How Brands & Retailers Can Profit from the Group-Buy Trend

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As investors pour millions into social commerce sites of the Group-Buy persuasion, should brands and retailers be looking to add Group-Buy functionality to their sites?

If investment activity is an indication of market opportunity, then adding Group-Buy features to e-commerce sites – a la Dell Swarm – is a no-brainer.  18-month-old-and-already-profitable startup Groupon has just received $135m investment from Facebook backers DST, valuing it at $1.2bn (projected sales $350m this year). And last week the US Group-Buy challenger site LivingSocial received a further $14m funding from a group of investors led by Lightspeed Ventures (taking total funding this year to $44m).  Meanwhile, German Group-Buy site, CityDeal recently received a further $5m Samwer brothers funding, and event shopping giant Gilt has just invested in creating its own local Group-Buy brand – Gilt City.


All this while startups are investing time and effort in new and creative variations of the Group-Buy local-deal-a-day model (70+ sites in US, 15+ in Germany and counting); focusing on particular niches (e.g. restaurants – BlackboardEats, and Feastery), deals with local newspapers, Group-Buy deal aggregators (e.g. Yipit) and imaginative deal tweaks such as making the size of the discount dependent on the number of people signing up, and special private VIP deals for premium members (HomeRun avalanche deals and ‘private reserve’).

Adding Group-Buy functionality also makes sense from a consumer trends perspective.  Group-Buy is a novel form of local advertising (‘Woot Local’) that builds on three big trends (in addition to the obvious social media trend) – the real-time-web, the location-based web (80% of disposable income is spent within 5 miles of home), and O2S (online to store), the trend that has Google fixated. The net result? A surge in popularity of Group-Buy traffic.

So how could online retailers go about implementing Group-Buy on their sites?  Well most obviously, they could either participate by offering deals with these sites, or deploy Group-Buy widgets on their own sites from social commerce solution providers such as Twongo and eWinWin.

Another approach for profiting from the social commerce group-buy trend could be to experiment with the Group-Buy blueprint proposed this week by Jim Tobin, president of social media agency Ignite.  Although Tobin sees these ideas more as an opportunity for marketplace sites looking to seize social commerce opportunities, they could easily be adapted and deployed as ‘brand butler‘ services by brands and retailers.

Phase I: Group Facilitation – Add a simple forum to your site, and invite customers to connect and coalesce into groups looking for a particular product and then come as a group to you ask for a discount.  If you are a brand, consider setting up a group-buy forum for category-related non-competitive products

Phase II: Group Negotiation – Now invite suppliers and partners to pitch for the business of the groups as they emerge

Phase III: Procurement and Purchasing – Next move from simply facilitating deals to taking payment for them (benefits of negative working capital)

Phase IV: Direct Distribution – Begin sourcing products directly from manufacturers to secure better deals for customer groups

Perhaps you’ll decide that Group-Buy opportunities are not for you.  Nevertheless Group-Buy is at the epicenter of social commerce right now – so surely that at least merits a discussion with your colleagues and agencies?

Warren Knight thanks


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