A few years ago group buying websites were all the rage. Lately though it seems like the quality of the goods offered has decreased, some of the deals seem too good to be true and their customer service is lacking.
The idea of group buying is that it offers products and services at huge discounts based on the condition that a minimum number of people would make the purchase.
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A deal gets “activated” when a certain number of people agree to buy. There is a time limit on buying the deal and each potential customer sees how much time is left before the deal expires.
The History of Group Buying
The concept of group buying originally began in China. It began when a small group of people (sometimes friends, sometimes strangers) would band together and agree to buy a specific product and haggle to get the price down.
The concept has come a long ways since then. Today there are several large group buying companies that offer large discounts on virtually anything if a certain number of people agree to buy.
Groupon, Wagjag, Living Social, Team Buy, and MyCityDeal all offer a selection of products and services on sale at a significant discount.
Groupon, a Chicago-based group buying company, had revenues of nearly $4 billion in 2011.
How It Works
The group buying company charges the merchant a percentage of the deal (sometimes as high as 50%!) and then resells the product/service on their behalf. The customer receives the product/service at a significant discount compared to the retail price.
The merchant receives exposure to a wider audience they would have normally seen.
The entire industry relies on growth – the group buying company relies on growing it’s base of people wanting to buy ‘stuff’ via their daily emails, and the merchant relies on growing their business by attracting a wide audience of potentially repeat customers.
Lately there have been a few issues that have come up from consumers using the sites.
– The products sometimes aren’t as advertised. If you order a red shirt, you may end up with a green one because thousands of other buyers snapped up all the red ones before you
– Impossible to get a service appointment. All the deals have an expiry date, so if you don’t get your appointment booked by the expiry date you may be out of luck
– The quality of the goods/services offered has decreased. It seems like every website now sells cheap toys, useless gadgets or items no one would need or want
– The merchants aren’t screened. The group buying business model depends on growth, so the companies will deal with any merchant that is willing to offer a significant discount on their goods. This means you may be dealing with an amateur, unprofessional or low-quality merchant
– The service sucks. A lot of the merchants aren’t used to high volumes and when they get extremely busy they just can’t handle it
This industry seems to be headed downhill fast, and I’m curious to see if the consumer backlash keeps picking up steam.
The problem with the biggest companies is that they only focus on growth and seem to neglect the customers that they already have. This could be a recipe for disaster in the future.
Personally, I love a good deal but I find the products to be of lower quality or not what interest me so I usually don’t buy. I’ve also had a couple negative experiences recently with them and have heard horror stories from others about getting the wrong goods, not being able to book appointments or businesses that shut down after the deal has been offered.
Has anyone had a positive (or negative) experience using a group buying website?