GROUP BUYING: A GLOBAL SUCCESS IN ONLINE RETAIL INDUSTRY
GLOBAL ECOMMERCE REVENUE WILL LIKELY TO UP 18.9 PER CENT TO $680 BILLION IN 2011. THE REVENUE WILL FURTHER RISE TO STAGGERING $963 BILLION BY 2013, ACCORDING TO JP MORGAN.
TARIQ AHMED SAEEDI
Aug 22 - 28, 2011
Group buying is slowly and gradually becoming impalpably a segment of online shopping that still is limited to small group of internet users in Pakistan. Inspired by the Chinese style of team buying called Tuango, group buying entitles online shoppers hefty price concessions when a certain number of buyers agree to buy goods or services.
Group buying companies, also known as daily deal sites for purveying discounts on daily basis, are getting popularity not only in developed countries where consumer buying power is relatively strong and disposable incomes allow them the luxury of window-shopping, but amazingly in developing economies of Africa, and parts of Asia.
Discount seekers popularly known as bargain-hunters aggregate discount coupons to save money. The group buying does not remain a class-based and all that want to buy goods and services can browse daily deals on the sites and get deep discounts of up to 90 per cent. The recession-hit economies have seen rapid emergence of such sites and online shoppers would love to buy from these internet-shopping channels instead of directly from online retailers to grab deep discounts.
A small numbers of group buying sites are operational for major cities of Karachi, Islamabad, and Lahore. Their revenues are inconsiderable. A main reason is lacklustre online shopping trend in the country. Besides, they are facing several hindrances in popularising the novel buying concept to a larger portion of the society. In fact, they are catering to niche markets and dealing in specific numbers of luxurious products in contrast to staple goods and convenience services covered under group buying in established internet market worldwide.
The business models of daily deal companies are very simple and depend on sound technological infrastructure to shower wonders in the life of low-income group. These sites collaborate with merchants to market and sell all that people want to see, do, play, own, and eat for prices much less than original ones. Certainty about sale volume in a given time encourages online as well as brick and mortar businesses to consent with sale on discounts.
Price concessions increase traffic in slow time as in case of restaurants and produce bulk business to consumer sale. The deals are purveyed city- and/or nation wide, comprising of meals, groceries, tickets, health and wellness, and even cars.
Online shopping is flourishing worldwide with internet usage growing at a significant rate. The convenience of sifting through catalogues and buying goods or services is encouraging local and cross-country buying. Global ecommerce revenue will likely to up 18.9 per cent to $680 billion in 2011. The revenue will further rise to staggering $963 billion by 2013, according to a JP Morgan's projection.
Despite having seen information and communication technology boom over last few years, ecommerce has yet to enjoy rapid growth in similar proportion. Weak regulations and absence of cybercrime laws are holding back due progress in the sector. The government enacted cyber laws but that were limited in scope and failed to cover technical aspects involved in cross-border or local ecommerce payment transactions. It is worthwhile to mention that internationally recognized payment gateways that are imperative to handle digital payment transactions between merchant and consumers are reluctant to support payment card industry (PCI) of Pakistan. PCI signifies debit and credit cards, e-wallet, etc. Identity thefts are major concern.
In Pakistan, online shoppers agree to pay only after delivery while payment before delivery is common in ecommerce transactions in countries where legal provisions ensure security of confidential data of internet shoppers.
Internet penetration is increasingly spreading nationwide with web-savvy people utilizing wireless or broadband services. The rising popularity of internet can be gauged from the fact that a foreign broadband company was shocked with 1000 per cent growth in its subscriber base in a year.
Broadband subscribers are expected to reach 21 million by 2013 in Pakistan, estimated Business Monitor International. International Monetary Fund (IMF) registered 18.5 million internet users in the country in 2010.
Daily deal media tracks 3,000 daily deal sites operating globally. Total 1,000 local group buying sites are dedicated to China, over 900 working in Europe and 600 touting deals in South America. Rest is fragmented along the different regions.
No daily deal company is as big in size as Chicago-based Groupon (over $2 billion revenue per annum) and Washington-based LivingSocial are at present. Alone the former has more than 70 per cent market shares of US daily discount market and huge followings of 50 million bargain hunters all over the world.
Group buying sites are also entering exuberantly in India where ecommerce is expected to grow 47 per cent to over 46,000 crore in 2011. According to Economic Times, there are 20 group couponing sites operating in India.
The rising interest of the buyers in the discounted products is encouraging private sector to invest in the group buying ventures, which are giving a sigh of relief to the recession-hit retailers and consumers and leading to new online businesses.
Group buying concept has emerged as an innovative means of buying relying on the collective buying by a certain numbers of customers. The collective buying results in up to 90 per cent discounts on goods and services from foods, electronics, health & beauty products to hotel accommodations, gate passes to the theme parks while it leads to a significant growth in sales.
Retailers gravitate towards Middle East and Africa that escaped unhurt during the recession. New markets will pave the way for group buying since customers would eventually be attracted to the new brands if they carry some incentives like discounts or other attractions.
Rising popularity of daily deal sites in Asia, Middle East, and in the hinterlands of Africa can be cited as evidence. Obviously, customers prefer to make purchase on discounts of what they eat, see, and own.
All technological majors are capitalizing on daily deal industry or planning to do so. Google, Amazon, New York Times are few of the names. Millions of dollars are invested to acquire small deal websites.
The time is ripe that Pakistani government should devise legal and policy frameworks to make its ICT sector assimilate developments in the cyberspace.