Although new ideas on the internet come and go like April rain, there are not many things that would cause such madness as the discount portals recently did. Concept of group buying is out there already several years but it only fully hit Czech internet scene at the end of 2009. To demonstrate the fact that it is not just another good imported idea but it is truly becoming new phenomena, one can only take into consideration that there are already more than 200 of group buying portals in the Czech Republic and several aggregator servers as well. Making it even easier, one can simply browse the web and easily see how oversaturated Czech internet is with group buying portal offers. Czechs really do like their discounts.
The idea of collective shopping (also called tuangou) originates in China and from there it spread to USA and Europe. It was very successful in the USA and continues to gain more and more popularity worldwide. It is interesting that even the big players such as Google or Facebook are realizing the huge market potential and for example Google is already launching its own group buying portal called “Google Offers.”
In the Czech Republic the avalanche of discount portals started mainly with the most popular Slevomat.cz and Zapakatel.cz at the end of 2009. Currently there are over 220 discount portals. There are also already around eight aggregator servers. Considering how small the Czech market is and the specifics of local customers that are notoriously known for being very careful, this is truly immense success. Big shark of Czech internet scene Seznam.cz and world major player Groupon.com also announced that they will enter the Czech group buying business. This can make things even more interesting in near future.
The basic idea behind the concept is quite easy and comes from fundamental economic concept of economies of scale. The more people buy certain product, the cheaper the production of this product becomes and the smaller profit margins a seller can give making the price very competitive. Group buying portals provide an opportunity to set a minimal amount of products that are required before the product discount is activated which makes group shopping very simple and economic calculation for sellers easy and with predictable results.
In reality, collective shopping concept offers much more than that. It has become mainly a great marketing tool. From the perspective of sellers, it can be used to promote a new restaurant, gym or anything else with minimal cost. If your product is good, people can come and see it on their own. It is very simple, cheap and effective. Many customers also end up buying product or service they would not even consider buying otherwise. It is easier to reach early adopters as well in this way. From the perspective of customers, the group buying offers cheaper products and if they use some aggregator server they can also easily compare different offers. They can also find something new and exciting in the area of discount offers they like.
The concept is interesting not only from economic perspective but mainly from the perspective of Media. It is almost a text book example of how new media can be commercionalized. Discount portals can be accessed from different media platforms and they are more and more interconnected with other content providers such as facebook. The idea itself also changes the balance between consumers and producers. It is not the revolution where consumers finally get the upper hand as many new media thinkers would hope for, but it still revolutionizes the way producers and consumers interact. Group buying portals match and coordinate customers and sellers enabling them to mutually profit. It also offers users the opportunity to choose only the product categories they are interested in which in turn gives discount providers valuable marketing data to individualize their offers even more. It is only another step forward and the users could for instance massively subscribe to potential future product or service or even in a way cooperate on new product development.
Nonetheless, enough of enthusiastic talk, let’s get real and face the things the way they are. As every idea on the Internet, collective shopping has its own problems and in some cases also potentially limited lifespan. Considering how things work on Czech group buying market, the original idea of group selling and shopping can be applied only to smaller part of offers. The vast majority consists of wellness packages, spa and cosmetic services or food & drinks. It is true that even service can be sold in large quantities and make a certain use of economics of scale but it is much harder to trace down how good the bargain-package really is. Discount of 90% from unreal price or otherwise unsalable product is hardly a good offer. As a marketing tool, the problem of discount portals is that there will be a large portion of users that will simply buy next good offer, instead of becoming loyal customers to certain restaurant or gym for instance. Another indispensable problem is with unreliable discount portals and even worse, there are also unfair practices of coupon sellers. Once customers spent money on something that never arrives or on terrible service, they will not be happy to come back and buy more. Big group buying providers can reimburse the customers, smaller probably cannot. In either case, any damage to reputation will come down hard on the whole collective shopping market and all the players.
Not only because of the above reasons are future predictions of group buying business in a way like attempting to make crystal ball prophecy. Nonetheless, there are potential changes which are quite inevitable. Mainly, with the entry of large players such as Google, the competition will be massive. Some of the smaller discount portals will probably go out of business or gradually merge together with the bigger ones. After all, the opportunities and money in the group buying business are not without limits. It is also only a matter of time before the unreliable portals will be pushed aside, either by the association of other discount portals or simply by negative consumer ratings and subsequent gradual elimination from aggregator servers. New players such as Google can also add new functionality to their group buying portals which others cannot. Oversaturation of market is already becoming a problem. This might either bring impulse for new ideas or it might eventually bring group buying business back to its roots. After all, the original idea of group buying was about putting people together and offering them a chance to buy goods in large quantities for good price and not about yet another way to sell useless products or overpriced services to customers that do not want it.
Lastly, talking about my own experience with group buying portals, I would say it was mostly positive. Unfortunately, I had negative experience as well. In first case a restaurant simply did not calculated with the number of sold coupons and decided to cancel the promotion. Since it was a big group buying portal, after several months it reimbursed the customers for the unused coupons. The second case was even worse, because the coupon seller made it impossible to use their services in time and after making false promises, it simply ignored the rest of the clients. Nonetheless, I did not become bitter user of group buying portals yet, just more careful one. Every idea simply has its pros and cons, so, are you ready to buy in large?
Nice! I'd appreciate a picture though!
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