eSwarm have recently launched as the latest “Group Buying” website.
The basic idea is to group together consumers who are all wanting to buy the same thing (such as a TV, a computer, etc). By getting them to all buy together, the price they get for whatever the item is should be cheaper, due to the bulk buy.
On the surface it seems like a good idea, and in theory it should work, but eSwarm is not the first website of its kind, many others have come before, and all have failed.
The idea seems valid to me - there’s no obvious reason why this concept shouldn’t work. Yet, it never takes off.
Here is a 2001 article from the New York Times about the failure of MobShop, another such company. The article says, “MobShop executives said late last week that they were shutting the company’s consumer business because the costs were too high and the customer base too diverse. The company will continue offering group-buying services in the business-to-business sector.” But that was in 2001 and I don’t think the company exists any more. The mobshop.com URL redirects to a French e-commerce company. I don’t think it’s doing this sort of business, but I can’t read French. Another article about MobShop and Mercata is here.
I would think this could work in theory.
Not sure how they did it, but I would have gone to the producer/manufacturer and cut a deal first.
For instance, find a plasma television manufacturer.
Get a price on a standard 42" screen television.
$1200 for one.
$1100 each for purchase of 20.
$1000 each for purchase of 100.
$900 each for purchase of 500.
$800 each for all purchases of over 1000 units.
Then you would give a cut off date and try to get as many people as possible.
The headache would then be to get all those people to pay in advance and get the funds by a certain date, work out shipping and handling and warranty and service, etc.
It is hard enough to get four people at a restaurant to cough up an adequate tip.
I think it would be more trouble than it’s worth. Want to buy a plasma TV? There are probably dozens of stores in your area that are selling the same models. Shop around and negotiate. People think that the big box stores won’t negotiate. If they refuse to lower the price you might be able to get them to throw in a TV stand or extended warranty, if that’s something you were planning to buy anyway.
I would think that the average consumer has more leverage today than they did a few years ago given the current economic climate (no cite).
Well, if the supplier has to ship to 1000 different addresses and deal with 1000 different customers and process 1000 different payments that is going to cost money. It’s not the same at all as wholesale buying, in that case they would ship 1000 units to one address and send one big bill and it would be up to their customer to deal with the 1000 different people. It’s much better for the company just to sell wholesale…also if these type of deals took off it might tick off their more valuable wholesale customers.
Also, the flat screen TV example is not a good one, flat screens don’t have that kind of wholesale vs retail margin. I know lots of guys that own home theatre stores and they are lucky if they can buy flat screen TV’s from the manufacturer for anything less than 10% off MSRP, they have to make it up on other products.
I once worked for a company that was a group purchasing organization in the healthcare field. Basically, they did the same thing, but for hospitals. So they would negotiate discounts on hospital products with the suppliers, with the understanding that the selected suppliers would get orders from the 500 or so member hospitals.
I don’t think this is a perfect example. Say I want to buy a box of Snickers. I can buy a single box, and get a way better price. But I can also buy a case of boxes, and get yet a better price. The opportunity is there, but it’s not exactly the same as pre-paying for a pallet of stuff with a known group of people.