Group buying describes the practice of purchasing a good or service at significantly discounted prices if a minimum number of buyers make the purchase within a set period of time. Group buying sites typically send to subscribers a deal of the day.  Subscribers have the opportunity to purchase the deal by submitting payment information. If the minimum number of buyers purchase the good or service, the offer is valid and the buyers must print out vouchers to take to the retailer/service provider to redeem the deal. If the minimum threshold is not reached, the deal is not valid and no charge is processed.

Since many large media companies also have stakes in group buying sites, it has been noted by some, including yours truly, that criticism of the downside of group buying has not been as forceful given the inherent conflict of interest/editorial bias (Wagjag,  Swarmjam, Lerenard are three examples of local group buying sites owned by media outlets).

However, the risks and consumer protection issues in group buying is the same as in any normal consumer purchasing relationships and, in some instances, amplified. Specifically:

Bankruptcy risk doubles. Group buying requires two parties- the group buying site (the modern day equivalent of the middle person) and the supplier (the retailer and/or service provider). If either goes under (which, in such an explosive industry, is bound to happen as function of a pure numbers game), the consumer either many not redeem their voucher or have recourse against the group buying site (a double edged risk since the retailer/service provider may not have collected all their money from the group buying site).

Retailers change the terms of the deal. Given its novelty, some retailers have not figured out how to price the deal properly or cannot handle demand. So they change the rules on the fly. Some retailers also will treat consumers with group buying vouchers poorly (more a bad customer service issue than group buying issue).

Be careful of limitations of the vouchers. Many vouchers can only be used in set times (weekends only, nights only, lunch time etc.). The other practical problem is if the voucher is for a service provider, there are only so many hours in a day to book a spa, get your nails done etc. A colleague who is a group buying fan advises me to avoid deals where you have to book a time. It may be difficult to get a convenient time (who really wants to get their hair done at 8:00 am Monday?). The lesson being read the fine print in every offer.

Refunds can be difficult. Who do you ask for a refund? The retailer and/or service provider or the group buying site directly? The larger players have, laudably, taken the position that they will accept all refunds (which many new sites do copy to the benefit of the consumer) but refer back to bankruptcy risk.

Blatant consumer protection offenses. Group buying sites have already been cited for such deceptive sales and marketing practices as bait pricing (goods/services priced at low prices but offered in small quantities), non-supply of services and misleading size of discounts (in one example, a 60% off dinner offer failed to mention the discount was only valid if another diner paid full price). Like any other industry, there are good players, bad players and charlatans.

Group buying is a great tool to get discounts- if used properly. The moral of the story is group buying is no different than any other purchase- the same amount of diligence should be applied to ensure you protect yourself.  Good luck.

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