The group-buying concept, which has exploded in recent years, is pretty straightforward: Consumers can take advantage of a significant deal – delivered via a daily e-mail – for a product or service as long as enough other consumers make the same buying decision.
It’s a business model that has turned Groupon Inc. into a company worth a staggering $9-billion. At the same time, it has spawned a flurry of similar services, fuelled by low barriers to entry and plenty of investors who want in on the action.
The ultra-competitive landscape makes it challenging for players to stand out from the crowd, but Toronto-based TeamBuy.ca is hoping to carve out a distinct niche by not only focusing on Canada but by diversifying its business beyond daily deals via e-mail.
At the core of TeamBuy’s strategic direction is a decision to expand its product offerings. In announcing a $5-million financing deal last month, the company also unveiled plans to move into the home, children’s and infant categories, as well as expand its existing local, products and travel categories.
Another key plank in TeamBuy’s growth is making its website a destination for deals beyond the offers delivered by e-mail. In many respects, this could make the company an e-commerce business and, at the same time, differentiate it from the competition, which includes rivals such as WagJag and Groupon.
“As opposed to viewing us as a pull service, where typically Groupon and ourselves have sent you e-mail to push you to the site, we are moving towards being a destination where you can come to our site and find practically everything,” said Ghassan Halazon, TeamBuy’s chief executive officer, during a recent interview. “The visits to the site are increasing on the organic side without having to come through e-mail, and without us having to show them content.”
Edward Yao and Andrew Hutchings started TeamBuy in late 2009. Mr. Halazon, who was an investment banker with Citigroup in New York, joined them shortly afterward. The company, which also raised $7-million last July, took advantage of its first-mover advantage to cement its position as the leading group-buying company in Canada.
While declining to disclose the identity of TeamBuy’s investors, Mr. Halazon said the company had to tap financing outside Canada because it couldn’t convince conservative domestic investors to get involved.
“The Canadian VC community is quite conservative compared to what we see on a global level, partly because they are consumed by a lot of negativity in the media around the space,” he said.
TeamBuy caught a huge break when it appeared on the popular Dragons’ Den television show. While it didn’t take up the Dragons on their investment offer, Mr. Halazon said it raised the company’s profile nationally and internationally. This caught the attention of investors who were familiar with the group-buying market.
One of the growing realities of the group-buying market is that there will be consolidation as weaker players fall by the wayside.
“A lot of small players are falling off because of lack of access to capital, technology and depth in content,” Mr. Halazon said. “In terms of consolidation, we are seeing smaller types drop off, although nothing material. In terms of the bigger guys, you look at the landscape; you have Groupon, a few media companies doing interesting stuff, Dealfind and ourselves.
“In many ways, TeamBuy is the largest independent player that exists, not having been a previous business that pivoted into this or having media support. If we look [out]six months to a year, it will be more and more apparent – there will be few players – [but]there is quite enough to go around on the local side and certainly enough to go around on the product side, where inventory is unlimited around the world.”
Special to The Globe and Mail
Mark Evans is the principal with ME Consulting, a communications and marketing strategic consultancy that works with startups and fast-growing companies to create compelling and effective messaging to drive their sales and marketing activities. Mark has worked with four startups – Blanketware, b5Media, PlanetEye and Sysomos. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshmarketing and meshwest conferences.
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