Group buying. Isn’t it fun!

It’s a revolution

WHERE DID GROUP BUYING COME FROM?

“group buying” or “store mobbing,” tuangou is a shopping method that originated in China. People would swarm a store all at once and haggle for a group discount on a particular item. But people quickly realized that it was a lot less painful to contact other potential buyers and organize massive group buys online.

Let's go! (your last picture for a while)

THE OLD MODEL

• Start a group dedicated to a specific product and set a target price.Alert your network and encourage them to add in to your group. The more people join, the lower the final price.The group closes and vendors bid on the sale; lowest bid wins. The group is happy because they’ve just got a substantial discount, and the vendor just sold a lot of product

WHY DID IT FAIL IN THE 90s?

Sites like Mercata and Mobshop in the 90’s failed because:

• Buying groups could take days or weeks to form

• No social networks so no word of mouth

THIS TIME IT WORKS

• Social networks have made people used to joining groups quickly

• Texting, Facebook and Twitter means deals spread fast

• Groups fill faster creating larger discounts, incentivising buyers

• Offers for specific products

BENEFITS

• Big discounts• Discovery of unknown new services• Often get ‘side deals’ in addition to main deal• Deal personalization potential• Targeted by location (e.g. postcode)

WHO IS BUYING?

• Tend to be affluent with disposable income

• 18 to late 30s

• Likely Facebook and Twitter users

ECONOMICS

• Merchant retains minimum 50% of the deal

• High offer redemption rate, about 80%

• High spending

• Repeat customers (around 20%)

BEST FOR…

• High fixed cost businesses

• Business with high customer acquisition cost, normally have to advertise A LOT

• Business thriving on repeat customers. e.g. spas, lifestyle, restaurants

TOP CATEGORIES

City tours, Hair Removal, Spa days, Facials, Massage, Yoga, Manicures, Seafood, Pizza/Fast food, Hair Salon

FOLLOWED by Restaurants, Fitness, Life Skill classes, Food and grocery, Sporting events, Beer, Dance classes, Home services, Bars and Clubs, Treats, Wine tasting, Womens clothing, Theater

(So probably more men than women, then)

4. How To Build distribution

Email sign ups via: Refer a friend, Twitter, Adwords PPC, PR, affiliate schemes, Facebook fan pages (built by Facebook PPC) and loss leader deals.

• And a large customer acquisition budget.

AND FINALLY

We will gradually see more and more local businesses using group platforms for filling excess inventory, smaller deals, self service format (e.g. small local hairdresser wants to fill 5 chairs)

Man the barricades!

Here come the group buyers!