Thanks to companies like Groupon and LivingSocial, group buying has rapidly grown into a multi-billion dollar market in just a few short years.
The reason: group buying offers both consumers and businesses a deal that’s too good to pass up. For consumers, there are steep, limited-time-only discounts on products and services. For businesses, there’s the promise of a flood of new customers.
Unfortunately, despite the money being made by companies like Groupon, the group buying model, in its current form, may not be nearly as attractive as it appears.
But that doesn’t mean that there aren’t other group buying models with potential. One startup, Five and Fifty, is trying to break into the market with a new model that brings real-time to group buying.
Its pitch to consumers: discounts of 50% or more at local businesses, available immediately, delivered directly to your mobile or email inbox. Five and Fifty’s pitch to businesses: the ability to drive foot traffic only when it’s needed, on demand, and without commissions.
In other words, Five and Fifty hopes to tap into the demand for deals on the consumer side of the equation while removing some of the problems present on the business side of the equation.
Businesses participating in Five and Fifty have the ability to create their own deals at any time, meaning they don’t have to wait for a Groupon slot to open up.
The deals they offer are available for only five hours, making Five and Fifty an interesting solution for local businesses that need to move product quickly. Example: businesses selling perishable goods, such as bakeries.
Five and Fifty’s strongest selling point: no commissions. Businesses pay as little as $5 to send 100 coupons to consumers signed up in a city it serves. Although this requires up-front investment, some businesses may find that spending on the front-end to distribute a deal makes more financial sense than giving up a hefty percentage of the revenue on the back-end.
So is this the future of group buying? It may very well be a part of it. LivingSocial is planning to launch a similar offering, called LivingSocial Instant, and it wouldn’t be surprising to see Groupon follow with its own take on the model.
That said, a real-time take probably won’t be a panacea for what ails group buying. Discounting will always be a tricky game for small businesses to play successfully, and providing real-time discounts on a regular basis could be even more detrimental to the perceived value of a business’ products and services than a single Groupon deal, for instance. For consumers, there’s the risk of deal fatigue, as notifications of deals flood in from eager businesses.
At the end of the day, real-time group buying may prove to be a worthwhile, fruitful addition to this space, but for businesses looking to take advantage of it, a solid strategy will still be a prerequisite for success.