Triple Pundit: Is Group Buying Sustainable?

90 percent off for a skydiving jump? 75 percent off for a candle-lit dinner for two? It’s easier than ever before for consumers to find good deals offered by local merchants, restaurants, and businesses. Collective or group-buying sites such as Groupon, LivingSocial, and Google Offers provide us with hard-to-pass-up deals and discounts from their business partners. These sites have tools that allow us to choose what we want to buy, plan activities, and share them with friends on Facebook or via email.

So where’s the catch? There is one potential issue surrounding this new industry: whether the business model can prosper and sustain itself in the long run.

Let’s take Groupon, the first, the biggest and the fastest-growing player in group-buying as an example: Groupon helps local businesses to promote their products and market themselves with no upfront cost. Offering deals via Groupon can greatly increase visibility of a business. On the surface, Groupon creates a win-win-win solution for all main stakeholders: customers get great deals, merchants and businesses gain recognition and customers, and Groupon gets a percentage of revenue from the deals. Businesses actually compete to be featured on Groupon by cranking out outrageous deals — only 10 percent of those who apply get picked by the company. While in the short term these deals might not even result in profits for the small business, in the long term this could be their only chance of going big.

By Somsak Boonkam

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Originally published on Triple Pundit, republished with kind permission.