In Russia and Eastern Europe, Daily Deals Market Shrinks As Well

A few weeks ago, I spent some time in the Ukraine, watching a lot of soccer and wandering around Kiev. Inevitably, I started thinking about hyperlocal and daily deals in Eastern Europe. (You can take the writer out of Street Fight, but you can’t take Street Fight out of the writer. Or something like that.)

Anyhow, while there aren’t a lot of hyperlocal publications in Eastern Europe (a topic I’ll tackle in the near future), there is a strong daily deals market. It is dealing with some of the same issues that the American market is — consolidation, possible contraction — and some different ones as well, particularly potential legal issues.

I asked Natasha Starkell, founder of Goal Europe, and Heissam Hartmann, vice president for Eastern Europe of Rebate Networks, to help us understand it all. First off, I wondered who the “winners” of the contraction were going to be.

“Slevomat in Eastern Europe, Stephan Glänzer and Michael Brehm’s Rebate Networks (South East Europe) and BigLion in Russia,” Starkell answered. “The consolidation is inevitable and we see acquisitions regularly. Most recently, a part of Polish Gruper was sold to Grupa Polska Presse.” (According to one report, BigLion — which landed $25 million in funding last December — averages 234 million visitors a day.)

Hartmann argued that the daily deals organizations that survived and thrived are going to be the ones that can reach the increasingly selective consumers and merchants. Translation: The ones that move beyond the “garage” group buying phase and develop a robust, professional attitude. “The ‘winners’ are going to be companies like Kolektiva, which over the past few years has managed to become a number-driven, professional organization that is a well-known and a trusted partner for customers and merchants,” Hartmann says.

Although there is some thought that the Russian market has reached its peak, Starkell doesn’t see any reasons to believe that’s the case.

Daily deals are big in other countries as well, with iEurope Capital recently investing $3.7 million in KupiMe.hr, a Croatian group buying site that services Serbia and Slovenia as well. The company made $3.5 million in revenue in 2011, not bad for a relatively new venture.

One issue that is not present in the United States is the potential illegality of daily deals. Starkell said she wasn’t aware of any issues, but did note that some countries require more caution than others when representing the deal. (There are problems with this across Europe.) And there’s seller fraud as well. Turkey’s Grupanya pays suppliers upon delivery to combat any attempts to cheat the buyer.

Eastern Europe and Russia lags behind the Western world in terms of Internet access and ubiquity, which hampers the daily deals market. This leads to a distrust that group buying sites have to overcome. “On the Eastern European market people are still discovering the Internet and online shopping,” Hartmann says. “Many merchants do not even have a webpage yet. Potential costumers in Eastern Europe are far more cautious in their approach to online transactions.”

Overall, however, the daily deals market in Eastern Europe and beyond is increasingly resembling the one in the United States. It’s a tough business, but somebody’s gotta do it. And plenty of people are going to make serious money doing so.

Follow Natasha on Twitter at @natashaStarkell

Noah Davis is a senior editor at Street Fight.