Half of collective purchase websites shut down in 2 years

Monday, December 12, 2011

Half of Brazil's collective purchase websites have shut down in less than two years, news service Agência Estado reported, citing an analysis by local e-commerce consulting firm e-bit, in partnership with group buying aggregator SaveMe.

According to the report, since the launch of Brazil's first collective purchase website, Peixe Urbano, at the beginning of 2010, some 1,600 similar websites - around 50% of the country's total - no longer have offers available or are currently out of service.

The report also found that the eight largest collective purchase portals in the country account for nearly 85% of sector sales.

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According to SaveMe cofounder Guilherme Wroclawski, the ease of launching a company in the sector has led to the high number of such websites.

But many entrepreneurs launched domains without having sufficient financial backing to remain in the market. According to the executive, despite that small websites are still the majority, the market trend is consolidation of these into fewer, bigger companies.

And the larger firms are the ones betting the most on expansion, going abroad and receiving international investments.

Since its launch, for instance, Peixe Urbano has seen its registered user base reach more than 14mn, and over 9mn coupons have been sold through nearly 18,000 deals. The site received investments from US funds Benchmark Capital, General Atlantic and Tiger Global Management.

Peixe Urbano is also one of the most international of Brazil's collective purchase websites, with operations in Argentina, Chile and Mexico. And the Mexican unit is now eyeing Monterrey and Guadalajara as the next steps in its expansion plan.

In February, Click On announced operations in Argentina, and the plan is to expand to Uruguay, Chile and Colombia as well. The expansion is said to count on financial support from Germany's Group Buying Global (GBG), which holds 50% of the company.

In addition to Click On, Groupalia and SaveMe also launched operations to Argentina.

Nevertheless, the high proliferation of such websites in Brazil has raised concerns among authorities regarding the services' validity and credibility. Several cases of false offers and services not being provided are also coming to light.