Can Group Buying Work for Premium & Luxury Brands?
Group buying, or social shopping, is certainly in the news. Google’s unsuccessful attempt to buy the market leader, Groupon, a couple of months ago was followed by rumours that Groupon is planning an IPO valuing the company at up to $15bn. For a company that launched just over 2 years ago, that’s a quite an achievement.Hence, it’s hardly surprising that Google is reportedly launching its own service – Google Offers – after its advances were spurned.But is group buying something that premium and luxury brands should be paying attention to? To answer this question, we need to look a little at the roots of social shopping and where it’s going.Group buying was founded on 3 principles:- Local offers from local businesses – hence, consumers sign up for the Groupon that relates to their locality, be it London, Brighton, Manchester or Nottingham etc- Great Offers - retailers offer huge discounts. In some cases, up to 90% off. It may be on distressed stock, or it may be a sampling campaign with the aim of giving consumers a low cost trial in the hope they’ll come back and pay at full price at some point in the future. Or, more commonly now, it may be a discount on gift vouchers (£50 gift voucher for £25 etc).- Social – the offers are only triggered when those interested reach a pre-determined level. Hence the retailer is guaranteed a minimum volume of business for their discount.Premium and luxury brands are less likely to have a purely local focus and/or devalue their brands by discounting heavily, so surely group shopping is not for them? Not necessarily.First of all, we need to consider the audience – younger, female, educated and relatively affluent. The core market for many fashion, accessories and beauty businesses.Secondly, because of its local focus, social shopping could be a relatively low cost way to create some tactical local noise and footfall for bricks & mortar retailers during key trading periods – for a new store opening or during quiet periods – by offering discounted gift vouchers for example.And social shopping doesn’t necessarily need to be local. Two of the most successful offers – Gap on Groupon and Amazon on LivingSocial – have been for nationwide offers for national brands. Gap redeemed almost ½ million discount vouchers back in August 2010, driving footfall across their retail network of stores in the US. A retailer could use it for a national campaign.But can the social shopping phenomena work for luxury brands that don’t have ‘distressed’ or ‘end of line’ stock and for whom discounting is an anathema?Perhaps, via a new service launched by Kelkoo called Kelkoo Select. What’s different about this service? Well, discounts aren’t essential, although exclusives are. Hence, exclusive preview events and added value offers can be substituted for discounts. And the ‘group’ in ‘group buying’ isn’t compulsory – hence offers don’t need to reach a critical mass before they're triggered unlike Kelkoo’s rivals.This service has just been launched so it’s still early days as to whether it will be a success. Could exclusives and upgrade offers work when the ‘hook’ for social shopping experiences has been big discounts? And online phenomena like Google and Facebook have demonstrated that niche players can find it hard to survive the onslaught of a dominant market player once they spot a profitable niche and decide to move into it.We should, of course, sound a couple of notes of warning, before recommending that brands grasp the social shoping nettle. The audience may be understood demographically, but it is still opaque from a brand’s perspective – hence a brand won’t know whether they’ll be speaking to a new audience or just offering discounts to an audience of existing loyal clients.And there is disagreement as to whether these services can work as a sampling exercise, or whether they’re followed by ‘offer junkies’ who won’t respond to anything other than big discounts.But social shopping is only going to get bigger. Luxury and premium marketers needn’t necessarily participate – it’s not for everyone - but they should at least appraise the opportunity thoroughly to see if it’s right for their brand.