Group-buying websites have launched a worldwide Internet craze.
With the holiday buying season upon us, the sites also are an
alternative to traditional online shopping.
Group-buying websites have launched a worldwide Internet craze. With the holiday buying season upon us, the sites also are an alternative to traditional online shopping.
The idea is simple: provide your email address, receive emails with deals of the day, and click “buy” if you like it. Discounts are often as much as 50 percent, and climb from there (70, 80 even 90 percent off).
But don’t confuse these sites with Web coupons, which you redeem when you make your purchase at the store. Similar to a gift card, here you’re actually purchasing the deal from the group-buying site. You then receive a voucher to exchange for your pre-paid merchandise or services.
Most sites will not charge your card immediately – a certain number of customers have to “buy” the deal for it to be activated. In most cases, if that number is not reached, the deal is canceled and no one is charged. If the deal does go through, you receive your voucher either by e-mail or traditional mail within a day or two.
Some say the group-buying phenomenon serves as a win-win for both customers and businesses, while others disagree, particularly noting the adverse effects mass buying can have on budding businesses.
Customer trade-offs
Pros:
– Money-saving deals: Customers can get products and services at severely discounted prices.
– Community: The deals encourage locals to explore their city and region.
– Convenience: It’s free to sign up, get daily deals e-mailed to you; most deals don’t expire for a year or so.
– Perks: Some sites give you extra perks for sharing the deal with friends, who also purchase the deal.
– Charity: Some sites donate a portion of your purchase to a cause.
– Privacy: Email addresses are not given out to businesses when you buy deals.
Cons:
– The fine print: If the minimum number of orders is not reached, the deal is canceled and you do not get the deal; most businesses require that you redeem the voucher for its full value in one use; may end up spending more than you want to because a lot of deals require that spend a certain amount of to receive the deal; most deals cannot be combined with other deals or vouchers.
– Timeliness: Deals do eventually expire; unlike a traditional gift, vouchers cannot usually be regifted later.
– Location: If either you or your giftee don’t live in or near a major city, you might not be able to find deals near you; even if you do live in a large city, traveling is sometimes required to participate in a deal.
– Buyer beware: Consumers usually aren’t able to “return” deals once purchased; this may be problematic for those who receive vouchers as holiday gifts and are not interested in the deal they receive.
Business trade-offs
Pros:
– First impressions: Participation in a deal shows your business is tech-savvy.
– Increase in number of sales: Can generate a lot of sales in a short amount of time, which can be useful for companies with small or nonexistent marketing budgets.
– Traffic and name recognition: Can attract new clients by offering discounts to get first-time customers to check out a business, with the opportunity to convert new customers into return customers.
– No harm, no foul: If the minimum number of orders is not reached, the deal is canceled and no one benefits or loses from the deal.
Cons:
– Cost of the deal: Depending on the site, businesses share up to 50 percent of revenue earned from the deal with the group-buying site.
– Future marketing: Local businesses are not provided with the email addresses of customers that buy the deal.
– Repetition vs. an annoyance: There are real concerns of diluting your brand if deals are done too often.
– “Deals-only customers”: The type of customers drawn by the deal may not be what your business wants – some customers only spend just what they need to for the coupon to take effect, which could cause a loss in revenue.
– Competition for deals and advertising: Dozens of group coupon buying sites exist now, so there is more competition for deals.
A Look at Sites
Groupon: www.groupon.com
Features deals in more than 150 cities in the U.S. and Canada and 23 other countries.
What makes it unique: Being the largest social buying site, Groupon has applications available for both the iPhone and Android devices, unlike many other sites of its kind.
LivingSocial: www.livingsocial.com
Features deals in dozens of U.S. cities, Canada and four locations in the United Kingdom.
What makes it unique: In addition to its iPhone app, LivingSocial has two popular Facebook applications, Pick5 and Visual Bookshelf, which allow members to share their favorite things with friends – including books, sports teams, celebrities, etc.
HomeRun: www.homerun.com
Offers deals in more than 30 U.S. cities.
What makes it unique: HomeRun allows members to earn “credit,” its own form of virtual currency, through promoting the site. Credit can be used to make a purchase, and if you earn enough credit by inviting friends to join, you can get a free deal. In addition, other features, such as the “Beginner’s Luck” and “The Private Reserve” allow members to gain more benefits. The “Beginner’s Luck” feature gives new members the chance to take advantage of many deals within the first 30 days of joining. Members join “The Private Reserve” section when they gain a certain amount of HomeRun points. The section offers exclusive deals to the most valued members.
SocialBuy: www.socialbuy.com
Features deals in more than 50 U.S. cities.
What makes it unique: Social Buy also promotes the “group” aspect of group buying – for every friend you refer to the site, you get one “SocialPoint.” When any friend you send a sign-up link to joins, you earn an additional 5 points (up to 50 friends per month). If any of these friends purchase their first deal in the next 30 days, you earn $10 in SocialBucks, which are equal to one U.S. dollar and can be used toward any purchase.
Dealster: www.dailydealster.com
Offers deals in more than 50 U.S. cities.
What makes it unique: Dealster not only gives members a $10 credit for referral, but its coupons also are transferable and can be given to others as gifts.
Grub Life: grublife.com
Offers deals for restaurants and eateries in and around six large public universities.
What makes it unique: Grub Life is a condensed version of the traditional group-buying site, created specifically for money conscious, food-loving college students. Grub Life takes advantage of the 18-to-25 crowd’s addiction to technology by alerting members via e-mail or text message of new deals.
Tippr: www.tippr.com
Offers deals in 12 major U.S. cities.
What makes it unique: For one, the site does not offer just one deal each day for your city – it offers three! In addition, Tippr features “accelerated deals.” Essentially, the more members you invite to Tippr who buy a daily deal, the bigger a discount you all receive on that deal. “It encourages a lot more sharing with friends,” said Martin Tobias, CEO and Founder of Tippr. In addition, Tippr distributes their deals to more than 100 online syndicators who feature their daily deals on their websites. According to Tobias, doing so provides higher-quality customers who walk in the doors of featured businesses. “We deliver the businesses more valuable, loyal customers,” Tobias said. “They’re not just deal-hunters.”
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