It can prove costly
The exposure you get on a group buying site comes at a cost. On average, group buying sites take a 30% revenue cut from each deal, making the margins impossibly slim for some start-ups.
This loss can build up significantly over time. Indeed, it’s possible for your products or services to become too popular on group buying sites – if consumers are snapping up your offerings en masse via Scoopon, why would they come to your site and pay top dollar?
It may devalue your brand
The cut-price nature of group buying offers can not only damage your bottom line. It can also harm something more intangible – your brand.
A high-volume, commoditised business may be able to get away with merrily shifting stock through Cudo or Spreets, but what if your start-up is built upon an image of high-quality exclusivity? Flogging wares in the bargain basement doesn’t exactly do wonders for the brands of many start-ups.
It erodes customer loyalty
If someone buys from your site or even at your store, there’s a good chance that you will be able to capture their data and incentivise them to make a return visit.
With group buying sites, it’s likely that once the coupon has been sold, you will never see that customer again. No repeat sales. No insight into who makes up you customer base. Nothing.
The PR operatives of the various group buying sites are quick to push their respective clients’ claims to being the number one site in Australia.
You can slice and dice the figures anyway you like – unique visitors, email database, number of vendors, etc – but, ultimately, there isn’t one dominant group buying site like Groupon in the US. Which begs the question – which group buying site should you use? Experiment with all of them in turn, or several at once? It’s a pretty laborious exercise in order to find the best fit for your business.
Some industry observers argue that you can achieve similar results from group buying without using a specialised site. You could run deals yourself by using Facebook, for example. You would be able to set your own terms and prices and launch deals whenever you like.
