The Power of Group Shopping

August 30th, 2010

The hottest new Internet trend is collective shopping. If you already like buying dining certificates from Restaurant.com or 1-deal-a-day sites like Woot!, this is a logical next step for you. Groupon is by far the biggest of these group shopping sites, with a presence in 93 U.S. cities and mobile apps for both iPhone and Android. With the purchase of MyCityDeal, it has become one of the largest group buying websites in Europe, as well. Add to that a recently-purchased majority stake in Japanese Qpod.jp and Russia’s Darberry.ru, and Groupon’s reach extends literally around the globe – 230 markets in 29 countries. And the concept is so elegantly simple, that many other group buying clones are springing up worldwide and other popular online outlets start offering daily deals as a side service to their customers.

How it works

This economic concept puts the power in the hands of the buyers, because it’s the strength of their collective buying that enables these sites to offer up such great deals. Typically services and products are discounted 40%-60% off normal pricing, which causes a rush of people each day taking advantage of the limited deals available. Unfortunately for the country folks, the group buying sites don’t have deals in every city yet. They’re serving the big cities first, and typically give the most attention to the city where the site is based.

The entire focus of these sites is to offer localized deals. Willing merchants wanting to gain new customers become clients of the site and offer their products or services at great discount, in the hopes of adding to their customer base. The new daily deals are posted for a limited time on the shopping website and distributed through social media and email newsletters. Customers purchase the group coupon vouchers from the website. The sites offer referral bonuses or other incentives to encourage their readers to post the deals and share them with friends, because in most cases a minimum number of buyers is required to activate the deals.

The combined use of social media, outstanding deals, and bonus incentives helps to continually increase the subscriber list. When a deal first goes live, it needs to reach a minimum number of purchases before the deal is active. So if it’s not popular among consumers, then it won’t be activated and your credit card won’t be charged. If the deal is activated, you’ll be able to print your vouchers directly from the site or through an email link.

More Group Shopping Sites

Here are 5 more popular group shopping sites, each with their own twist on the basic format.

LivingSocial is probably the biggest Groupon’s competitor. They started in Seattle and now serve 55 US cities, 2 in Canada, and 2 in the UK. They have a mobile app for the iPhone and offer referral incentives. After you buy the deal, you’ll get a unique link to share, and if three people buy the deal using your link, then your deal is free.

Eversave offers customers the ability to purchase local daily deal coupons in 57 locations as well as online codes. It’s also more of a social group buying site that encourages customers to post comments, and there’s no minimum number of sales required to purchase the deals.

Home Run offers deals in 33 cities so far. The site encourages users to connect their Facebook accounts and includes profiles that show which members have purchased which deals. They’re hoping peer pressure and trusted recommendations will result in more sales. Their “Avalanche” deals don’t have static prices; the price continues to fall as more people sign up. When the deal closes, everyone pays the last and lowest price. Accrued points for visiting the site, inviting new members, sharing and buying deals, and commenting and voting can yield cash-back credits. Users with a lot of participation points are rewarded with “Private Reserve” deals and newcomers can take advantage of “Beginner’s Luck” offers.

Adility serves 44 US cities so far. It may be one of the few sites that mails out the vouchers to buyers, and there’s a $1.50 flat rate shipping and handling fee for that. They also have a 30 day return policy for unused vouchers.

Twongo created its name from the Chinese term, Tuangou, which translates to team buying or group buying. They serve about 60 locations in the US and Canada, and also have a 30-day return policy. Twongo’s extra features include live support via web chat, a public discussion forum, and Twongo Charities, for which a portion of revenue is donated to nonprofit organizations.

Conclusion

Is group shopping a fad or a long-term trend? Only time will tell. It’s certainly not a new idea. The first sites appeared more than a decade ago, and failed in a few years. But in these economic times, this business model is very appealing to the merchants as well as the customers. I don’t think group buying has peaked yet, and will continue to improve over time. As long as the group shopping sites can continue to entice more merchants to offer high discount deals, we can enjoy the savings opportunity they give us!

Entry Filed under: Shopping