Why group buying is not every merchant’s cup of tea?

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A lot has been said and written on this topic already. Group buying may not be successful in long term mainly because it is not a sustainable business model as vendors/merchants can’t keep providing heavy discount (typically >50%, sometimes even 90%) regularly. Most of the deal sites in India are shifting their focus from deals to e-commerce. However this is just one aspect of it. Group buying is actually a wonderful marketing idea which can do wonders to the business of a merchants.

Unfortunately, the problem is that most of the merchants think of it as a quick and easy way to increase sales temporarily rather than turning those ‘discount’ customers into repeat customers, which should be their main objective. It’s an open secret that generally customer of such deals do not get the same treatment as the regular customers. For example, quality of service is generally poor, quality is reduced (e.g. 4 piece instead of 8 piece in case of starters in a restaurant) and even lower quality products are used (in saloons, spas and beauty parlors). I have been a victim of these deals and the saloon and restaurant examples given above are experienced by myself (and a couple of my unfortunate friends whom I pulled into one of these deals). In fact, both restaurant manager and saloon owner admitted that they reduce quality and use low quality products respectively for customers having deal vouchers. That’s the reason they don’t mind coming up with deals regularly on various group buying sites like Snapdeal, Koovs and others as they still make money from these deals. However they fail to understand that people are not fool and how negative WOM spreads like fire now a days.

Instead, the merchants should provide same to better services to ‘discount’ customers which they provide to their regular or non-deal customers so they get a real taste of their service or products. This will help them turning those ‘discount’ customers into repeat customers. In the long run, this is not only result in more profits but will also help improving their image. I was discussing this with a friend who mentioned most of the merchants don’t have adequate education to appreciate group buying concept. But I don’t agree. Anyone who has been in business for few years should be able to figure out how to utilize group buying opportunity and some of the merchants are making good use of it and have acquired new customers but most of them are probably happy with short term profits. Ideally, it should be the responsibility of the deal sites like Snapdeal to educate the merchants on how to get benefited from such deals without having to compromise on service quality but they are probably too busy worrying about their own profits.

What’s your take on this?

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