Groupon site for the Ottawa area, as of Monday November 14, 2011
Clearly, Canadians love a good deal.
According to a report by Dallas-based marketing firm Epsilon, Canadians are more plugged into the so-called group deal or deal of the day trend than Americans, and are willing to live with a flood of promotional e-mails in exchange for cut-rate deals.
About 53 per cent of surveyed Canadians said they were familiar with at least one group deal web site — such as the Chicago-based originator Groupon or homegrown competitors like Dealfind, TeamBuy and WagJag — while only 39 per cent of Americans knew of the sites.
Such sites typically offer discounts of 50 per cent off or greater to be redeemed at local businesses, usually restaurants and bars, shops and spas or salons.
About 42 per cent of the Canadians familiar with group buy sites said they signed up to receive daily offers via e-mail, compared to 34 per cent of U.S. respondents. Nine per cent of those Canadians also said they buy a discount voucher every few weeks, two per cent said they buy weekly, and one per cent said they buy something every day.
The survey results weren't surprising to consultant Albert Bitton, who follows the industry and runs the blog Group Buying Canada. He said previous studies have suggested that Canadians are also more engaged in loyalty programs and other money-saving promotions, so it makes sense that they're into daily deal sites too.
"Canadians have always been known as more conservative buyers," Mr. Bitton said.
Gary Lipovetsky, co-founder of Dealfind, which launched in Canada in 2010 and now serves up offers in 28 Canadian cities and 41 U.S. cities, said he too thinks the numbers ring true.
"These trends are accurate," Mr. Lipovetsky said.
"I find Canadians are far more responsible than other countries in their spending and this is just another way for them to be responsible."
Mr. Bitton said the Canadian group buy market is about a year behind the American industry, with more innovations having already been launched south of the border.
"Just now are daily deals sites coming up that have niche categories, such as for women or specifically for families or travel," he said.
One trend that's already beginning to catch on is a move toward offering discounted products alongside the traditional local deals.
"Daily deal companies — especially large ones — have to chase the revenue and in order to chase the revenue they have to become e-commerce sites," Mr. Bitton said.
But the first sites to offer those kinds of product deals have got off to a somewhat shaky start.
Dealfind had problems after it offered some low-priced made-in-China tablets that customers found subpar.
"As time goes by we get into new aspects of the business and we're selling different products and services. And what happens over time is, unfortunately, we'll run a deal with a merchant who doesn't fulfil their side of things," Mr. Lipovetsky said.
"On a go-forward basis, we have actually stopped running tablets and other electronics over the last few months... and the reason we did that is because we didn't want to repeat the same mistake. Right now we're in the process of securing new relationships with very credible, national suppliers of electronics."
It's difficult to offer products made by top-tier electronics brands because consumers expect deep discounts, he added.
"The whole premise of the site is to get people deals and on branded electronics there's very little margin," he said.
"We feel there's not enough of a discount to the consumer, there's not enough of a value to really call it a good deal. So, yeah, we look into other alternatives."
Mr. Bitton said there's a risk that group buy sites will damage their brands by selling cheaply made products.
"If you're going to do products, then do it very well," he said, adding that many of the products currently being sold are "complete garbage."
"It's a disaster waiting to happen because there are a lot more service issues with products than local offers."
Group buy sites must also watch out for merchants that bite off more than they can chew, as was the case in Toronto when a butcher shop offered an eyebrow-raising 75 per cent discount off organic meats, across several group sites. Thousands of discount vouchers were sold and it wasn't long before the inundated store stopped taking orders.
Dealfind was among the sites that offered the discount and Mr. Lipovetsky said the fiasco did lead to some good lessons learned.
"We learned not to always trust merchants who say they have unlimited capacity. A lot of the times now we'll set caps on deals," he said, adding that Dealfind is pursuing legal action against the store.
"On a long-term basis it's good and bad. On the good side, when people buy a deal and then it goes wrong and they call us, we give them their money back and they're happy. They understand they can now buy safely with Dealfind."
Another emerging trend in the industry is mobile deals, allowing consumers to search on their phones for nearby businesses offering discounts.
"They're fantastic for merchants. No other time in history has a merchant, especially a restaurant, been able to communicate the need for customers immediately, based on either the weather, the time of day, or construction," Mr. Bitton said.
"I just don't believe local merchants understand how to use it in the most effective way just yet, because it's so new, but that will improve over time."