Group Buying Sites

Finding deals has never been so big on the web. The collective buying concept involves featuring a “deal of the day” for different cities. Each deal has a specific amount of people that must opt-in for the deal to go through. The company leading the way is Groupon which recently secured venture capital funding of over $135M which valued the firm to be worth over $1B. Groupon has grown from 400 subscribers in November 2008 to over 4 million this year. Ever since Groupon hit the scene in 2007 a number of copycats have hit the scene creating a whole new landscape for consumers to find local deals.

What makes collective buying such a successful concept is that each deal has a minimum amount of vouchers that must be sold in order for the deal to go through. This causes people to tell all their friends to buy-in so that everyone can reap the new deal of the day. You can find many deals offering over 50% off at local restaurants, spas, museum tickets, haircuts, yoga classes and just about anything else consumers might be interested in. In essence, a business has an offer featured that only triggers if enough people take the deal. The catch is that you must enter credit information on the spot and if enough people buy-in the deal goes through and you are charged. If by the end of the deadline the minimum amount of vouchers or coupons is not sold the deal is taken down and a new one is posted.

This extremely effective model benefits merchants with new streams of customers, and consumers with big savings. The companies that feature these deals take a percentage of revenue (usually 30%-50%), which creates an extremely lucrative business.

I go on Groupons everyday to check out the new deals. Groupons, ebusiness model

Thousands of group deals are now being sold on the web at astounding rates. Living Social, Groupon’s biggest competitor has secured a solid flow of merchants. The size of the collective buying market has yet to be determined. Some analysts are saying the market is around $5B but I think this concept is versatile enough to where it could generate much more in years to come. Groupon and Living Social are targeting educated affluent women between 18 and 34 years old and this market has proven to be very successful for them.

Many collective buying companies are starting to take this concept worldwide and this new business concept shows no signs of slowing down. What do you think will be the next big target market for collective buying?