Introduction to Group Buying

Ecommerce is, without doubt, a growth industry that has enormous potential to continue benefitting consumers and merchandise suppliers alike. Although South Africa has dragged its feet with regards to the installation of high quality and high speed internet infrastructure, investment over the past few years is beginning to pay off. Nowadays many South Africans have access to the internet at decent data transfer rates. Combined with this is the fact that mobile penetration of the internet has dramatically increased in the very recent past: in translation, this means that the numbers of internet users are growing every day, and with this influx of economically active individuals comes the opportunity to form communities the likes of which have not been seen before.

Group buying sites create communities of consumers that have similar demands. In turn, the group creates an economy of scale which drives prices down. The net effect of the ability of discrete, geographically or socially separate individuals to communicate with one another and form buying blocks is greater consumer surplus. That is, you, the consumer, get more “bang” for your hard earned bucks because the supplier of the product/service is able to cut down on costs.

This is not a one way relationship, however; service providers and goods manufacturers are guaranteed bulk sales which means that (in most cases) marginal costs per unit are reduced without the business itself losing out on profit. In essence, one could think of group buying sites as a new type of market place that enjoys several advantages over more traditional market places. One disadvantage, however, is that only certain types of products are amenable to group sales: property for sale in Plettenberg Bay, for example, is not a commodity that can easily be influenced by group communication (if anything, demand will only increase prices). Things like restaurant vouchers, spa treatments, LED floodlights, tablet computers, etc., however, are a singe for group buying.

So how does group buying work? The answer, when considering the potential pay offs, is surprisingly simple. Group buying is the communication and alignment of consumer interests. That’s the principle, neatly presented in a figurative nutshell. The phenomenon is not an economic novelty and has existed in the Far East for several years already. The advent of the internet has at present changed commerce in a multitude of ways, and the rapid pace of technological progression means that this veritable revolution is only set to further alter our commercial environment. The truly revolutionary aspect of the internet is that it is the only mass medium to encourage, and in fact rely upon, interactive communication. Whereas television, radio and print can reach large audiences, the ability of those respective audiences to communicate with one another is not enabled in a meaningful way by any of the latter mass media. The World Wide Web allows for a mass conversation to take place rather than merely facilitating one way information dissemination.

In brute social terms, people are thus empowered with the ability to form organisational units that they wouldn’t necessarily be able to do without the aid of the internet. Referring to group buying specifically, and recalling the earlier “nutshell” description of group buying, sites like UbuntuDeal.co.za therefore provide a platform where consumers are able to come together, align with other individuals who share an interest, and then collectively purchase in bulk. This site will briefly look at this phenomenon and explore some of its more interesting facts.