Group buying emerges as consumers tighten their budgets
It’s convenient and anyone can start their own group buying community.
The community group buying model is slowly gaining traction across Asia as consumer behaviours are shifting and more are tightening their belts.
Residents within the same neighbourhood will buy products in bulk and will be offered discounts based on the overall amount of their combined purchases. Meanwhile, the person delivering the goods will receive a commission.
Consumers in China first utilised this model, having tapped into WeChat Mini Programs and WeChat groups when coordinating purchases. Eventually, companies like eGrocer and Shihuituan caught on and introduced community group buying services. Interestingly, this model has community group leaders who handle last-mile delivery, acquire new customers, and coordinate purchases. They are offered 8%-10% commissions on average.
Meanwhile in Asia Pacific, most group buying chats offer consumables that are constantly in demand, such as groceries or daily necessities. In Singapore, group buys are coordinated over WhatsApp, and include fresh produce, condiments, dried goods, and meat.
Moreover, customers can start their own community group buying group, be it through Facebook or WeChat groups.
“This model can reap many benefits for retailers, such as increasing brand awareness, brand authenticity and new user acquisition, potentially leading to larger profits,” said Leo Wang, director, publisher development Asia at Rakuten Advertising.
Wang also said that based on Rakuten Advertising’s recent consumer study “The Road to Recovery: 2020 Shopping Peaks Re-Imagined”, 46% of Singaporeans will turn to friends and family for holiday shopping inspiration this year, which backs why group buying has a strong, viral effect.
What it means for retailers
Before implementing the community group buying model into their businesses, retailers must first understand the potential consumer behaviours a community group buying model can bring, and craft appropriate discount mechanics in line with these.
Retailers should also consider increasing the average order value (AOV), or the average total of every purchase made with a merchant over a certain period of time. Hitting the AOV threshold will result in larger discounts for group buy, which will naturally entice group buyers to invite more people into their community buying group.
“Once consumers see the potential discount of the group buying model, retailers can expect to see new group buying discussions forming around specific new products or SKUs,” said Wang.
However, managing returns can be complicated in group buying, as many parties are involved. To streamline the process and reduce errors, retailers should consider tapping into customer management systems, advised Wang.
Aggregating demand, supply, and delivery of products may also be a challenge. To solve that, retailers should maintain close communication with community group leaders who know the demands of buying groups. Ensuring that these leaders have appropriate storage facilities for produce is also key.
Other digital trends in the sector
As for group buying, retailers are tapping into concierge publishers across Asia Pacific that fulfil group buy orders for their customers. After they receive orders in bulk, these publishers will ship the purchases individually.
Concierge publishers also offer customer service and return assistance, as well as help advertisers connect with audiences who are new to purchasing overseas, whilst providing localised product information, local payment options, and freight forwarding.
Some brands are also working with publishers to connect with their customers through strategies such as card-linked offers, which let publishers push discounts and offers both online and in-store. Meanwhile, card-linked offers also allow retailers to partner with premium banks or credit card providers as another way to entice consumers.
In addition, more brands are utilising AI tools to serve personalised offers to each consumer, backed by data from past shopping behaviour.
What all these trends confirm is that retail has gone digital, noted Wang, citing that retailers must tap into available technology to connect with customers.
“In a quarantined world, where most shoppers gravitate to e-commerce, affiliate marketing can boost retailers miles ahead in terms of new user acquisition and brand awareness,” he added.