Business | Your Money

Banding together for financial gain

When people want to achieve something big, they band together

  • By Cleofe Maceda, Staff Reporter
  • Published: 00:00 July 10, 2010
  • Gulf News

Shopping
  • Image Credit: Supplied
  • Shopping

When people want to achieve something big, they band together. We've seen how citizens who join forces have toppled leaders, exerted influence on a global scale or effected social change.

That is the power of numbers or crowd clout. But beyond just civic, social or political causes, consumers can leverage their collective size for their own financial good.
 


Let's say you've been dying to buy a new mobile phone. However, the retail prices are too steep for your budget. You know you can always save on bulk buying, but you can't just pay for 12, 24 or even two phones.

So you decide to find a group of consumers just like you who are looking for the same phone. You then pool together an order and go straight to a wholesaler, or negotiate with a retailer. That's the same old trick people use when they want to pay less on museum passes or insurance plans.

However, it may not always be as easy as it sounds. Rallying together like-minded consumers who want exactly the same thing can be difficult. Getting a business to reduce the price in exchange for a volume purchase may require a bit of skill.

This is where group-buying companies come in. These startups, which have been mushrooming on the web, put a modern twist on group discounts, taking that age-old idea and extending it beyond warehouse clubs, general merchandise stores, museums and the like.

These companies do the work for the consumers: they negotiate with businesses to get special deals, which can be anything from a basket of organic skincare products and a bouquet of flowers to teeth whitening and spa pampering.

Social media platforms

Using the power of internet and social media platforms, they then round up potential buyers, and if enough people agree to take the same offer, everyone saves between 50 per cent and 90 per cent. (See box)

GoNabit is the first to introduce a similar platform in the UAE last May. Headquartered in Dubai, the company has over 1,000 fans on Facebook and 9,000 members as of Wednesday. At the same time, at least 16 deals have been nabbed and total savings for subscribers reached Dh170,000.

Deals include hydra-facial therapy for Dh450, a week-long summer camp for Dh250, a royal Thai massage for Dh150 instead of Dh350, and a whole-day boat cruise in Ras Al Khaimah for Dh250 instead of Dh500.

"It is a great, easy way for people to save money at the same time as discovering new and exciting things to experience in their city. The deals we offer start at 50 per cent off and could increase to as much as 90 per cent, offering subscribers some great money-saving potential," notes Dan Stuart, CEO of GoNabit.

"It's a good strategy for consumers to spend less, especially with the current financial climate, people are more into saving or cutting down on expenses," adds Edward Rizk, operations manager, retail division, at Intercat.

The payout for merchants can be substantial. A group-buying company's huge subscriber database can translate to higher footfall numbers and long-term sales for businesses.

"It provides a risk-free, low cost, reliable and measurable channel for acquiring new customers. GoNabit uses strength in numbers and unbeatable deals to help buyers and sellers benefit from discovering each other online. There is no upfront cost for merchants, either financially, or in terms of time."

"Merchants only have to be prepared to offer a discount between 50 and 90 per cent off their regular retail price, an investment which only becomes applicable to actual customers," Stuart adds.

GoNabit's online group buying concept is based on a successful model out of the US. Stuart refers to it as the "next frontier in e-commerce" in the Middle East and it's only a matter of time before other entrepreneurs copy the same model in this market.

Loay Eletreby, a web content manager in Dubai, says the recent buzz is quickly spreading in the UAE. "It is circulated heavily among people by word of mouth… When you [check GoNabit page on Facebook], you will see how users are more active and willing to share the experience," he tells Gulf News.

"We're seeing our subscriber database growing daily… The constrained economic climate has actually created the perfect demand conditions for group buying as consumers are generally more conscious of their spending and looking for ways to save but still enjoy the fabulous things on offer."

How online group buying works:

A group-buying company looks for some interesting deals in town and get merchants to fork out discounts ranging from 50 to 90 per cent

Consumers sign up for free on the company's website, to subscribe to and keep track of the deals.

There's usually one deal every day. Each deal is being floated for 24 to 48 hours.

A minimum number of people has to commit to purchase a particular deal in order for it to "tip" or go through. The number varies by deal or merchant. If the "tipping point" is not met, no one gets the deal and would-be buyers don't get charged.

If the critical number of people for the deal is exceeded, the deal is on and everyone that signed up for it gets the discount.

Purchases are usually made online using a credit card or PayPal account. At GoNabit, however, buyers can come to the company's office in Dubai to pay cash or cheque, if they don't have a credit card.

Buyers receive an e-voucher which contains details of how they can redeem the service directly with the merchant. Vouchers can last around six months.

What do you think of the concept? How can group buying be made more popular? If you had to buy a product in a group purchase, what would it be?

Gulf News

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