Should our business use group buying channels?

Group buying started in 1977 when the Home Shopping Network was founded after 112 electric can openers were sold on a Florida radio station programme.
A group buying channel can be useful if your business:
• Wants to move excess or old stock;
• If an SEO company wants to rank a website in Dublin.
• Is a venue such as a hotel or spa and wants to fill ‘quiet times’;
Group buying is fraught with challenges and has created difficulties for numerous small businesses. These include the cupcake bakery Need a Cake, which offered a 75% discount on 12 cupcakes, which normally cost $30, and underestimated the response, resulting in an extra 8,500 customers and a €15,000 loss, or Posies Cafe, which lost nearly $8,000 with its Groupon campaign and had to use personal savings to cover payroll and rent.
You should only use group buying if you:
• Have the time to manage the process;
• Can get your staff to support the deal;
• Don’t need instant cashflow as you often have to wait for some weeks or until the deal is completely finished (which could take some months) before you get your income;
• Are good at negotiating with commission-based sales people who work for the group buying companies.
Critical factors that affect group buying are:
Customer retention: Group buying customers often are deal-hunters, so they go from place to place depending on a deal, and are not always seeking a long-term solution;
• Local access: The offer must be locally-based to achieve conversion rates – for example, ‘Dublin spa offers 2 for 1 on Monday’;
• Consumer trust: People are naturally suspicious if an offer looks too good to be true. Be specific about your terms and conditions and ensure the customer has read these before they pay.
To explore group buying further, look at www.groupon.co.uk, www.livingsocial.com and www.wowcher.co.uk to explore which of your competitors have signed up to sell offers in this way.