The Disadvantages of using Online Group Buying

There is always a good side and a bad side of a products or services. Online Group Buying like Groupon, WeBuy or even Everyday are good but there have their disadvantages for the company who are using it.

a)It attract low-end bargain seekers:

This is because their customers mainly comes from bargain shoppers so there are low rates of spending and low rates of return.

b)It don't generate repeat customers: 

For online group buying, you will hardly get repeat customers keep buying the deal again. They may never buy from you again without a coupon on hand. So it is mostly varies by product categories.

c)The deals are not profitable:

Normally these company will keep 50% of the revenues from each coupon deal. However for those normal company are keeping 75% of the revenues, so whenever the customer buy the deal, the company gonna loose money.

d)Deals hurts the brand:

For this, it is not building up the brand loyalty and brand awareness for all the brands because the obsession with price. Besides that, it makes customer price sensitive because they tend to pay low prices for certain products or services and become inclined to pay full price for the same item again. 

How does online group buying work?

             

                                 

Last week, I went to a hair salon and paid half of what I usually spend because of a deal that I bought in online two months earlier. When I bought the deal, I suggested it to two friends, who each bought it and I was rewarded with RM10. I used those money to buy another deal in online. And the cycle continues.

Welcome to the world of online group buying, where the power of the Web can be utilized to offer surprisingly large discounts to a sizable number of people for things they actually want to buy.Online group buying websites are popping out lately in Malaysia. It's a bit of deja-vu like many were attempting to build a local social network site some years back. They offer daily deals in your local area, sometimes up to 90% off the normal asking price and you might have wondered how the group buying work.

The way they work is simple. You sign up for a free daily email, and get heavily discounted offers from local businesses.The emails are free, and you only put your payment details in once you find an offer that you are interested. The items range from deluxe food hampers, to booking a flight ticket!

In another way to define online group buying is collective buying. The merchant is assured of a large group of customers, as well as the exposure of their brand and business, while the group of users receive sizable discounts on products or service they want.

The group buying concept has origins in the Chinese “tuangou” trend where a large group of people was executed to get discount prices from retailer when they were willing to buy the same item.The difference now is that the online group buying sites do the negotiations and gather the collective so that the individual only needs to take up the offer.

The leaders of group buying are, without doubt, Groupon. It is said to be the fastest growing company ever, with five million users in the UK alone and is available in 42 cities. Other than that, people can be notified of these deals by signing up for daily emails from the site or by checking social networks like Hotmail and Facebook. They may then purchase deals by logging onto the group-buying site and printing vouchers from the site.