Understanding Group Buying in International Markets

The basic idea of group buying is that buyers come together to approach a vendor about buying a particular product in bulk. UnderstandingGroupBuyinginInternationalMarkets Home»Blog»UnderstandingGroupBuyinginInternationalMarkets March10,2021 Thebasicideaofgroupbuyingisthatbuyerscometogethertoapproachavendoraboutbuyingaparticularproductinbulk.Buyingatscaleusuallymeanstheycannegotiatealowerpricebyworkingtogether.Alowerpriceisn’ttheonlymotivatingfactorthough.Thistypeoftradecanevenenabletransactionsthatsimplywouldn’thavebeenviablewithoutthegroupbuyingapproach. Buyingingroupsisn’tanewconceptbutthesecommunitieshavebeenhugelyenabledbytechnology,particularlysocialmedia.Thishasmeantthatthesegroupsareenabledfordifferenttypesofpurchasesandfordifferenttypesofconsumer. Oneexampleiscollectivebuyingofhouseholdsolarpower.TherearemanylocalschemesinplacesincludingtheUKandUStoenablehouseholdstogetsolarpanelsinstalledbyorganisinglocalhouseholdstocometogetherasagrouptoapproachinstallers.Itmakesitworthwhileforinstallerstoprovidethisserviceifthereareenoughbuyersinarelativelysmallareaandmorecost-effectiveforbothparties. Groupbuyingdealscanalsohelpbusinessesmanagetheircapacitybetter.Acommonexampleisahospitalitybusinessthatoffersagroupmealorentertainmentvoucherdealthat’sonlyvalidonquieterpartsoftheweek.Marketingcostsarelowerforofferingthedealtoagroupwherevolumeislikelytobehigh. Thiscanbringinfootfallduringtheweektoabusinessthat’sgenerallyonlybusyatweekends.Althoughitmightnotbeasprofitable,thevenuewillattractcustomersthatprobablywouldn’thavemadeapurchaseatthenormal,higherrateandbusiertimeandhelpsmanagecapacitybetter. Buyinggroupsareincreasinglyanoptionforbusinesses–evenonesthataren’tbigenoughtohaveaformalisedprocurementfunction.Sometimes,groupbuyingisenabledbyamiddleman,suchasaprocurementgroup.Sometimesthey’reorganisedonplatformssuchasWhatsAppandLinkedIn,tovariousdegreesofformality,andthesetendtobesector-specific. Buyinggroupsinthepandemic Manybusinesseshavehadtopivotatbreakneckspeedtostayafloatduringthepandemic.Foodbusinessesarejustoneexampleofanindustrythat’shadtoadaptrapidlytonewwaysofoperating. Somerestaurantshavestayedoperationalbystartingtooffertakeawayfoodandfinish-at-homefoodkitsthathaven’tpreviouslybeenamajorpartoftheiroffering.Thishasmeantscramblingtofindtherightpackaging.Luckily,thistypeofstandardisedcommoditylendsitselfwelltogroupbuying. OneprocurementgroupintheUKfoundthatitsmemberswereparticularlydemandingofitsservicesduring2020astheirbuyingneedschangedrapidly.Itattributessomeofthe20%increaseinbuyingfromitsmemberstorestaurantssuddenlyrequiringtakeawaypackaging,aswellasahighvolumeofdemandforpersonalprotectiveequipment(PPE)tomeetnewhygienestandardsintheCovid-19pandemic. AnincreaseintakeawaypackagingisjustoneexampleofhowtheCovid-19pandemichasimpactedgroupbuyingbehaviourintheUK. Butwedon’tneedtobeinthemidstofapandemicforbusinessestobenefitfromgroupbuying.Forsmallerbusinesses,there’sarealadvantagetoteamingupinordertoformalargerscalebuyingteamandaccessthesavingsthatareusuallyonlyavailabletolargerorganisationsbuyingatscale. Fornewerbusinessesstrugglingtosetupasupplychainandgettakenseriouslybysuppliers,joiningagroupmayhelpthemgaincredibilityasabuyer.Somebusinessesalsofindthegroupbuyingapproachlesstime-consumingastherearefewersupplierstohavetodealwith,fewerinvoicestomanage,andsometimesrequireslesstimespentsearchingfordealsandnegotiatingwithsuppliers. READMORE:IstheGroupBuyingMarketBecomingMainstream? Advantagesforvendors Whenbuyersorganisethemselvesintogroups,thereareadvantagesforthevendortoo.Forastart,thereareadvantagesforvendorsthatarehopingtoscaleup.There’susuallyalowercosttoservecustomersthatbuyasagroup,withloweracquisitioncostsperbuyerbecausethegrouptendstoorganiseitselfandrecruititsownmembers. Individualbuyersaren’taslikelytoaskforspeciallycraftedproductsordeals.Dependingonhowthebuyersareorganised,theremaybefavourablecircumstancessuchasbeingmorecloselygeographicallylocated. It’salsothecasethatgroupbuyingmayenablesalesthatwouldn’totherwisehavehappened.Inabusinessbuyingcontext,itmaybethecasethatindividualbusinessesaretoosmallforavendortoserve. Ifthesamebusinessorganisesitselfintoagroupwithothersmallbusinesses,thevendormayfinditcost-effectivetoservethem.Evenbetter,thegroupmediatorsmaytakeonsomeoftheworkassociatedwithfulfillingtheorder,suchasbydistributinggoodsamongmembers. Dependingonhowthegrouporganisesitself,sellingthiswaymaybeaneffectivewaytoreachanewaudience.Thisisoftenbecausethevendorisreachingbusinessesthatareusuallytoosmalltomakethemaprofitablecustomer.Thishastheadvantageofhelpingthevendorcoverpartsofthemarketthatwouldotherwisebereachedbycompetitors,andgainmarketshare. It’sadvantageousforvendorswhentheircustombaseorganisesitselfintoahandyreachablegroup,andthat’sexactlywhathappenswhenpeopleandbusinesseswithspecialintereststeam-up.Notonlyaretheyidentifyingthemselvesbyareaofinterestbuttheyarealsoshowingtheyarereadytobuy. Itmakesiteasytoreachtherightconsumerattherighttime.Forvendorstryingtoreachbusinesses,itcanbeahelpfulwaytoreachtherightpeopleinthatbusinessastheonesresponsibleforthebuyingdecisionstendtobetheonesinthebuyinggroup. Buyinggroupstendtooffertheirmembersmorethanjustdealsonproducts.Whethertheyareonlineorofflineit’scommonforthegrouptodiscusstopicsofinterestwiththepeopleinthatgroup,andsometimesorganiseevents.Ifyou’reavendortryingtoengagewiththisaudienceitcanbeanexcellentwaytoseewhat’sconcerningthemandtrytobepartofthatsolution.Inthisway,buyinggroupsoffermuchmorethanjustopportunitiesforimmediatesales. Groupbuyingfornewmarkets Ifyou’rethinkingofenteringinternationalmarkets,approachingagroupbuyingcollectivemaybeanoptionforyourbrand.Itcanbeafastwaytogainanintroductiontoanewaudience,mediatedbythegroupbuyingplatformordealbroker. Thereareadvantagesanddisadvantagestousinggroupbuyingtobreaknewmarkets.Obviously,it’safastwaytoenteranewmarketandgetyourbrandvisible.Ifyoucanfindtherightgroupofconsumersorbusinesses,itcanhelpyouconnectreallyquicklywithyourintendedaudience.Andit’sawaytorapidlyscaleinanewmarketandpotentiallygrabmarketshare. Ifyou’rebringinganewproductintothismarketandconsumersdon’treallyunderstandit,thengroupbuyingisanabruptwaytofindthisout.Ifyoustartoutinanewmarketwithahighvolumedealthenyoumayalsohavetotacklehighvolumecustomerdisappointment,returnsandcomplaints. Ideally,youshoulddosomesmaller-scaletestsaleswithcustomersinamarketbeforeyoutrytomakehigh-scaleones.Groupsellingwillalsohighlightallthelogisticalchallengesassociatedwithsellingtoanewmarket. Ifyoufailtomeettheexpectationsofyourbuyersinagroupdealthenit’smuchhardertorecoverfromthisthanitwouldbefromasmallervolumemistake.Rememberthatyouraudienceisalreadyorganisedintoaconsumergroupandmayfinditeasytoorganiseagainstyou.Thiscanreallydamageyourreputation. Approachingabuyinggroup Ifyou’reinterestedinsellingtobuyinggroups,it’sadvisabletochooseonewithagoodreputation.Don’triskyourreputationbybeingassociatedwithagroupthatisknownforbadquality.Buyersuspicionwilldiminishthevalueofyourproductorservicemerelybyassociatingitwithpoor-qualityvendors. Manyvendorshavehadsuccessinofferingasimplifiedorrestrictedversionoftheirregularproductorservicetocustomersbuyingaspartofagroup.Anexamplewouldbeonlyofferingthemedium-sizedversionofaproductthatusuallycomesinsmallandlargeaswell.You’llneedtodecidewhetheryourproductorservicecanstillgeneratehighvolumeappealinaone-size-fits-allversionofwhatyounormallyoffer. Craftyourdealcarefully.Somegroupbuyingsitesofferdynamicpricing,whichmeansthecosttothebuyervariesaccordingtohowmanybuyersenterthedeal.Itsoundsobvious,butmakesurethatwhateverthepriceandvolumeare,it’sstillworthwhileforyoufulfillingtheorder. Makesureyoucandeliverontimeandmeetthetermsofthedeal,asit’sahighprofilefailureifyoucan’t. Youshouldalsobeawarethatwhenahighvolumeofbuyersreceiveyourproductorserviceatthesametime,theremaybeacorrespondingriseindemandonafter-salescareandcustomersupport. Ifyou’reusinggroupbuyingasastrategytoenteranewmarket,besuretoinvestinmultilingualcustomersupport. It’salsoimportanttorememberifyou’reusingbuyinggroupsasafirstpointofentryforanewlanguagemarket,sayFranceforexample,you’llneedtohaveadditionalFrenchlanguageresourcestotackleassociatedcustomersupportenquiries.AreportfromtheICMIrevealedover70%ofcustomerserviceleaderssaid“supportinacustomer’snativelanguageincreasedtheirsatisfactionwithcustomersupport”. Youmightalsoseeahighvolumeofreturnsthatneedprocessingatthesametime.Makesureyouhavetheinfrastructureinplacetohandleallthiswithinthetimescalesvendorsexpect.Fulfillingbigdealsfromgroupbuyingsitescanreallytestyourresources,particularlyforthingssuchasresponseanddeliverytimes. Dangersofgroupbuying VendorshavegotintotroublethankstobadlycrafteddealsonsitessuchasGroupon.It’simportanttoapproachgroupbuyingdealsinaninformedway.Makesurethere’sacaponsalessoyoudon’tovercommitorseethedealbecomeunprofitableforyourbusiness.Additionally,ensurethatyouplanyourcapacityandbewaryofintermediariestakingahugecutofanysales. Youshouldalsobewaryofgroupbuyingintermediariesthattellyougroupbuyingcanbringinnewcustomersandwinthemawayfromcompetitors.Whilethatmaybethecasesometimes,it’sbynomeansguaranteed. Thereisariskthatcustomersthatpreviouslyboughtfromyouindividuallymightswitchovertobuyingaspartofagroup,whichmaynotbeasprofitable.Ifyougetnewcustomers,theymaybeprice-sensitiveandmayswitchagainifthedealsaren’tasfavourable.Customersthatpreviouslyenjoyedalowerpricebuyingfromyouaspartofagroupmaynotbepreparedtopaytheusualpricewhenbuyingasanindividualinthefuture. Althoughgroupbuyingcanbeaverydifferentprospectfromyourusualwayofdoingbusiness,therecanbehugebenefitsifyoucrafttherightdealandapproachthegroupeffectively.Ifyoumanagetoexecuteagoodgroupbuyingdeal,thereareusuallyopportunitiestorepeatthetransactionatalaterdate. Groupbuyingisreallyaboutrelationships–betweenthebuyersaspeers,betweenvendorsandbuyersandbetweenvendorsandanymiddlementhatrepresentthegroup.Ifyoucanmanagetheserelationshipseffectivelytherecanbehugebenefitsfromengagingwithbuyinggroups. WrittenbyDemetriusWilliams DemetriusWilliamsisaDigitalMarketingSpecialistatTranslateMediaandhaspreviouseCommerceexperienceworkingwithanumberofluxurybrandsinthefashionandbeautyindustry.Heenjoysphotography,binge-watchingNetflixandcanoftenbefoundroamingaroundLondonwithacamerainhishand. Relatedposts HowWillRetailersBouncebackFromthePandemic? August31,2021 HowGenderFluidityInfluencestheFashionIndustry August24,2021 HowBrandsCanManagetheConstantGratificationModelinRetail July6,2021 HowtoIdentifytheBestMarketsforEcommerceExpansionOpportunities May14,2021 Recent Popular HowtoManageTextExpansionandContractioninTranslation April12,2022 WhatDoestheEndofThird-partyCookiesMeanforAdvertisers? March3,2022 HowtoImplementanEffectiveMobileAppLocalisationStrategy December7,2021 HowtoMakeConsumersFeelSecureOnlineinAnyLanguage November15,2021 HowtoLocaliseYourEcommercePresenceEffectivelyinChina November8,2021 HowCultureInfluencesConsumerPurchasingDecisions September6,2019 HowCultureisImportantinLanguageLearning April10,2019 CulturalSensitivity:HowtoMarketYourBrandtoOtherCultures July9,2018 HowtoDescribe“Luxury” October4,2017 Understandingthe6DimensionsofUKCulture September1,2017 Subscribetoournewsletter Subscribe Byusingourwebsiteyouagreetoallowustousecookies.Ok