A Business Owner’s Guide To Group Buying Sites

Updated: March 24, 2011

There are two positive things that group buying sites are doing for Filipino consumers.

First, it’s helping them save money.

And second, it’s encouraging them to try and be more confident about shopping online.

But how about business owners?

What do group buying sites positively do for merchants?

For today, we take a closer look at group buying sites from the perspective of the business owner. We’ll talk about its advantages and disadvantages and also, give some points to consider to help you decide if your business should go into group buying or not.

Advantages of Group Buying Sites

Above anything else, it is a great marketing tool. Group buying sites can create brand awareness for relatively unknown businesses.

Also, most group buying sites offer deals at city-level. This helps merchants geo-target customers that can easily be converted to repeat sales.

For established businesses, collective buying sites can be used to launch new products or services.

And lastly, since these vouchers are prepaid and the deals are available only for a limited time on the site – businesses are readily paid in lump sum for the goods and services sold. This is a benefit because in business, remember that cash is king.

Disadvantages of Group Buying Sites

Group buying is not for all merchants. Businesses who don’t mainly cater to end-users may not be able to optimize the marketing benefits that group buying offers.

And contrary to what most business owners might think, offering group discount vouchers is not a good way to make profit. In reality, most businesses end up at breakeven or even with losses after the deal.

It’s really important to first consider your business financials before venturing into group buying. Keep in mind that this is a marketing expense and not an income strategy.

Moreover, while participating in collective buying could bring you new clients, your regular sales income can decrease if your loyal customers purchase multiple vouchers from these sites.

And speaking of new clients, many deal-based customers don’t necessarily become repeat customers. So it’s important to have additional marketing strategies that will encourage first-time visitors to come back.

Lastly, group buying sites could overwhelm your business with customers. If your business is not ready to handle the traffic, then your customer service could fail and hurt your business reputation instead.

Things To Ask Yourself Before Dealing With A Group Buying Site

  • What are my marketing objectives that makes group buying a good strategy for my business?
  • Can I afford it? Remember that this is a marketing expense and not an income activity.
  • Do I have the right product or service to offer, like those that…
    • Are low cost: so I could offer a high item volume for this deal
    • Have high profit margins: so I could minimize losses or afford to offer good discount rates
    • Are consumable: so that repeat customers are more likely to happen soon
    • I can use to upsell or cross-sell other products or services: so I can have potential profit
  • Can my business handle the demand? Is my staff prepared for the increased influx of customers?

Things To Ask The Group Buying Site Before Making The Deal

  • Who are you? What is your company profile? Where is your office?
  • What are the demographics of your members? Are they my target market?
  • How do you market your company? How do you specifically help businesses promote their brand?
  • Who are the businesses you’ve worked with? Are any of them my competitor?
  • From the point of view of the consumer, how does your site work and what makes it different from other group buying sites?
  • What are your deal requirements? How much is your share of the sale?
  • How and when does my business get paid for the sale?
  • What happens after the deal? Do you offer after-sales support?

Group buying is definitely alive and very much active in the country today – with deals being offered not only in Metro Manila, but in other key cities as well.

And while more and more consumers are joining and buying from these sites, it doesn’t necessarily mean that it will be a good marketing opportunity for your business – so study it well.

Are you a business owner which have participated in group buying? How was your experience? Did it helped your business or not? Please share your story below.

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  1. good day,

    mr. fitz after reading your article about registration of business there’s a question pop up in my mind, because im planning to start an online business like selling clothes accessories through online do i still need to register it in DTI or any other? please help. im looking forward to your response soon.

    more power!

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