Update (3.11.2011): We’ve updated the information regarding Estonia to better reflect the market situation. After analysing a 3rd party data source (Refresh.lv) we realised Zizu’s figures were wrong. They are now portrayed correctly in the data below. Please note that we have not changed the overall market situation of the Baltics, even though it would change slightly due to the change in figures from Estonia. Samad Mukhamedov from Zizu Project contacted us and we’ve discussed this over e-mail. According to their figures, they are number 2 in the Baltics in September, but due to the sheer difference in figures between Cherry’s and those of the research site Refresh.lv’s we are unable to replicate this. However, we wanted to bring this up as to make the figures as transparent as possible.
This post is a very comprehensive look into the daily deals, group buying market in the Baltics. We’ve also talked to the market leader, Cherry Media Group about the situation on the market and how they see it develop in the future. Despite being a fairly established trend in the world of e-commerce, the daily deals industry is far from saturated in the Baltics, but we’re going to see consolidation among the players in the future. Cherry Media Group is the largest player in the market by far. According to calculations from the company themselves (that are available to the public, based on the deals the companies have sold), they have 49% market share in the Baltic market. Cherry Media Group operates in all three, Latvian, Lithuanian and Estonian, markets.
Looking at the pie chart above, we can see that there are around 30 players on the market, in the three countries. Cherry Media Group, which has operations in each of the countries is by far the largest player. The market share shown above is calculated by monthly revenues based on September figures.
The annualized revenue rate of Cherry Media Group at the moment, according to the group CEO, is currently around 15 million euros. It’s quite easy for Aldas Kirvaitis, the Group CEO, to state, “we believe that makes Cherry Media Group the fastest growing Baltic internet business ever.”
Cherry Media Group opened up for business in May 2010. Since then, the company has saved some 11.5 million euros for their clients and sold around 900 000 coupons. They were also able to offer 684 deals to their clients in the three countries in September, up from 353 just March this year. The 684 deals were bought by around 50 000 customers region wide.
The Estonian market grew 22% in September, showing solid growth. In Estonia, in September, Cherry Group was the largest player with 56% marketshare.
In Estonia, the differences are quite clear in favor of Cherry growing the fastest on a month-on-month basis. The Group’s service in Estonia grew at nearly 100 000 from August to September in revenue. The Estonian market is the smallest of the three in terms of monthly sales at approximately 646 000 euros in total turnover for all the participants.
The Lithuanian market pretty much exploded with 44% growth in September. In September, Cherry Group also dominated the Lithuanian market with a combined marketshare of 66%.
Looking at the data on a monthly basis, we can see that Cherry Group’s Beta and Grupinis are killing it in Lithuania. Both of the companies increased their revenues in Lithuania by over 100 000 euros. The amount is quite a lot as the whole market in monthly sales was about 1 million euros in September 2011.
The Latvian market grew the slowest with only a 5% growth in September. The Latvian market is a lot more equally balanced with three companies taking up around 76% of the marketshare. Citylife is the largest with 30%, while Cherry is just behind with 27% and Zizu is at 19% marketshare.
On a monthly level – Cherry Group is the clear winner though. If we look at month-on-month figures, Cherry Group is taking over the competition clearly. Even though the figures are relatively smaller in Latvia, compared to Lithuania for example – the difference is clear. On a monthly level, the overall market size in terms of revenues was around 911 000 euros.
The market overall
Another interesting figure is the average deal size in each of the countries. It rolls around 10-14 euros depending a little on the provider and the market, but on average the deals are relatively small in size. Then again, they probably appeal to many and the barrier to get on board is low.
Overall, Cherry Media Group had a turnover of 1.2 million euros in September and it’s growing strongly. Below is the development of their monthly revenue since May 2010, when they launched the service. I have a feeling we’re going to be hearing a lot of good stories from the company in 2012. Performance like this does not go unnoticed.
The future is definitely bright for Cherry Media Group, but what about the industry as a whole in the Baltics? Aldas Kirvaitis, the CEO of Cherry Media Group states that the competition has been fierce due to the fact that “daily deals industry is one with virtually no barriers to entry but very significant barriers to scale”.
Some of the market players that started out in late 2010 are no longer around due to this fact. It’s easy to setup shop, but very difficult to scale your business. The market overall continues to expand in the Baltics as late comers also discover the cheap bargains available to them. However, the future will see the industry consolidate quite dramatically. Many of the smaller players are bound to go out of business or get acquired.
Despite what future might have in store for Cherry Media Group, one thing is clear – they’ve been able to build one hell of a business in a fragmented and small market!