Groo’s NIS 100m. sale ends group-buying era

The rise and fall of the daily deal website was one of the dramatic business stories of recent years

A bit more than a decade after daily deal websites first rocked Israel’s shopping and entertainment world, Groo (formerly Groupon Israel) has been acquired by shopping mall operator Melisron for NIS 100 million.

Melisron, which owns 17 malls around Israel, said it will convert Groo into a “hybrid mall” that will combine stores’ digital presence with their physical locations to offer a fuller shopping experience. That will help it maintain pace with its main competitor in the mall sector, the Azrieli Group, whose Azrieli.com site has become one of the largest shopping sites in Israel.

The rise and fall of the daily deal website business was one of the dramatic business stories of recent years. In the United States, Groupon and Living Social began offering daily discounts of 50% or more in locations all around the country in 2008, and began growing at a meteoric pace. The idea that group-buying could allow stores and restaurants to increase business by offering steep discounts that would bring in more customers was a tempting proposition, and clones began springing up in cities around the world.

In Israel, the craze began in 2010, when Grouper was first to market with daily deals focused mainly in Tel Aviv. Other sites like Baligam, Dealhayom, Buy2, and dozens more quickly followed. By early 2011, new sites were popping up nearly every day. Groupon, by then an international juggernaut, acquired Grouper for some $15m. in December 2011 and quickly became the dominant player, but others were able to thrive by focusing on different niches like religious buyers, travelers, or young parents.

In the English-speaking market, Groopbuy

launched in Jerusalem in November 2010 and set off a discount frenzy. The site was able to procure discounts of 50% or more at even the trendiest restaurants and entertainment providers in the city, and Jerusalemites would scramble to get the deal before time or inventory ran out. However, while it seemed wildly successful from the outside, Groopbuy ceased operations six months after it started, and the founder left Israel.

Another English site, Dealon, didn’t fare as well, and shuttered quickly. A third site, Anglodeals, looked to aggregate deals from other sites and translate them into English. (Full disclosure: this writer had business dealings with all three of the English sites at different points.)

If there would have been just one website offering one great deal per day in each city, as was the original idea, perhaps group-buying could have gone on forever. But the proliferation of so many sites and the low barrier to entry turned a unique marketing model into a race to the bottom. Instead of helping vendors build market share and brand loyalty, businesses grew tired of losing money and lowering their quality catering to masses of customers chasing the latest deals. The industry declined as quickly as it started, and only a few sites remained, often selling thousands of products at minor discounts, like any other online store.

In 2017, Sky Fund acquired 83% of Groupon Israel from the international parent company for an estimated $2m. and changed the name to Groo. In 2019, they acquired cash-strapped Baligam, once one of its biggest competitors, for NIS 4.6m. Sky apparently succeeded in pumping new energy into both sites, as the sale to Melisron represents a strong return on its investment.