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Groupon Arbitrage Alive but Not Well on eBay

It’s true you can find almost anything for sale on eBay, but shoppers might not think to go there to buy Groupon or Groupon-like coupon promotions. According to Terapeak, which offers eBay and Amazon market research tools, there is actually very limited activity for such coupons on eBay – gift cards are more popular, the research firm found.

Groupon is a daily deals platform where local merchants offer coupons for discounted services – EcommerceBytes profiled Groupon in its early days – and the company spawned competition including Living Social and Amazon Local.

When we spoke to Terapeak’s Aron Hsiao in early June, he said the market for such coupons was just over $9,000 for a recent 90-day period. He defined three broad categories – arbitrage, gift cards, and second-hand vouchers – as follows:

Arbitrage. Sellers selling a Groupon, Livingsocial, or similar “voucher” on eBay for more than the purchase cost of the voucher, but for (of course) less than the value of the deal. So, for example, an $8 Groupon for a Magazine subscription might be sold for $10 or $12 on eBay. This is less than the regular cost of the magazine subscription (which provides value to the eBay shopper) but more than the cost of the Groupon voucher (which provides a margin for the seller).

Gift cards. Sellers that are selling gift cards for voucher marketing platforms like Groupon at slightly below face value. So, $95 for a $100 Groupon gift card or similar.

Second hand vouchers. These are vouchers that were purchased by individuals that intended to use them, but for whatever reason will no longer be able to do so (moved out of area local to business, went on vacation and planned to use it at destination, but ran out of time and didn’t, and so on). These often go for well below the voucher value (i.e. A $25 voucher for $50 worth of product at the retailer might go for $12 on eBay).

We wondered what the sellers’ objective was of such promotions – was it to make money on the actual promotion, to build a customer list, or something else. Hsiao said it was difficult for him to say. The arbitrage angle might be interesting for very high demand Groupons that sell out quickly, he said, though sellers would have to navigate around per-buyer limits on Groupon deals.

“It’s hard to see how this could be made into a sustainable business model, but clever sellers in the past have probably managed to do more with less. There might be space for a “voucher broker” business model. If someone were to begin snapping up as many unused vouchers as possible for a song and build a very diverse inventory, they might be able to do something with that as well in an eBay store situation – but once again, it’s certainly not a clear win.”

Hsiao looked at the data by conducting three searches:

  • “Groupon” keyword within eBay category 172008 (Gift Cards & Coupons);
  • “Living Social” keyword within eBay category 172008 (Gift Cards & Coupons);
  • “Gift Card” keyword within eBay category 172008 (Gift Cards & Coupons) -for comparison/context.

Providing refreshed numbers this week, Hsiao said the total dollar volume was $22,169 for the entire year ending July 11, 2014 for Groupon and Living Social combined. Compare that to the almost $45 million in gift cards on eBay.

Total unit volume (items sold) for Groupon and Living Social coupons was 1,093 for the entire year. The data covers only eBay US (eBay.com) and excludes Amazon Local because total sales over the course of the year for Amazon Local in that category were less than $10.

“There is no discernible trend – it’s a very noisy market, trend-wise,” Hsiao said. The sales seem to come in “events.”

“Due to the complexity of the scenario, I’d hate to try to characterize these, but my suspicion is that it’s likely to do with seller sourcing/pricing realities and availability – i.e. the involved sellers probably get involved when and only when they see a deal/opportunity that they think they can move profitably on, and then they do so in volume.”

Terapeak can only report on the category as a whole, Hsiao said, thanks to eBay restrictions. “Sellers that have access to a source of gift cards or vouchers or that are interested in arbitrage in this market can certainly use Terapeak in just the way that I’ve done to check for the viability of the particular opportunity they’ve found – search for that product or offer (by keyword) in the Gift Cards & Coupons voucher over a series of date ranges to see what volume looks like and whether the trend is upward or downward.”

The total numbers for “gift cards” suggests that there are good opportunities to be had in this category, but research to identify what they are is probably best done by a seller as they look at their own product availability, Hsiao said.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.