28th September 2011
These sites make it simple to search for bargains on everything – from everyday items to life's luxuries – and with the rise of social media sites like Facebook and Twitter the best deals are swiftly shared and taken up.
Yet with consumers' purchasing being rapidly eroded by inflation and the prospect of a downward economic spiral, is it any wonder the deals are snapped up and the online high street is changing?
One in three Brits use these sites – but what are they?
It's simple. You sign up to one or several of a growing number of sites such as Living Social or Groupon, and receive emails with enticing offers from yoga classes to city breaks at a fraction of their usual cost.
For example, Groupon offers deals for a limited time, but they depend on a particular number of people taking up the offer – known as ‘the tipping point'. Living Social, alternatively, does not require a minimum number of people but will reward you for getting friends and family to purchase the same deal.
Consumer buying power to force down prices
There's an increasing interest in group-buying sites, especially in light of Groupon's initial public offering – although this may be delayed owing to market volatility. It has said it is aiming for a $750m flotation on the US stock market this year.
New, forward-thinking rivals are arriving on the scene such as BuyaPowa, launched today, that promises to harness collective buying power to bring prices down, pushing the power even more into the consumers' pockets.
It claims to offer a unique way to buy big brands, as they become cheaper as more buyers take up the offer – bringing the attraction of bulk buying directly from the supplier to the online shopper. There is the added enticement of a free product for those who bring in the most people on any one item.
A maximum of 100 of any one product go on sale each day with prices dropping with every 20 new shoppers, and the 24-hour deals promise to beat the recommended retail price – even if only one person wants in.
Mindful Money interviewed founder of BuyaPowa Gideon Lask, 36, former managing director of hmv.com, who has worked in online retailing for 15 years.
"These days online retailing is about using social behaviour and platforms and rewriting the rules for the decade ahead – we need to make it our mission to ensure that the online high street is characterful, interesting, innovative and intriguing, and it will continue evolving," says Lask.
"Last year's models such as Groupon are continuing to evolve and gain pace – so this is not to replace what's gone before but to engage media and social behaviour in different ways."
He adds: "Until today, consumers had not been able to co-buy online – to group together and taken advantage of bulk buying power. After all, retailers buy products in bulk, selling them onto consumers and keeping the difference."
How does he see consumer power changing? "Consumers have a desire for power – and technology has helped by providing a point where they can group together and this power becomes a mighty force. Most forward looking brands recognise retail in its current guise as broken and they are looking for ways to engage the consumer but this has to be something different."
Finally, Lask adds: "We see co-buying as the next generation of online shopping as the more people group together the lower the price gets – there is a gaming element. For instance, while eBay goes crazy in the last five minutes of an auction only one person gets to win – whereas with this everyone wins."
The business of social business
For small business owners, group-buying sites can provide a savvy marketing strategy that drives sales and generates awareness – just as social media tools can. This is the power of instant marketing, and allows businesses to market to new consumers that they might not be able to reach on their own.
Organised consumer purchasing power can change business
Alongside the appeal of cut-price products, growing tides of consumers are prepared to use their shopping basket to make a point.
For example, the Carrotmob group is keen to demonstrate this – by offering businesses a ‘carrot' with the offer of sales and publicity. It will build a network of consumers – and picks the businesses it will target by their commitment to how much of the money spent they're prepared to pledge towards reducing carbon emissions.
"We decide who gets rich"
A spokesman says: "This is coming together and buying stuff in a collective way with a network of consumers. Harnessing the power of the consumer to change the world, making purchasing together in stores with a percentage of the money spent going towards environmentally friendly improvements."
"No-one loses – the company, the consumer and the planet wins."
There is massive buying power in the casual consumer, and Carrotmob is doing it with the carrot, not the stick – through positive cooperation.
Mindful Money's resident psychologist blogger Kim Stephenson adds on the general power of the group: "Consumer power isn't exactly taking over the world, but the principle that people can form local groups that allow them to pool resources to have more buying power, to have more say in what they buy (organic, non-GM, ecologically friendly etc.) and that have enough clout to get bigger organisations to take notice and "do the right thing" is promising from the "look after the planet" and "what is money for, isn't it about living a good life rather than becoming the richest person in the graveyard" points of view."
The innovative concept of group buying has proved to be advantageous to businesses and consumers alike over the past year – so who knows where the power of the consumer will go next?
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