Group Buying Systems on the Rise

On January 21st, Google announced that it is preparing to launch Google Offers, a competitor to group-buying giant Groupon1. A few months earlier, Google tried to buy Groupon for more than 5 billion dollars. Groupon rejected Google’s offer and is preparing for an initial public offering that will put the company at an estimated $15 billion in value2. On a related note, Groupon’s main competitor LivingSocial has recently acquired a $175 million dollar investment from Amazon.com.

What has Groupon done that has Google scrambling to imitate it? Groupon has taken the old age concept of discounts and coupons, and combined it with a new age concept – social technology. Groupon invites local merchants to launch a coupon that Groupon sends to all its customers in that localized region. Each “Groupon” deal has a minimum sign-up number it has to reach: if a number of people sign up for the deal, the discount becomes available to all Groupon members. However, if the minimum sign-up number is not met, nobody gets the deal of the day. Users are only charged when they sign up and if the minimum sign-up number is met. Groupon sign-ups not only give the merchants a guaranteed customer base, but also give their brands exposure to the public.

The idea behind the process described above is that Groupon reduces the risk for merchants and creates a win-win situation for both the sellers and the buyers. The predetermined minimum of sign-ups allows for the merchants to make up the lost revenue from the discounts through the additional volume from Groupon’s massive subscriber base. Due to Groupon’s 33 million worldwide subscriber bases, merchants may also use the process as a promotional platform for their own products and brand. Groupon deals encourage consumers to try out new products with the great discounts Groupon provides.

We live in a new and exciting world in which old concepts such as mail, media, and networking have been transformed by technology. The coupon business, on the other hand, has managed to stay well-saturated and unchanged for decades. The success of group buying companies like Groupon and LivingSocial shows that the coupon business too can be digitalized and revolutionized with social technology. Lastly, with the help of technologies, more local businesses could be introduced to the general public by advertising their products through Groupon.

References:

http://mashable.com/2011/01/20/google-offers/

http://mashable.com/2011/01/13/groupon-prepares-for-spring-2011-ipo-at-a-15b-valuation-report/

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5 Responses to Group Buying Systems on the Rise

  1. menewell says:

    After being turned down by Groupon why didn’t Google try to buy out Groupon’s main competitor, LivingSocial? LivingSocial already has an established presence in this market, so why after being turned down by Groupon is Google trying to start from scratch? And with there current approach do you think Google poses an immediate threat to Groupon?

  2. Shelley says:

    This article reminds me to think that I got Email from Groupon and Living Social almost everyday, but they always came to my Email”trash box”. This kind of coupon industry seems new to me. Because I used to get coupon for free, I never think of buying a coupon, although I know which will save money for me. Also, before I did not know this kind of website is for “group selling”, I did not know how they works. I know more from Jen’s article. I think I will try to see if the coupon they are selling is useful, I will try them some day, because they are new technology.

  3. aholling says:

    Groupon is also considering a move into China through the Internet portal Tencent. There is a lot of debate about whether it will succeed there. See link below:

    http://www.nytimes.com/external/venturebeat/2011/01/26/26venturebeat-groupon-in-china-why-it-could-succeed-where-21267.html?ref=technology

    • kc says:

      I think that Groupon has a great chance of succeeding in China. The article discusses that the failures of past attempts to launch a company in China were due to the lack of cultural understanding. Groupon has fully embraced the differences in culture even within the United States. The offers are specific to location, which accounts for the different interests of the population. In China, Groupon would increase awareness of brands and companies that are already established. It is a great system that is really a “win-win” for companies and consumers.

  4. Sisi says:

    Groupon is not a new technology to many people. Their competitors are not only Google. As I know, a lot of small companies started to explore this group sale business, such as 310labs. They are more focusing on customized offer and the quality of the products or service they are offering. Although those competitors are too little to beat Groupon, they brought up the next step for group sale websites — customization. Many people receive daily emails from Groupon and LiveSocial and move them to the trash without opening it. Why? It’s because those deal is not relevant to them at all. Later on, people who did not have any positive experience of reviewing deals might end up finding those newsletter annoying. Therefore, how to distribute right deals to right people will be the key for Groupon now.