

Why Group Buying Is Leaving Local Businesses Behind - emilyann
http://mashable.com/2011/01/20/group-buying-local-business/

======
klochner
I agree with the basic idea - large brands shouldn't have to pay the usual
Groupon-style 50% margins, but they probably don't - LivingSocial/Groupon
likely offer large brands heavy discounts, like a cross-promotion. And I'm
sure Groupon is happy to run custom promotions for large brands.

Anyway, this annoyed me a little:

    
    
       2. Brands that need a quick shot of cash can capture that
          demand with a great deal and the right social commerce
          middleware 
    

coming on the heels of this:

    
    
       Chris Treadaway is founder and CEO of Lasso, the
       social commerce middleware solution for brands
    

I don't know of any other companies pitching "social commerce middleware", and
nowhere does he define said middleware.

I'd prefer he go ahead and just pitch his solution instead of using this
circuitous "large brands should use middleware"-->"what is
middleware?"-->"middleware is lasso!".

------
wccrawford
"Group buying"? I don't think I'd call a bunch of individual customers a
"group" just because they visited the same site on the same day. I also don't
think I'd call the site a "group" because the site didn't buy anything, they
just arranged a deal for the individual customers.

"Group buying" would be people coming together as a "group" and buying a LOT
of 1 thing, then splitting it up.

If we're going to call Groupon "Group buying", every newspaper in the US (and
possibly the world) has been doing it for decades.

~~~
catone
Whether the term is semantically correct or not, "group buying" is how most
people have been referring to those types of sites (either that, or "daily
deal site" -- though even that, one could argue, is incorrect, since many of
these sites have deals that last more than one day or present more or less
than one day or present multiple deals in a day).

Your point is valid, I suppose, but the accepted nomenclature is the accepted
nomenclature.

~~~
jhancock
It is unfortunately accepted nomenclature, but still off and there exist
models that are truly "group buying". This model is quite popular in China.
Hundreds of people will show up in front of a big store in China in the
morning and demand a 10% across the broad discount or else none of them will
go in the store. That's group buying.

------
pchristensen
This guy is missing the point. Small businesses _have_ to buy exposure because
they don't have the capacity to generate it. Big brands that have exposure,
fans, advertising, etc don't _need_ Groupon & Co - it's one of many options
they have for acquiring new customers.

Also, as Groupon and Living Social do customer acquisition deals where they
cover the discount in order to get people to sign up (Groupon has done it too,
although I'm not sure I'm allowed to say which deals we did it for), then big
brands enter the picture as _audience vendors_ to the deal sites.

So LS pays $10/customer for Amazon's brand equity. The local spa doesn't have
brand equity so they buy customers from LS or G for 75% (in practice more like
30-60%) of that customer's bill.

He's also WAAAAYYYYY off when he says local businesses are being left behind.
Groupon has done a couple dozen national deals, and while there are more and
bigger ones to come, there are some large number, call it 1,000 for round
number purposes, deals a day, spread over ~500 cities, almost all of them from
local merchants. Amazon was the first national deal I've heard about LS doing
so I assume they're about the same.

------
pedalpete
I'm not a group buying user, but I think this article clearly shows the
separation between journalist and entrepreneur.

Ignoring the question of if group buying makes sense for large brand, the
desire for local businesses to leverage group buying capabilities is a
recognizable issue with the explosive growth of the business.

If groupon and livingsocial are no longer filling the need, those companies
will adapt, if they need to, or another company will fill their shoes.

This article points to the issue of group buying not working for the consumer.
But I question how it really works for the businesses. Good on groupon and
LivingSocial for being able to extract the huge $$ from businesses to run
deals. I suspect we'll see a drop in the amounts businesses are willing to pay
to run a campaign with either of these businesses.

This article doesn't only say that 'local businesses are being left behind',
but that 'the consumer is the big loser'. If consumers are truly losing,
doesn't that mean the marketers are loosing too? Ergo, the company running the
campaign is loosing. It is WAY to early to make these calls on this sort of
environment. All 3 parties are still figuring out what works.

~~~
damoncali
I think his larger point is that it may not be working for _anyone_ in the
future, and that all of this stuff is about to change quite a bit.

------
thinkwise
Group buying has been around for eons starting in China known as tuangou.
Although there are lots of new competitors in the space, there is clearly a
great deal of pent up demand from local businesses in the marketplace. I doubt
that this form of consumer purchasing will die anytime soon.

One should ask themselves why there is so much pent up demand for group buying
in the marketplace?

Some critics focus on poor efficacy rates for repeat business from Groupon
customers. Others will claim that it is a fad. Still others will argue that
the business running a Groupon campaign will not make money from the deal.

But what is the alternative?

The alternative for most businesses is to purchase ads in local print
newspapers, create print flyers, and other more traditional means of
marketing, which all require upfront costs from the local business. Most small
businesses do not use online SEM.

The great advantage with Groupon is there are no upfront costs. (1) Businesses
get thousands of impressions from the email marketing campaigns showcasing
their deal. (2) If a deal gets executed the business gets guaranteed foot
traffic and revenue from customers, which is trackable. (3) There is the
potential to acquire a percentage of new customers as repeat customers. All of
this with no upfront costs.

The reason I am very optimistic on the continued growth of this model of
purchasing is that the market is validating it. You can see this from the
explosive revenue growth numbers of group buying companies. And businesses
recognize that it is much more cost effective and measurable to launch a
Groupon than invest in the alternative.

So the analysis should not be what is the best or perfect solution for local
businesses to acquire customers, but what is a marginally better alternative
for customer acquisition. Group buying is.

For large businesses, I see a similar value. I would make an educated guess
that Gap and Amazon spend a great deal of money on customer acquisition. Thus
the group buying economics probably work in their favor. I would have a hard
time believing that they lost money on their Groupon campaigns. Even if they
broke even, it is a campaign that successfully drove millions of paying
customers to their site, broke major headlines, and was great PR for both
companies. Just because you are a big company doesn't mean that you do not
appreciate this kind of attention.

We are witnessing the nascent stages in the evolution of group buying. Larger
companies like Groupon and LivingSocial will build an incredible amount of
data to mine for new initiatives like determining their customers' preferences
and targeting them for secondary purchases. This is just the beginning.

------
thinkwise
Group buying has been around for eons starting in China known as tuangou.
Although there are lots of new competitors in the space, there is clearly a
great deal of pent up demand from local businesses in the marketplace. I doubt
that this form of consumer purchasing will die anytime soon.

One should ask themselves why there is so much pent up demand for group buying
in the marketplace?

Some critics focus on poor efficacy rates for repeat business from Groupon
customers. Others will claim that it is a fad. Still others will argue that
the business running a Groupon campaign will not make money from the deal.

But what is the alternative?

The alternative for most businesses is to purchase ads in local print
newspapers, create print flyers, and other more traditional means of
marketing, which all require upfront costs from the local business. Most small
businesses do not use online SEM.

The great advantage with Groupon is there are no upfront costs. (1) Businesses
get thousands of impressions from the email marketing campaigns showcasing
their deal. (2) If a deal gets executed the business gets guaranteed foot
traffic and revenue from customers, which is trackable. (3) There is the
potential to acquire a percentage of new customers as repeat customers. All of
this with no upfront costs.

The reason I am very optimistic on the continued growth of this model of
purchasing is that the market is validating it. You can see this from the
explosive revenue growth numbers of group buying companies. And businesses
recognize that it is much more cost effective and measurable to launch a
Groupon than invest in the alternative.

So the analysis should not be what is the best or perfect solution for local
businesses to acquire customers, but what is a marginally better alternative
for customer acquisition. Group buying is.

For large businesses, I see a similar value. I would make an educated guess
that Gap and Amazon spend a great deal of money on customer acquisition. Thus
the group buying economics probably work in their favor. I would have a hard
time believing that they lost money on their Groupon campaigns. Even if they
broke even, it is a campaign that successfully drove millions of paying
customers to their site, broke major headlines, and was great PR for both
companies. Just because you are a big company doesn't mean that you do not
appreciate this kind of attention.

We are witnessing the nascent stages in the evolution of group buying. Larger
companies like Groupon and LivingSocial will build an incredible amount of
data to mine for new initiatives like determining their customers' preferences
and targeting them for secondary purchases. This is just the beginning.

------
pchristensen
"Group buying", etc [Groupon, Living Social, etc] are _marketing expenses_.
The best way for any merchant to think about it is that by being featured on a
group buying site, they can have a Black Friday. Huge buying potential, lots
of customers, a chance to upsell or convert. You get the same benefits and
risks as every retailer does the day after Thanksgiving.

