Not many people can resist a sale - especially in a weak economy that has forced nearly everyone to tighten their belts. Group buying sites have entered the market in full force offering consumers deals that go far beyond the traditional coupon. These upstarts have also provided new options for small businesses to market their wares. (Reducing the amount you spend is the easiest way to make your money grow. See 5 Money-Saving Shopping Tips.)

TUTORIAL: Introduction To Banking And Saving

How It Works
There are several group buying sites available for shoppers. For the most part, they all operate on the same principles. Consumers sign up for free to the site(s) of their choice by providing an email address. You must also provide information about the city in which you live, as the discounts are localized. Subscribers receive daily emails with a featured deal that is usually at least 50% off and up to as much as 90% off the regular price. Fifty-percent off of a spa treatment, 50% off tickets to a comedy show or 70% off two months of yoga classes are examples of the types of deals that are offered.

The deals are only given out if the minimum number of people purchase the deal in the specified time. If the goal isn't reached no one gets the deal. This is when the group buying element comes into play. Those that want the deal are encouraged to use email and social media to promote the deal to other potential buyers. Other incentives are also offered to subscribers. For instance, on group buying site Living Social, customers get a free deal if they can get three other people to buy that same deal. On Groupon, users can earn $10 in Groupon bucks that can be used towards the purchase of any Groupon each time they refer a new user to the site.

How the Deals Impact Business
Most group buying sites have no initial fee for the businesses that use the deals to market their goods and services. The sites make their money by taking a percentage of the revenues from every coupon purchased. The businesses get more traffic and advertising once their deals are purchased, without having to spend any money. The goal is that customers that wouldn't normally visit the business will be attracted by the deal and then become repeat customers.

The Group Buy Marketplace
The popularity of group buying sites has resulted in a saturation of the marketplace as more and more deal-a-day companies are created. There are more than 500 group buying sites worldwide. Google offered Groupon, a pioneer in the group buying craze, a $6 billion buyout. The company rejected the proposal, so Google launched a competitor site called Google Offers in early 2011. The site is currently in BETA, and only people in New York City, San Francisco, Portland and Oakland can subscribe.

Facebook has also joined the trend. The social media giant launched Facebook Deals in November 2010. The service works in conjunction with Facebook Places which lets people to "check-in" on Facebook when they go to various physical locations. When a customer checks in they get information about the deal and a post is put on their wall allowing their friends to find out about the deal. It is considered to be word-of-mouth marketing. Facebook Deals offers four different types of deals: friend, loyalty, charity and individual, to allow business owners to tailor to their customers. (Use coupons strategically to score big savings on everyday purchases. Check out Coupon Shopping: Clip Your Way To Savings.)

The Bottom Line
These days everyone is searching for a deal. A swarm of start-ups have entered the market to meet the growing consumer need for a bargain and businesses' need for new marketing opportunities.

Related Articles
  1. Taxes

    Internet Sales Tax Vs. Brick & Mortar Sales Tax

    Learn about the differences between sales taxes and Internet sales taxes, and the goods and services that typically incur each type of tax.
  2. Entrepreneurship

    How an Internet Sales Tax Will Affect Your Small Business

    Learn about how the Marketplace Fairness Act may impact small business owners should it pass in the House and what the act requires from business owners.
  3. Investing Basics

    Internet Sales Tax's Effect on Interstate Commerce

    Find out how a national Internet sales tax could affect interstate commerce, and why some bigger online retailers are lobbying for such a tax.
  4. Entrepreneurship

    3 Ways You Can Support Small Business Growth

    Discover a number of different options available to support small business growth, including crowdfunding campaigns and shopping locally.
  5. Professionals

    Advisors: Do You Need to Tweak Your Marketing?

    Advisors use a variety of marketing techniques to attract clients, but they don't all work. It may be time to evaluate what is, and isn't, successful.
  6. Stock Analysis

    Does TripAdvisor Offer Upside Potential? (TRIP)

    Will TripAdvisor's downside risk outweigh upside potential in 2016? It's most recent SEC filing offers some strong clues.
  7. Personal Finance

    Wal-Mart vs. Target: Which One Is A Bigger Threat To Amazon?

    Walmart and Target both revealed multi-year plans to grow their businesses. Which of these two retailers is the biggest threat to Amazon?
  8. Stock Analysis

    Are the Brands Millennials Love a Good Buy?

    Millennials make up a very big — and thus important —c onsumer generation. So if they love a brand, its stock is likely to outperform, right?
  9. Personal Finance

    Amazon Studios vs. Hollywood: Is Netflix the Better Pick?

    Amazon Studios is a relatively new division of Amazon that is trying to revolutionize Hollywood. While it may succeed, is Netflix actually the better option?
  10. Entrepreneurship

    10 Ways You Can Make Money as a Blogger

    Obtain helpful information about the top 10 techniques that professional bloggers utilize to generate their incomes from blogging.
  1. Does QVC charge sales tax?

    QVC, an American TV network, is registered with states to collect sales or use tax on taxable items. QVC is also required ... Read Full Answer >>
  2. Does Walmart take international credit cards?

    Foreign visitors to Walmart locations in the United States can use their credit cards issued by banks outside of the U.S. ... Read Full Answer >>
  3. Is QVC publicly traded?

    QVC, Inc., is a wholly owned subsidiary of Liberty Interactive Corporation. It is attributed to the QVC Group tracking stock, ... Read Full Answer >>
  4. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  5. Is a financial advisor allowed to pay a referral fee?

    A financial advisor is allowed to pay a referral fee to a third party for soliciting clients. However, the Securities and ... Read Full Answer >>
  6. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center