Group buying platforms: A new way to generate revenue

According to the World Bank's January 2024 report, global inflation is at a high level. And even though it is expected to decrease slightly this year, it will still remain above the pre-crisis level.

In such conditions, people try to save money and look for ways to reduce everyday expenses. Group purchasing is an effective way to significantly reduce the cost of a wide range of goods. Moreover, buyers have the chance to acquire goods that were previously unaffordable for them.

Entrepreneurs find group buying platforms to be an excellent service option due to their convenient business model. In this article, we explore:

• Whether such platforms are suitable for your business needs
• The challenges involved in developing a group buying marketplace
• And strategies to simplify the process

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Ready to jump in? Let’s go!

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Group buying app development: Why now?

If you are familiar with eCommerce buying, you have probably already come across group buying platforms. These collaborative shopping services allow you to get goods at more favorable prices when you team up with other shoppers.

A study by Forrester Research: The State Of Social Commerce In 2023 predicts that by 2025, the number of people using collaborative shopping globally will reach 150 million. The global collaborative shopping market will reach $250 billion.

The first group purchasing platforms appeared in the US in the late 1990s. They were extremely simple and based mainly on forums and email newsletters. The range of goods offered at the time was limited, and prices were not always favorable.

In the 2000s, group buying platforms got more popular, and the group buying business model became more advanced:

• The first platforms offered a limited selection of goods, mainly from the entertainment category. Subsequently, the range of goods and services expanded significantly to include electronics, clothing, home goods, travel, and more.
• Also, the first group buying websites offered only fixed discounts.
• The mechanisms for spreading information about the platform were limited to verbal recommendations from user to user. There were no marketing channels such as social networks, contextual advertising and others.

Today, artificial intelligence automates many processes on group buying platforms. For example, AI can recommend products that may interest customers based on their purchase history, search queries, and other data. Modern services can also predict demand for goods, for example, by optimizing stock levels.Among the resources for group buying are the following platforms:

• Groupon, one of the largest group buying sites in the world. The company's total revenue for 2023 was $967.1 million.
• Taobao is one of the popular online platforms in the world, which includes a section for group buying. In 2023, Taobao was valued at around $20.2 billion.
• Coupang is a Korean company founded in 2010. It initially started as a group buying platform for food with delivery, and then expanded to other categories of goods and services. Coupang is currently one of the largest eCommerce companies in South Korea. Its revenue in 2020 during the COVID-19 pandemic increased by 91%.

The eCommerce market for collaborative buying groups, as well as group buying power, is growing rapidly. According to a market study by Clarity Ventures, it is expected to reach $186.79 billion by 2027. This is the best proof of the potential of the group buying eCommerce market.

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How does group purchasing work?

Group buying sites typically work as follows:

1. Offers from vendors. Vendors of goods or services offer discounts or special offers on the group purchasing platform. These offers may only be available when a certain number of orders or participants are reached.
2. Minimum purchase requirements. Activating an offer usually requires reaching a minimum number of orders or participants. This could be, for example, a certain number of people ordering a certain product or service to make the discount available to all.
3. Time-limited deals. Offers on group buying platforms often have a limited validity time. This creates a sense of urgency among service visitors and motivates participants to make purchases as quickly as possible.
4. Customer participation. Customers join offers that interest them and can share these offers with their friends or acquaintances to increase the chances of reaching the minimum number of orders or participants.

Let's explain in simple words what is a group buy website.

Imagine that you and your neighbors want to buy groceries (or some other goods) at the best price. Instead of each person going to the store and buying individually, you get together and place one large order. Because you are buying items in large quantities, the store may offer you a volume discount. This is the basis of cooperative shopping.

Now imagine that there is a special company that helps people make those big orders. This company creates an online platform (groupbuy marketplace) where people can shop together. When you place an order through this platform, the company gets a small commission from selling products or collecting orders. This is their revenue from the co-buying business.

So, the more people use this platform and place orders through it, the more revenue the company earns. Group buying organization earns by helping people save money and shop together.

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Cost savings and more: Group buying advantages for consumers

Participating in group buying allows consumers to receive substantial discounts on goods and services. The more people who join a group purchase, the lower the final price. Such services also offer access to exclusive deals and special offers that are often not available at regular stores or online retailers.

On group buying websites, consumers can find a range of goods and services from different sellers and select the most suitable option in terms of price and quality.

In addition, group purchasing is not only beneficial but also a fun shopping experience. Consumers can invite friends or family to join in the shopping experience, as well as discuss offers and share their impressions of the products.

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Group buy marketplace: Benefits for businesses

Group buying is not just a way for people to save money, but also a profitable strategy for businesses. Such deals attract new customers and increase sales.

By teaming up with other companies, businesses can purchase goods or services at wholesale prices. It reduces costs and allows them to offer more attractive prices to their customers. In addition, group buying increases brand recognition and improves brand image.

Participation in such promotions demonstrates to customers that the company cares about them and strives to provide them with favorable offers. By encouraging loyal customers, relationships with existing customers are strengthened and new ones are attracted. Group buying can also be used to test new products and gauge demand for them.

In this way, you get:

• Increased sales. Group buying sites allow businesses to reach a large audience of potential customers. Group buying can lead to a significant increase in sales.
• ‍Expanding the customer base. Group buying platforms help a company attract new customers.‍
• Increase brand awareness. Group buying sites can help a startup increase its brand awareness.‍
• Increase average check. Group buying sites can help increase the average check by offering bundled offers and promotions.‍
• Reduce marketing costs. Group buying sites can be an effective and relatively inexpensive way to promote products and services.‍
• Gaining feedback. Group buying sites provide an opportunity to receive feedback from customers and enhance their products and services.‍
• Improving competitiveness. Group buying sites can help a firm become more competitive in the marketplace.

Examples of successful groupbuy marketplaces

Amazon, the world's largest online shopping platform, offers group shopping through various features and tools. One such feature is the ability to create Wish Lists which are shareable with the rest of users. You can bring together products you want to purchase in a list and invite other members to that list so they can add their purchases or join in on shared orders.

Those interested in the group buying business model should also look into Amazon Lightning Deals, which are short-term offers available on Amazon. These offers, are directly organized by Amazon. A limited number of items are available for each Lightning Deals. If you are interested in a Lightning Deal, you need to quickly add the item to your cart and checkout before the offer runs out or sells out.

The idea of group purchasing is very versatile. It can be applied across business sectors, including cab and car-sharing services, similar to what Uber does with the UberPool option in its app. The UberPool option allows multiple passengers to take a trip in the same direction and split the cost of the trip between them. This is convenient for passengers as they can save on the cost of the ride compared to individual rides. Apart from saving money, it can also help reduce traffic congestion and pollution as fewer cars are used for the same trips.

So, using the concept of group purchasing in cab and carsharing services, as Uber does with UberPool, is a great example of applying this idea to areas seemingly far removed from the traditional concepts of purchasing goods and services.

Of great importance to the collective purchasing market is the geography of transactions. Buyers from different cultures may make purchasing decisions differently. The number of transactions of the same products can vary greatly too. For example, compared to people in China, people in the United States are more individualistic when it comes to shopping. They do not necessarily want to advertise what they are buying or coordinate their purchases with others.

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What you need to launch a group buying platform

Diving into the group buying game isn't just about launching another eCommerce site. Think less traditional online store, more social shopping extravaganza where deals get sweeter as more people jump on board. If you're ready to shake things up and bring people together for some bargain-hunting camaraderie, you're in the right place.

Here's what you need to consider and pay attention to as you develop a group buying website:

1. Business model and niche

Conceptualize. Clearly define the type of co-shopping platform you want to create. Will it focus on general merchandise, specific categories (e.g. fashion or electronics), or local offerings? At COAX, we provide B2B eCommerce development services, so we can consult you at this stage. 

Target audience. Identify your ideal customer base. Understanding your customers' needs and preferences will greatly influence your product selection, marketing strategies, and overall platform design.

Revenue source. Decide exactly how you will generate revenue. Common payment models include commissions from merchants for each group purchase made, subscription fees for premium features, or a combination of both.

2. Technology and development

eCommerce platform. You will need a robust eCommerce platform to manage your product lists, user accounts, shopping carts, and checkout process. As for the platform engine, it is more cost-effective to use open-source engines like Magento or PrestaShop at the initial stage of development. However, if you have ambitious plans and your business will grow, such options will not be the optimal solution.

If you plan to scale your project in the future (for example, your traffic will increase significantly), you will need to budget for a custom CRM development team that will develop the platform as a SaaS solution and provide technical support.

Co-buying functionality. The platform's basic functionality should include an option to create a deal, as well as the ability to form groups and track progress (an indicator of how close a deal is to reaching its goal). Automated communication between buyers and sellers to resolve basic issues, such as clarifying order information, should also be present.

Mobile optimization. Given that a considerable amount of online shopping occurs on mobile devices, make sure your platform is responsive and user-friendly for smartphone and tablet users. Here again, you'll need proficient retail software developers.

3. Legal and regulatory compliance

Understand the consumer protection mechanisms in your target market. These mechanisms may include data privacy laws, refund policies, and product safety standards.

Payment processing. Choose a reliable payment gateway to process transactions. Partner with a reputable processor that adheres to the Payment Card Industry Data Security Standard (PCI DSS) to ensure secure financial data processing.

Here are some examples of payment gateways that provide secure and convenient payment processing:

• Stripe is an easy-to-use payment processing API supporting different payment types: credit and debit cards, mobile payments, and more. It also offers tools for managing subscriptions and more.
• PayPal is one of the most famous payment gateways in the world. Users can send and receive payments online through their PayPal account or with credit and debit cards.
• Authorize.Net is a payment gateway that provides a variety of services for processing payments, including the ability to accept credit cards, electronic checks, and other forms of online payment.
• Square provides on-site payment processing tools, including wireless terminals for card payments. It also offers options for setting up an online store and processing online payments.
• Braintree is a part of PayPal. It provides powerful tools for processing payments in apps and online stores. Braintree supports various types of payments and provides a high level of security.

These are just some examples of payment gateways that can be used for collaborative shopping platforms. Choosing a specific gateway depends on your project's needs and requirements.

Terms and conditions. Clearly and understandably outline the terms and conditions for using your platform, including user responsibilities, dispute resolution procedures, and warranty limitations in the appropriate section of the site.

4. Vendor sourcing and management

Sourcing. Establish relationships with reliable suppliers who are willing to offer products at discounted prices for group purchases. Negotiate terms and conditions to ensure product quality, timely fulfillment, and customer service.

Delivery and logistics. Determine how you will organize the delivery of products to customers. For this, you can build cooperation with existing courier services or develop your own order fulfillment network. It depends on the scale of the project and available resources.

5. Marketing and user engagement

Building your own brand. Develop a powerful brand identity that resonates with your audience. It should include some kind of memorable logo, consistent messaging, and a user-friendly platform design. The logo should be easily recognizable, reflect your company's values and appeal to your target audience. Try to make it immediately clear to platform users what your brand is about and what its core principles are. Understanding the values of the brand allows you to create relevant offers that can interest customers whose values coincide with yours.

Use a common communication style (writing style, terminology used, etc.). Your brand should "speak" the same language to your audience across all touchpoints, whether it's the website, social media, email newsletters, or advertising.

Develop usable platform design. Make it easy and enjoyable to use your group buying website or mobile app. The interface should be intuitive, navigation simple, and the shopping process as quick and painless as possible.

Here's the deal: we're not just talking about slapping together a website and calling it a day. We're looking at building a platform where your customers don't just shop – they band together, unlocking deals that get better as the crowd grows. Imagine turning the solitary act of clicking "buy" into a collective high-five with fellow shoppers.  With COAX, you will create a high-quality custom marketplace your users love. 

Next, let's discuss quality criteria.

Requirements for a site for group purchases

If you are building a business as a group buying site, you need to make the service as attractive as possible for users:

Improve design and usability:

• Organize the site to be easy to use and navigate.
• Add a convenient product search.
• Information about products and offers should be in a clear and attractive form.
• The website needs to be usable on mobile devices. It is good to have a mobile app for joint purchases.

The range of products should be wide:

• Offer visitors a choice of goods from different categories.
• Cooperate with reliable suppliers.
• Ensure that the quality of goods is high.

 Offer favorable prices:

• Make discounts on merchandise for group members.
• Offer promotions and sales.
• Introduce a system of bonuses and incentives.

Provide high-quality service:

• Provide detailed information about products and offers.
• Work out fast and convenient delivery of goods.
• Quality customer support must work.

Since the site implies a social component, it is also necessary to develop a community:

• It makes sense to create a forum and/or chat room for users to communicate.
• Hold contests and prize drawings.
• Organize joint events.

Use marketing tools:

• Advertise the site on social media and other platforms.
• Use email marketing.
• Hold contests and prize drawings.

The site should guarantee security:

• Use only secure data transfer protocols.
• Guarantee the confidentiality of users' personal data.

Follow trends:

• Analyze user feedback.
• Implement new features and functionality.
• Improve the site based on data and analytics.

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Get the most out of group buying with COAX

Group buying platforms are dynamic marketplaces that offer opportunities for both sellers and buyers. They may be the right tool for your business to achieve explosive sales growth and attract many loyal customers. 

However, it is very important to initially develop a product that will be convenient to use. COAX equips teams of highly qualified developers and designers who will do this quickly and efficiently.

Take the first step towards harnessing the power of group buying platforms for your business success. Contact COAX today to discuss how our expert teams can tailor a solution perfectly suited to your needs. Let’s transform your vision into reality and propel your business to new heights together.

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FAQ

What is a buying group?

A buying group, also known as a purchasing group or buying cooperative, is an organization formed by independent businesses or retailers who join together to leverage their collective purchasing power. The primary purpose of a buying group is to negotiate better terms, prices, and conditions from suppliers or manufacturers on behalf of its members.

Are businesses that use collective buying still independent?

Yes, businesses that utilize collective buying through buying groups maintain their independence despite collaborating with other members. While they leverage collective purchasing power to negotiate better deals with suppliers, they retain autonomy in day-to-day operations, branding, and customer relationships. This allows them to benefit from cost savings and access to resources while preserving their individual identities and business models.

What is a group purchasing organization (GPO)?

A Group Purchasing Organization (GPO) is essentially the same as a buying group. Both terms refer to entities that leverage the collective purchasing power of their members to negotiate discounts and favorable terms with suppliers. GPOs and buying groups serve similar purposes, aiming to help member organizations reduce costs, streamline procurement processes, and access quality products and services. The terms are often used interchangeably in various industries and sectors.

Can group buying platforms be integrated with a regular eCommerce website?

Yes, group buying platforms can be integrated with regular eCommerce websites. This integration can be achieved through plugins, APIs, or custom development. It allows businesses to offer collective purchasing options to customers seamlessly. Once integrated, businesses can promote group buying deals through various channels and efficiently manage inventory and orders. This enhances the shopping experience and can drive customer engagement and loyalty.

What industries can use group buying?

Group buying can be utilized across various industries, including healthcare, hospitality, manufacturing, retail, construction, education, nonprofit organizations, professional services, food and beverage, and transportation. 

For example, hotels, resorts, restaurants, and catering businesses may join buying groups to procure food and beverage supplies, linens, furniture, and other hospitality-related products at discounted rates. Hospitals, clinics, and healthcare facilities often form GPOs to negotiate discounts on medical supplies, pharmaceuticals, equipment, and services.