buyers were new clients," he said. "There's nothing to lose by being on the site, since you only pay a portion of the sales."

If nobody buys the deal, or the deal isn't tipped, the business pays nothing.

Both major newspaper chains in B.C., Black Press and Postmedia, have launched their own group buying sites for their advertisers. Black Press, who owns the Goldstream News Gazette, launched BCDailyDeals in the lower mainland in October and plans to eventually make it province wide.

Postmedia's Swarmjam launched Dec. 1. It's first deal was for Market on Millstream and Market on Yates, which sold nearly 900 $20 gift certificates worth $40 in groceries. Market on Millstream owner Darryl Hein said he was excited to jump on the bandwagon of a new marketing trend.

"I think these sites will have the most impact while they're new," he said. "Eventually they'll be passe."

That's not web giant Google thinks. It recently offered to buyout Groupon for $6 billion-almost four times what is paid to take over YouTube in 2006. The 30-year-old founder of Groupon turned the offer down.

But if Google wants a group buying site, it has no shortage of options.

Just last week both WagJag and EthicalDeal came online. The former offers deals from web-based stores, while the latter focuses on local shops with ethical business practices.

Royal Roads University director of entrepreneurial studies Geoff Archer said the number of copycats is an indicator of a good idea.

"The same thing happened when the automobile was invented, everybody wanted to make them," he said. "Eventually the stronger companies will buy out the weaker ones and some will die off on their own - it's basically darwinian evolution."

He also said he was surprised it took so long for somebody to come out with group buying sites.

"I don't know if these sites would have been as well received even three years ago," he said. "These days everybody is trying to make a buck go further. I think that's really contributing to their success."

He also said the link with existing social media helps.

"People have incentive to share the deals on Facebook, and that's tapping into a huge part of our culture right now," he said. "It's a brilliant idea. Somebody's going to make a lot of money on it."