Digital Diva • Social Buying Websites like Groupon gain in popularity

Social Buying Websites like Groupon gain in popularity

This week I made my first purchase with Groupon. I have liked the look of some of the offers and knew it would only be a matter of time before I made a foray into the world of social buying.

Social buying websites (also known as collective or group buying websites) have become increasingly more popular over the past few years, especially in the USA.

This handy infographic by Flowtown is a look at some of the most popular social buying sites:

How do social buying sites work for the buyer?

The seller agrees to offer customers a specific product or service at a greatly discounted rate (usually 50% off or more) if the social buying website can generate more than the specified minimum number of sales chosen by the seller.

Once the minimum number of sales is reached, the deal is on. Buyers receive an email for a printable voucher that is used to redeem the deal with the seller.

How do social buying sites work for the seller?

Social buying sites are great for small or local businesses. Group buying promotions are able to generate a ton of sales for the seller in a short period of time. Usually these deals are only posted for a 24-hour period and the viral nature of this promotion means that sales can be on the order of hundreds to thousands of orders in a single day.

For many local business owners this equates to an entire month’s worth of sales that can be gained in just a single day. While the business owner is only making 25% of the profits (Groupon takes 50% of sales), they are willing to take this short-term loss for the following reasons:

Cash flow boost: Payments for vouchers are processed by the social buying site quickly

Not everyone will redeem their voucher: People are lazy and not everyone will show up to turn in their voucher to the seller and take advantage of the deal.

New customers: Local businesses are always looking to expand their client base and new customers are a necessity for doing so. Daily deals are able to attract many new clients by offering discounts that get the first-time customer in the door.

Return customers: Businesses that use social buying site for marketing their products or services are hoping that the new customers that sign up for their deal will like what the local merchant offers and become a return customer.