Thursday, December 9, 2010

Aggregate Buy: A Tool to Augment Buyer Power

Imagine yourself shopping for 1000 Kg of rice … 5000 Kg of rice! What price & attention would you expect to get compare to the one who is there to buy 5 Kg of rice?

One of the tools to achieve the benefits of bulk buy while still purchasing in small amount is ‘Aggregate Buy’. This article deals in detail with various aspects of ‘aggregate buy’ as an option with small buyers, specifically an individual household buyer, to lower the overall procurement cost. We will also propose a model to implement this concept, analyze the associated risk & returns and support it with case studies.

Traditional Procurement Process

Traditionally, the individual units of large organizations were given the authority to decide on what to purchase, and from to which vendor, and at what price. Once the purchasing manager of this unit gets an indent from the user / stores, the manager will typically float an enquiry to the set of known vendors (generally local vendors) and get the quotations from each of these vendors. The quotations will then be compared and the order is given to one or many vendors depending on various factors like criticality of the item being sourced, relationship with the vendor, policy of the organization etc. A typical traditional process of procurement is as depicted below:

One obvious shortcoming of this process is that the organization as a whole would not be in a position to use ‘volume leverage’ to drive the cost further down. To understand this better, let’s take an example of a large automobile manufacturer with its units located in eastern and western parts of the country. Both these units will definitely be purchasing various common goods & services like office supplies, IT equipments, mechanical hardware, security services etc. However, because each of these units are procuring the goods & services in isolation they are either not aware or are not able to leverage the benefits which they might have got by aggregating their requirement and negotiating with the vendor for this aggregated quantity.

Majority of the matured organizations have by now realized the shortcomings in their existing traditional procurement process and have either started or are in the process of leveraging technology to achieve substantial cost reduction.

‘Aggregate Buy’ for Small (Retail)

Now with the advent of technology, the same concept of aggregate buy for industrial segment has been extended to retail or small buyers as well. The business works something like this - A shopping web site which puts a number of people together, all of whom want to buy the same item, for example a mobile or refrigerator or specific grocery etc. The site keeps track of how many people want to buy a certain item and then use this information to drive the price down with the company selling the product. The more people want to buy the item the further the price is driven down. “The More the buyers in the group, the lower the price”

Closing Statement:

This is definitely a great business model but the associated challenges in managing the supply chain, gaining critical mass of customer and need for huge marketing effort is a big concern. Deep pocket and ability to maintain continuous cash flow is the key to success. My take is we will see lot of consolidations in this field and only top few will survive and flourish. We may also see few aggregator website popping up which will give best deal from all sources…At the end it’s a great win-win situation from all stake holders.

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Aggregate Buying Site

India Centric: (acquires (closed)



Living Social



WeGiveToGet (Chicago)






3oClockClub (Chicago/Las Vegas)

SoWhatsTheDeal (Washington DC)

GoNabIt (Middle East)

DealPerk (Orange County)

Groupolitan (France and Belgium)

CrowdClick (San Francisco)

DealsForDeeds (Washington DC)

ClubDeal (France)

PlumDistrict (CA Bay Area)


YouSwoop (Chicago)

TownHog MyDailyThread

TwoBuckDuck (Chicago)


DailyDeal (Germany)

Adility CoupMe



Joffer BloomSpot (LA, SF, NY)

Zozi SavvyAvenue

PromoPipe (CA Bay Area) Liquor (Alcohol)

GroopSwoop (CA Bay Area)

SpecialDeals (CA)

YouveGottaGetIt (Chicago, Bay Area)

SwoopOff (Los Angeles)

CircleBuzz (San Diego)

TheDailySave (San Diego)

ReaderSteals (San Diego)

Grooster (Vancouver, Calgary)

WagJag (Canada)

StealTheDeal (Canada)

TeamBuy (Canada)

WowCher (UK)

Wahanda ScrumBuy (London)

ScoopSt. (New York)

LifeSta (Re-Sell)

DealsGoRound (Trade, Re-Sell)

Yipit (Aggregate)

DealRadar (Aggregate)

8Coupons (Aggregate)

TopTownDeals (Israel) (mexico) (mexico) (mexico) (France) (USA)

From publically available sources:

Groupon is the market leader in the online “group buying” industry, and according to Crunchbase Groupon has raised a whopping $172.8M in funding to date. Available in 140 cities world wide, Groupon offers deals in more cities than any other group buying company. For every city, every day, Groupon presents a discount for a niche market item (such as a spa, restaurant, or a paintball outing), and if enough people sign up for the deal, they get the discount. The coupons are sent to the buyers by email. Conversely, if the quota is not reached, the deal is off, and no one is charged for what they promised to buy. Of course, if the deal doesn’t work out, the company that Groupon was “advertising” through the discounts, and the people who signed up to buy them will be a little bummed.

Because the success of each deal relies on getting enough people to sign up, Groupon has created some incentives for their users to spread the word about the discounts they offer. Groupon encourages its customers to share news about deals through email, Facebook, and Twitter, and promises that if one of their users sends a Groupon link to a friend, and the friend buys a Groupon (coupon) within 72 hours, the one who sent the link gets $10 worth of Groupon credits in their account. Also, if a user sends a referral to a friend, who then subscribes within 72 hours, the person who sent the referral will get $10 worth of Groupon credits in their account when their friend buys their first deal on Groupon.

Living Social is Groupon’s main competitor, and they serve in 26 cities across the U.S. and have received about $44M in funding. LivingSocial’s model is somewhat different from Groupon’s, as there is no minimum number of people needed to make the deal valid. But like Groupon, the discount can only be activated, and then used, after the deal’s run-time has ended. LivingSocial offers each deal for exactly 24 hours on weekdays, from 5am-5pm.

Additionally, LivingSocial uses a different incentive to encourage more people to sign up for their deals. If a LivingSocial user shares a deal through a link provided by LivingSocial, and then three people join the deal through the link, then the person who shared the link gets their deal for free.

Gilt City, which was recently created as a subunit of Gilt, is only available in New York City so far. Unlike many of its competitors, each of Gilt City’s deals lasts for seven days, and are updated once a week, rather than once a day. Also, rather than trying to sell as many of their deals as possible, Gilt City’s inventory for each of the discounts appears to be limited, and can become sold out, much like the rest of the sales on Gilt.

Like LivingSocial, Gilt does not require a minimum number of people to sign up for the deals to make them valid.

BuyWithMe has essentially the same setup as Groupon, with a new deal on display each day, with each the time limit for each deal set for about a week. Though they bring up a new deal each day on their main page, they do run a number of deals in each city (the number of deals running varies from city to city). BuyWithMe operates in 5 cities in the U.S, and has so far received $21.5M in funding.

Tippr is another group-buying site, and offers deals in 25 major U.S. cities. Tippr is owned by Kashless, which has raised $5 M since starting up.

Unlike Groupon, LivingSocial, and BuyWithMe, Tippr proudly shows off three deals each day on their main site, with at least one new deal each day. As an incentive to get more people to join the deal, the discounts that Tippr offers get larger for everyone who signs up, as more people sign up for the deal, though there is a limit to how much the discount increases. A somewhat unusual aspect of Tippr is its army of ten patents, which are kept quietly on display at the bottom of the website (though it isn’t clear that these will actually help them beat the competition).

Juice in the City is a niche group-buying site that caters to mothers. This aspect of JITC is what differentiates it from the other companies in this roundup, as each deal that is offered on the site is meant to appeal to women with young children. JITC so far only serves a single deal each day within the San Francisco Bay Area and the Seattle-Tacoma area, and has not yet received any outside funding.

They promise incredible, money-saving deals like the rest, but JITC does not require a certain number of people to sign up for each deal. Each coupon is sent to the buyer via email after being purchased, though they can’t be used the day they were purchased.

We Give to Get is available only in Chicago, and offers a new coupon (which they call a GO-GO) each day. What makes WGTG special, is that when you create an account on WGTG, you are also signed up automatically for the charity website; As a result, whenever you buy a GO-GO, 10% of the money that is spent on the coupon will be donated to a charity of your choice, as long as it is listed on It seems like an unusual idea to connect a money-saving action to a money-giving one, but as they say, “opposites attract”.

Similarly to Juice in the City and LivingSocial, WGTG does not require a minimum number of people to sign up in order to make the deal valid, and the coupon is sent to the buyer by email after the purchase is made.

Snapdeal is launched by Jasper India in First week of Feb, 2010, presently offering discounts in Delhi, Mumbai & Bangalore and planning to scale it up to 25 Indian cities by end-of-this year.

Currently, this portal is self funded by Jasper. SnapDeal has been welcomed by Facebook users and have around 13,138 Fans.

MyDala , operating since Nov ‘09. Based on group buying process – Deal is posted on site and people bid for the deal, if deal doesn’t grap enough people then its cancelled else people avail the deal. Mydala has more than 19000 fans on Facebook. MyDala has tieup with iMint for shooping rewards.

Wanamo, is also launched very recently in March itself and grapped good audience. Have more than 500 Facebook Fans. Currently offering deals in 9 cities.

Mobstreet - operates in Mumbai only. Have 100 fans on facebook. Product offering includes Best Deals and Mandi. Best deal (i assume you all understood now) and Mandi will feature exclusive sale for few days. However, no recent deal is available on site.

Grabbon - Operates in Bangalore only. Grabbed more than 2000 fans on facebook. Deals are quite ok but from Bangalore only.

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