In recent years, businesses have been exploring new ways to market and sell their products and services. Group buying is a phenomenon that has caught on in the last few years and it doesn’t show any signs of slowing down in the future. What exactly is group buying and why is a good for both buyers and sellers?
The idea behind group buying is that a seller can afford to sell a large number of products at a lower price if it knows that enough people will buy. Because of this, there had been a number of group buying services emerge in recent years such as Groupon
With a group buying arrangements, the group buying service approaches local merchants and asks if they have any products that they would like to sell in large quantities. They negotiate a deal in which the product can be sold at a deep discount. In many cases, the product is sold at half price or even at a lower price point. The group buying service then sends out a message to a large list of subscribers providing information about the deal. Subscribers can then purchase the deal directly through the group buying service. They will be given online coupons or a promotional code to use when they visit the merchant. The group buying service pays the merchant directly for the deal.
Advantages for Sellers
This type of arrangement can be very beneficial to merchants who decide to participate. In many cases, merchants sell their products at very high margins so that they can generate profits. Because of this, they know that if they had a large order, they could sell the same products at a much lower profit margin and still make money. In these cases, the merchant can make a decent amount just by offering a deal through the group buying service.
Another reason that these deals can be so beneficial is because many consumers buy other things while they are visiting the merchant. For example, if a restaurant offers a $20 gift certificate for $10, the customer probably won’t just spend $20 at the restaurant. Instead, he may spend $30 or $40 in one visit. When the deal is to a retail establishment, the customer may end up buying additional items that are not included in the deal. These items can be sold at regular price and the merchant can make a good profit margin on them. This means that even if the item sold through the deal isn’t that profitable, it can generate plenty of business in other ways for the company.
In some cases, these deals can be a good way to create brand awareness. Instead of spending money on a radio ad that may or may not bring people in the door, you can offer a deep discount through these group buying services. This will bring people in the door and let them see what you have to offer. If customers like what you have to offer, they will probably come back for more and pay full price next time. This can be a very productive way to bring in loyal customers.
Advantages to Buyers
The obvious advantage for buyers is that they get major discounts on many of the things that they need to buy anyway. These services typically work out deals with merchants in buyer’s local areas. This means that when you subscribe, you can expect to get some great deals on food and things that you would possibly need to buy already. The deals are usually divided up by geographic region, so you don’t get a bunch of deals that you cannot gain access to.
The online deals are usually not a sales gimmick. They actually do represent a deep discount of somewhere between 50 and 90 percent off.
Group buying is a process that has changed the way a lot of companies do business. It will be around for the long-term as more companies see the power in this promotional model.
This informative business article was provided by Victor Daly.