Retailers need to better understand group buying

  • Technology
  • Wednesday, 19 Oct 2011



Retailers need to fully understand how group buying can complement their business models before deciding to participate.

Praveen Sengar, Gartner principal research analyst for the enterprise software, said group buying is all the rage now and retailers have yet to understand how this latest trend in e-commerce can benefit them.

“Businesses must be clear on what they want to achieve with group buying before they use it to push their products and services,” he said.

Group buying offers products and services at a reduced price on the condition that there is a set minimum number of buyers to make the purchase.

In Malaysia, there are more than 50 group-buying sites, including Groupon, MyDeal, ILoveDiscounts and Milkadeal, offering attractive deals daily.

Sengar said retailers can use these group-buying sites to help bring consumers to their own site, or to expand their business, or even to win more customer loyalty.

But how ever they decide to leverage on these group-buying sites, Sengar said, businesses need to be sure that such initiatives don’t cannibalise their existing revenue models.

“Group buying should be able to bring in new customers. If similar incentives can be done on a business’ own website, even the better,” he suggested.

Group-buying sites would be more effective for businesses that have yet to set up their own web presence. “They can use group buying as a promotional tool to get people to come to their premises, by offering great deals on their products and services,” Sengar said.

Besides running promotions on group-buying sites, there are other ways of leveraging such sites to bring a business forward, according to him.

Sengar said that in addition to clearing sales, businesses could also put their excess merchandise on offer on group-buying sites.

These sites are also great places to introduce new products or services, and to get consumer feedback.

“I think the food and beverage industry can take advantage of this to gather customer feedback on new items. This way, they’ll be able to gauge what customers like and don’t like quickly,” said Sengar.

He foresees a consolidation in group-buying sites in the future as businesses understand how to use them to their advantage.

Instead of a myriad of sites, he said, there would likely be only a handful and many would be concentrating on niches.

“Some may provide private sales to a closed group of members having similar interests, while others will continue with the mass-selling model,” he said.

Sengar said it would take about three to five years for the trend to plateau and by then, businesses would have gained better knowledge on how to use group-buying sites as part of their marketing tools.

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