Much have been said about the advantages of Group Buying – a trend that’s becoming so huge lately that Groupon, one of the pioneers in this business is now considered the fastest-growing company in the world.
Well the idea is fascinating – you offer your products and service at more than half the price, provided a certain sales volume is reached, and the deal is on! It’s a win-win deal, as it claims, for both customers and business.
Quite a number of businesses are raving about it, sharing how the concept “brought their businesses back to life” and how it helped beefed up sales, and brought in new customers.
If you have a business and want to try it out, you need to pause for a moment and ponder on this question: Is Group Buying good for your business?
And let me ask you further questions:
- How often do you intend to run a Group Buying Deal?
- Will you be able to serve and deliver the quality like when your product or service is purchased at a regular price?
- What are the reasons to go Group Buying? Over-inventory? Expiring products? Cyclical demand?
- Will you be able to take advantage of the customer data and analytics which can be generated upon running the Group Deal? Or will you even have the chance to get those information?
- Do you have a back-end system that stores and processes those data?
- Will it increase customer loyalty, or will you lose some regular customers hoping they get another deal soon?
- What will be the over-all impact to your cost and profit?
- What are the alternatives to Group Buying? Customer Rewards? Affiliate and Referral Program?
Going through these questions will actually help you diagnose the “signs” how your business is doing. If you can regularly offer your products/services at 50% or higher discount, then you probably need to review your pricing strategy.
It will tell you whether you are planning and handling your inventory levels well, or if you are able to manage the demand dynamics of your business.
Group Buying can boost your sales and bring new hordes of customers, but it can also potentially lose you some regular ones. There’s this nice resto that I visit at least twice a month, but after they went on several Group Buying deals, I had to delay my visits hoping I can grab one of those deals and save.
You see, customer behavior is now changing dramatically due to the “splurge” of Online Deals, Internet coupons and discounts, and the promise of huge savings of the same stuff they purchase on a regular basis.
While this trend can help businesses, especially the BIG ONES, it will also potentially “endanger” the small ones and those who are just starting. It can hurt margins big time, and affect the opportunities to expand and grow. No matter how much sales you generated, but making only half of the money will still hurt your profit.
Ultimately, those who are “efficient” in process and systems will prevail. Now there’s a more pressing reason to look at how to improve productivity and efficiency, as well as utilizing tools and systems to help you run your business well.
These systems and tools are inexpensive, some are “freely” available. This is exactly what my Group is working on right now. You can contact us should you need help, and by the way, our services is currently at 50% discount. LOL! Just kidding.
Imagine how discounts and deals sometimes can affect credibility?
Group Buying is a hot trend, but it doesn’t mean every business can jump into it. It has disadvantages, and it is foolish for a business to consider Group Buying is the way to go to increase sales, isn’t it? While it is now popular, there’s not much “real urgency” to jump in.
If you are not equipped with the right systems and tools for your business, and very inefficient in managing it, certainly Group Buying Deals will not help.
And no amount of Social Media hype and reviews from the Big Bad Blogger would do if you’re business is not ready for it yet.
Feel free to share you thoughts.
Sponsored ads above is served by Google Adsense.
Pingback: Tweets that mention The Dangers of Group Buying to Businesses | The Disadvantages of Group Buying | Bloggista.com -- Topsy.com
Most small businesses are forced to close their business because sites like Groupon and LiveSocial may help in their exposure but not on repeat transaction as these big group-buying site encourage its users to ALWAYS TRY SOMETHING NEW. Therefore, the ROI for the business who invested or got into the program of these group-buying sites is not actually given. It may be good for the consumers but not for business owners.
I do see value for certain kinds of businesses, the kind that needs to seek out new customers without expecting much repeat business. An example of this is a photographer who gives a walking tour of the city with good opportunities for photography. He needs a fresh supply of clients each time, so group buying seems to be an excellent approach. And cutting the price on his time by 50% will be more than made up for by having 10 or 20 people to go on these tours.
Hi Art, yeah, I definitely agree that Group buying has its advantages and in fact, at the moment you cannot find much “disagreements” regarding its benefits. At this early, this article can probably just serve as a warning for business people not to rush in.
Although I doubt if this “phenomenon” in the long run will result to re-think and re-write the basic principles of managing a business.
Me too i agree with that. Group buying gives us huge opportunity. It really save us much time.
Great post, you have written it well and your own stuff is really nice! Keep it up
-Dealies Philippines
This can be an issue but I can see how it would work for some companies.