Strength in Numbers – Industry Trend or Event
William Van Winkle
Group buying can reap big-time savings
Eric Menke knew he was paying too much for long-distance phone service–15 to 20 cents per minute or more. But as president of the home-based Menke Equity Partners in San Francisco, he had neither the time nor market know-how to shop around for cheaper calling. So one day he surfed over to Demandline.com and joined a group of similar small businesses requesting lower rates.
“Four or five days later, Demandline. com came back with an offer from a national provider” says Menke. “Now I pay 6 cents a minute and the service is great.”
Group purchasing online is quickly becoming a solution for small businesses that pine for the steep discounts and superior service corporations get with their heavier buying volume. If you’ve ever joined forces with a couple of friends to buy in bulk at a discount, then you’ve already practiced aggregate buying.
Online, there are two different types of aggregators: those that serve the business-to-business (B2B) market, and those that serve the business-to-consumer (B2C) segment. The good news is that the line between the two is quickly eroding. This means you can take advantage of both types of aggregators; and best of all, the sites do all the haggling for you.
Business to Business The best-known B2B aggregators are Demandline.com and OfficeCoop (www.officecoop.com). Demandline.com focuses on core services, which make up about 23 percent of the average small and home-based business’s budget. These are services every company needs, regardless of location and brand.
Demandline.com pools all requests for a specific service, then uses a reverse auction to get corporate rates from nationally known providers. The service offers everything from Web hosting to long-distance phone services to retirement plans.
OfficeCoop operates a bit differently. For starters, the organization is a legal, member-owned cooperative (at press time, membership was free), so participants receive an annual refund based on OfficeCoop’s sales margins. More significantly, the site offers deals on office furniture and supplies–like bookcases and hand trucks. Goods appear on sale already heavily discounted from retail. Depending on the product, the buying window (how long you have to make a purchase) stays open between one week and one month. The more people ordering a product, the steeper the discount when the window closes.
Aggregate sites are often grouped with sites that operate on a request-for-quote (RFQ) basis like BizBuyer.com, Guide Smart’s ImSeeking (www. guidesmart.com), and LowerMyBills.com. The RFQ model is simple: When prospective buyers express interest in a product, the site gathers quotes from a group of vendors and presents the lowest bid to the shopper.
Business to Consumers If you’re willing to throw your checkbook in with the consumer crowd, two good starting points are MobShop (www.mobshop.com) and Mercata (www.mercata.com). Both sites offer links to special Small Business and Home Office sections, respectively.
MobShop focuses on business and consumer electronics, while Mercata concentrates on personal and home-related items. The depth of business goods and the information provided about them, however, is formidable–everything from computers to personal digital assistants (PDAs) to peripherals. Even so, we had no trouble beating most aggregated prices at comparative shopping sites like CNET’s Shopper.com (www.shopper.cnet.com). This indicates group buying might be a step ahead of its time, waiting for enough consumers and businesses to come aboard before it can offer bargains.
Volumebuy (www.volumebuy.com) is another site worth noting. Like most aggregators, Volumebuy uses a “dynamic” method, lowering the price of a product as demand increases. But Volumebuy also leaves some windows open indefinitely, waiting for enough people to sign on in order to hit a preset target discount.
Another Volumebuy approach is to offer discounts and rebates. For example, the company sells “Marriott money” at a 15 percent discount. Travelers purchase, say, $50 certificates, but pay only $42.50. Or members can purchase gasoline cards through Volumebuy at face value and receive 10 percent back in “Vmoney” applicable toward any product on the site.
As these companies evolve, expect to see an increase in their offerings. Demandline.com, which first provided 401(k) plans, then targeted home business owners specifically with IRA plans, is planning to add health insurance options. And according to Volumebuy chief operating officer Jeff Bluen, the company will soon add natural gas and service contracts.
In a field flush with upstart companies, we’ve found a few aggregators offering business products and services. Each site has its own strengths, so shop around to see which vendor’s sales model–and product offerings–best suits your needs.
Company Products/Service Benefits
Demandline.com Core business services Excellent List
www.demandline.com of vendors;
Essential.com Utilities and services Services everyone
www.essential.com can use–when
Ipool Mostly finance and Informative
www.ipool.com telecom services reports on service
Mercata Consumer and business Wide category
www.mercata.com products selection;
MobShop Mostly tech products Slick, easy
OfficeCoop Office supplies, Potential rebates;
www.officecoop.com hardware, furniture deep product
Volumebuy Mostly tech; consumer Smart, practical
www.volumebuy.com goods often applicable product grouping
to business use
works.com Office supplies, Huge product
www.works.com hardware, furniture selection;
Demandline.com Hard to judge without
www.demandline.com going through pool
Essential.com No competitive
www.essential.com services in many areas;
few competing vendors
Ipool Limited offerings;
www.ipool.com aggregated purchasing
Mercata Few products within
www.mercata.com categories; focused on
MobShop Limited product
OfficeCoop More wholesale deals
www.officecoop.com than true aggregation;
Volumebuy Confusing site
www.volumebuy.com navigation; no real
works.com Co-op fees and
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