Group Buying Approach Explained
The group buying approach is basically a method for a group of people to get together and buy some sort of item or service in bulk. This big bulk buy means that discounts can be negotiated. If you think of a single person going into a restaurant for a meal, that person does not really have any bargaining power so they will struggle to get any special discounts under normal circumstances.
Compare this to a large group of people who want to make a booking for a birthday meal. This group of 30 or so are much more likely to negotiate a better deal as the restaurants could do with the huge potential income from such a large group. Not only does the restaurant get the opportunity to make a profit from the birthday meal, they get to win over 30 people and potentially gain some new regulars so it’s worth giving a discount in order to have this privilege.
With a group buying web site, separate people who wish to make a purchase are put in a massive group so that they can be entitled to a discount.
The way that most of the group buying web sites are run goes like this: They go to a potential company, like a restaurant for example, and discuss a discount that the restaurant could offer a group of a specific size. They also negotiate the cut of the price that they get to keep if they can deliver a group of the agreed size. Once this is all agreed, the site puts this deal out to the users, the buyers pay for the offer and once the agreed number is reached the deal ends. The site then pays the seller the cut of the cash that was decided and then the customers are free to use the offer from the seller.
The dealers earnings are diminished in two ways. The first is the discount given and the second is the cut that they have to pay the group buying site. This can be well worth it though as the company received a group of new buyers that they now have the chance to impress.