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Gabriel Gomez
Gabriel Gomez

Group Buying Platform

Essentially, a buying group (or purchase group) is a set group of people (whether defined by a role, organization, etc.) that receive some sort of benefit for purchasing goods from a supplier. Generally, these benefits come in the form of discounts to the item price, services, or even shipping.

group buying platform

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Buying groups are especially helpful for smaller organizations. Being part of a buying group gives small organizations more buying power, much like a large enterprise has, when it comes to receiving deals from suppliers. One-on-one B2B relationships have their benefits, but they often don't offer the same deals and discounts as group buying.

That's why a buying group eCommerce solution can be one of the best ways to expand your business or marketplace. To begin our Buying Group eCommerce Resource Guide, we'll go over the unique applications of buying groups in eCommerce and what you'll need for a group buying platform.

To efficiently leverage buying group capability for your eCommerce platform, it's crucial to have the right systems in place. To know what features you'll need to implement, you'll first need to decide on these key factors:

To increase user engagement on your group buying platform, you'll need to make sure that your eCommerce software can intelligently interact with your users and that you're providing information about the benefits of joining a buying group or starting one for their organization.

Intelligently interacting with eCommerce groups or individual users on your buying group platform means having tracking, machine learning, and analytics enabled on your buying group platform. Then, you can use these tools and their reports to understand buyer behavior and answer questions such as: Did this item only sell while it was on sale? Were the presented "Frequently Purchased With" products useful to them? Did they seem interested in the sponsored items? And so on.

Additionally, you'll want to consider your marketing activities, and how you're presenting your buying group features to users. For example, do they know about buying groups and tiered memberships available on your platform? And are they incentivized to complete the procedures to gain access to those features and benefits? If not, you may want to reconsider your marketing strategy. These are crucial factors to increasing engagement with your buying group platform and eCommerce groups. If people don't think it's worth their time, they won't do it.

These features are important for advancing your buying group eCommerce platform. For example, intelligent displays of catalogs and product listings are important because organizations may have their own specific pricing and information that is available to them.

When Groupon stormed onto the e-commerce scene in 2008 it sought to bring group buying to the U.S. But unlike in China, it never quite panned out as the company envisioned forcing it to pivot to coupons. Now, new research from Maryland Smith is examining why that happened and how companies can best implement the strategy.

Taking those cultural issues into consideration is just the first step toward successfully implementing group buying, Tunca says. The next is designing the group buying process correctly to make it profitable.

The model developed in this research, Tunca says, enables businesses to apply data from previous group buying sales, such as the number and patterns of customer sign-up rates, as well as purchasing behavior for comparable products that were sold through traditional methods, to help determine parameters such as base prices and deal discounts for future deals and improve profits.

Group buying, also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. Origins of group buying can be traced to China, where it is known as Tuán Gòu (Chinese: 团购), or team buying.[1]

In recent times, group buying websites such as Pinduoduo in China have emerged in the online shopping business. Typically, these websites feature a "deal of the day", with the deal kicking in when a set number of people agree to buy the product or service. Buyers then print off a voucher to claim their discount at the retailer. Many of the group-buying sites work by negotiating deals with local merchants and promising to deliver a higher foot count in exchange for better prices.

Recently, group buying has been taken online in numerous forms, although group buys prior to 2009 usually referred to the grouping of industrial products for the wholesale market (especially in China). Modern day online group buys are a variation of the tuángòu buying that occurs in China.[3][4] Under tuángòu, an item must be bought in a minimum quantity or dollar amount, otherwise the seller will not allow the purchase. Since individuals typically do not need multiples of one item or do not have the resources to buy in bulk, group buys allow people to invite others to purchase in bulk jointly. These group buys, often result in better prices for individual buyers or ensure that a scarce or obscure item is available for sale. Group buys were, in the past, often organized by like-minded online shoppers through Internet forums. Now these shoppers have also started to leverage the group buying model for purposes of buying other consumer durables. Group buying sites are back in demand as small businesses look for ways to promote their products to budget-conscious consumers in a weak global economy.[5] Group buying is also used for purchasing real estate properties. Real Estate Group Buying is very popular in India where websites like Group Bookings [6] offers group deals on various properties.

In China, group buys usually happened when dealing with industrial items such as single-board computers.[7] China had over 1,215 group-buying sites at the end of August 2010 compared with only 100 in March of the same year.[citation needed]English-language group-buying platforms are also becoming popular. Online group buying gained prominence in other parts of Asia during 2010 with new websites in Taiwan, Singapore, Hong Kong, Thailand, Malaysia and the Philippines.

Google launched their own daily deals site in 2011 called "Google Offers" after its $6 billion acquisition offer to Groupon was rejected. Google Offers functions much like Groupon as well as its competitor LivingSocial. Users receive daily emails with local deals, which carry some preset time limit. When the deal reaches the minimum number of customers, all the users will receive the deal. The business model will remain the same.[8]Facebook's 'Facebook deals' application was launched in five European countries in January 2011. The application works on a similar group buying model.[9]

If subscribers to a discount website are tempted by a discount offer, they enter their payment details online and wait. When a minimum number of people sign up for the same offer, the deal is confirmed and a voucher is sent to their inboxes. Shops, restaurants and other retailers that partner with these discount websites have to take hefty price cuts. But it means they have instant access to a whole new group of customers.[10] The online group buying market is fragmented among hundreds of smaller players worldwide. The model has little barriers to entry and has gained attention from shoppers and businesses alike globally...[11] According to SmartMoney, by August 2010, there were more than 500 group-buying sites worldwide, including local sites that cater only to a single city in some instances.[12]

Tuangou, which translates as team buying or group buying (also known as store mobbing), is a recently developed shopping strategy originating in the People's Republic of China. Several people - sometimes friends, but possibly strangers connected over the internet - agreed to approach a vendor of a specific product in order to collectively bargain (haggle) with the proprietor as a group in order to get discounts. The entire group agreed to purchase the same item. The shoppers benefitted by paying less, and the business benefitted by selling multiple items at once.

The tuángòu phenomenon has been most successful in mainland China, where buyers have leveraged the power of group buying, which has led to English language media, such as, profiling the tuángòu buying process. The popularity of the strategy in China is often attributed to the Chinese tradition of bargaining for the purchase of goods of all types. Tuángòu buying also ameliorates a traditional distrust of goods purchased from unknown sellers as individual members of the buying group can vouch for a particular seller's quality to the rest of the group.[13]

The growth of e-commerce in the past decade has largely been driven by consumers in the urban areas with fast Internet access and savvy digital skills. Yet, there is a large demographic group with low purchasing powers, especially in developing economies, that have been ignored by large platforms. Those consumers, usually living in rural areas and small cities, are less Internet savvy, often overwhelmed by complicated shopping websites, and always looking for a bargain for necessity products. New platforms such as Pingduoduo (PDD) in China and CityMall in India are challenging their bigger rivals by targeting these untapped markets. At these new platforms, customers can gather for group-buying, exchanging time and patience for bargain prices. We develop a game theoretical model to study whether a platform that attracts and serves less affluent customers can be a viable strategy for a platform to compete with an incumbent. This paper has some interesting findings. First, a platform that specializes in group buying has to target low-value buyers first who are more willing to exchange time in waiting for a bargain. Second, high-value buyers will only join group buying when the waiting time for the group deal is less than a certain threshold. Third, the equilibrium discount from group buying increases in the valuation of the high-value buyers but decreases in the valuation of low-value buyers. In equilibrium, group buying always increases buyer surplus. It increases overall social welfare only when the portion of low-value buyers exceeds a certain threshold. The research provides important and insightful managerial and policy implications on platform competition. 041b061a72


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