Rapid Access International, Inc.
One of the most interesting trends for 2010 in the United States was the evolution of group buying by consumers in order to gain deep discounts on a wide array of products and services. The trend is based on a very large consumer population that is now connected to the Internet and able to respond quickly (within minutes or hours) to offers on goods and services in their local communities. The use of social networks such as Facebook and Twitter have greatly strengthened the ability of consumers to take advantage of short term offers for discounted merchandise or services. Mobile devices such as cell phones or IPads have also enhanced the ability of consumers to be constantly connected to discounter networks through emails or tweets from selected or preferred vendors. Mobile devices also allow consumers to find (through searches on the web) or receive (through emails or “tweets” for example) dynamic pricing deals while they are in a store or while walking on the street in the near vicinity of the vendor or store offering the discount.
Amazon.com has just announced the release of a new IPhone application that allows users to wave their IPhones over a product’s bar code (while in a store during shopping) or photograph the product or say the product’s name into the phone – and receive comparative pricing on the same product at different stores before making a final purchase. Such trends are now beginning to empower the shopper to be more aware of price and the huge discounts and savings that can be made by comparative shopping via smart phones or other devices. This new trend is replacing the need for coupon clipping from the newspaper and bringing those coupons to the store to receive a discount. Now consumers can use their smart phones to automatically receive discounts “dynamically” within stores directly.
2010 saw the introduction of several new trends in the US including group buying, membership sales from large retailers like Costco (but now available at designer boutique stores and even travel agents), flash sales, auction pricing or “dynamic pricing”, and local discounts (at specific stores based on the geographic location of the shopper).
Group Buying. The largest and most successful group buying company in the US is Groupon. The firm provides its members with a daily email of offers in the member’s local community and the offers are usually good for a very limited time (such as a day or two). The breakdown of products is usually from restaurants, service providers, retail stores, photo stores, etc. The key to Groupon’s success is to use large groups of consumers to lower the price of goods and services in a community. It is a win-win situation for both the retailer and the consumer since the lowered pricing will bring more customers to the retailer’s store and the consumer will pay lower prices. Both sides are happy. Groupon charges the retailer a small fee in order to set up the discount. With the success of Groupon in the US, there are many new competitors beginning to emerge such as Living Social ( http;//www.livingsocial.com). We interviewed Mr. Stephen Norwood, a member of Groupon who lives in Burke, Virginia. Mr. Norwood said there is no cost to join the service and he provided Groupon with some details such as his email address and his postal code and each day he receives a list of offers via email for his local community. “Typically there are offers for local restaurants, or wine stores, or a photography store. Sometimes there are coupons for events such as music concerts or drama, movie tickets, yoga lessons, art classes, and other things.” Mr. Norwood said that in all cases the discounts are 50% or more and there is typically an indication of what the actual price would have been without the Groupon discount. Mr. Norwood said he uses the Groupon service about once every two months or so when he sees something of interest.
Membership Sales. This model of group discounts has been around for quite a while and was pioneered in the US by firms such as Costco or Sam’s Club. Now, this trend has moved into high-end fashion and designer boutiques (such as Gilt Groupe – www.gilt.com) as well as travel services (such as Jetsetter – www.jetsetter.com) and home furnishings (such as DirectBuy – www.directbuy.com). Members of these online communities are offered “flash discounts” that offer last minute hotel and airspace at severely reduced prices or luxury designer clothing or women’s handbags at a fraction of the actual cost based on supply and demand. Flash discounts may only last a few hours or even minutes depending on the availability of products or services.
Local Discounts. Consumers are now connected to the Internet constantly and if they have an Iphone or a cell phone, deals can be pushed out to their phones or mobile devices based on Geo-location using GPS tracking. A good example of this kind of service is Foursquare (http://www.Foursquare.com) which is an online community of “friends” who provide comments to each other on their local city and pointers on the best places to visit or be entertained. Vendors often push coupons or make special offers or provide discounts to the members of Foursquare in order to gain more business. Facebook also has a service in this category called Facebook Deals.
Dynamic Pricing. This is one of the most exciting new services for consumers. Dynamic pricing was pioneered by the airline industry in order to sell last minute seats on flights. Priceline.com is an early example of this type of pricing model. Consumers are involved in an auction situation where they must bid on a product or service prior to the closing date and time of an auction. One of the best sites we found for this type of pricing discount is for very high end hotels in major cities around the world. The site is called Off and Away (http://www.offandaway.com) and allows consumers to bid on super luxury hotels where premier suites are available for auction on specific nights that are not already booked. Our investigation of this site found that luxury suites worth more than $4,000 for a two night stay could be purchased for $300-$400. Such deep discounts are based on the availability of the rooms and the ability of the consumer to travel on short notice. This pricing model is now being used for luxury goods as well.
On some of the sites such as Off and Away, the consumer is required to register and purchase increments of one dollar from the site in advance. This becomes a kind of “currency” for the customer to use to bid on current auctions and future auctions on the site. It also provides the website operator to gain funds in advance and keep on retainer from the consumer. Every new bid on a hotel room raises the price by $0.25 and adds an additional 30 seconds on the time for the auction to expire. Customers can get up to 90% off on the price of rooms, but may still have to pay large fees, so there is some controversy surrounding some dynamic pricing web sites. Customers who do not win the bid can still use their points or money on retainer to purchase rooms on future or upcoming auctions. There may be some hidden costs in such sites and it is important that the consumer do their research prior to committing to a large purchase. A description of this pricing model can be found at:
The future of group buying and dynamic pricing looks promising with many new and innovative sites emerging to provide discounts for a wide variety of goods and services. At the simplest level, services such as Microsoft’s BING search tool can offer the consumer many choices and comparisons from travel to designer goods, but customized new sites will continue to evolve to provide the best value to the customer.
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