The internet has been alive with the excitement and popularity of social buying websites. There seems to be a new one popping up everyday, trying to emulate the success of some of the leading names in this area.
The social element is essentially created by the customer who wants the deal informing their friends and family to also purchase the deal to increase the volume of sales, until a predetermined tipping point is reached.
As with any good internet based ideal, the aim is to create a ‘viral’ aspect to the site, which then relies on the social media networks (such as Facebook and Twitter) to spread round the internet.
The success of one of the biggest group buying sites (Groupon), as a result of its popularity, firstly with consumers, and now businesses who want exposure to the collective buying power of the sites followers, has resulted in a large backlog of businesses wanting to be featured. In reality only 1 in 8 businesses are successful in getting there deal published!
The success of the business model, and the over subscription to the group buying sites services, has opened a very large window of opportunity for competitor sites to launch. The amount is staggering, just a simple Google search will probably find you about 50, specialising in certain types of products, or in certain locations, or both! As with all successful sites, the key is traffic and more specifically subscribers who will receive the daily deals via email and thus more sales. This means good SEO and targeted advertising skills are a must.
The more popular a site is, the more sales it is able to achieve, the more it can charge in commissions and the more it can be selective in what businesses and products it promotes. This allows a simple entry strategy for a new group buying websites, as they can either charge lower commissions on sales, and/or be less selective on the businesses it advertises, providing a service to the 7 out of 8 businesses that cannot get on the biggest websites, or that simply want their promotion to be featured quicker that it would sitting in a bigger waiting list.
However, there are drawbacks for merchants increasing sales using social buying sites. These are most notably the loss many businesses make in offering up to 90% discounts, this has to be recouped by creating new regular clients from the promotion,ahrefs group buy which works to varying degrees, based mainly upon the type of business. A large percentage of the subscriber base of the social buying websites however, are savvy bargain hunters, who would rather look for the next deal to spend their money on, rather than revisiting a previous company that ran a deal for its full priced offerings.
In summary, there have been many arguments produced, stating that the social buying sites need to shift the balance nearer to the businesses that advertise and not so heavily towards the consumers. This could purely be a result of the economic climate, which has led to many businesses struggling to bring in customers. It could also be argued that as the competition in the sector increases, prices will reach a fairer equilibrium and benefit business more than is currently the case.
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