Group buying isn’t a “daily deal”
Starting a conversation with “when I was in college” makes me cringe now that was over 20 years ago, but that’s when I first became hooked by the idea of “group buying.” In fact, “group buying” on the internet, according to wikipedia, started in 2000 with Mercata. No one was writing about the “gig economy” or “unicorns” back then. Nor was there even a mobile internet, let alone social media.
As my fraternity’s “Rush Chair”, I was purchasing quite a lot (in dollar terms, to a college kid) of custom products like T-shirts and cups with our fraternity logo, and it was quickly apparent that buying in bulk was remarkably cheaper than trying to over-customize and do small runs. We spent 3x as much per T-shirt on 15 individualized pledge shirts we ordered, compared to 200 we handed out for marketing. The whole concept of wholesale price points was frankly eye opening, and then the cost benefits from printing in bulk added another revelation.
My intrigue wasn’t necessarily driven by a raw entrepreneurial profit motivation (although the extra spending cash I did make was great!) — I liked the idea of creating a “win/win”: figuring out ways to get more quality or more value for people by properly combining demand. The retail world, in my view, was set up to exploit individualism with high margins, and so I didn’t feel like I was “selling” anything any time I helped get orders placed in smarter ways. Accordingly, I really liked the custom T-shirts business model, and as the internet was taking off when I was graduating, I was keen to scale the solution with a website. Thankfully, I met Marc Katz and Dave Christensen and was able to work with them for some time on what became CustomInk.
(Plug: If you ever want to order custom t-shirts — try CustomInk and you’ll join millions of other happy customers. Email me and I should be able to get you a friends/family discount!)
The personal excitement I remember about the initial internet boom in 2000 (before the bubble burst!) was in part the heady valuations and opportunism, but more about the solutions we’d see generating new efficiencies particularly from scaling purchasing power with new groups of people that couldn’t have been aggregated before. Ideas like “SeamlessWeb” launched in 1999 (acquired by ARAMARK in 2006), which built tools used by corporate offices for food orders, are the prime example of how tools to tap collective purchasing power could be leveraged into a better way to handle every day orders and add value.
I got deterred from pursuing any of those ideas for awhile. Instead I went to finish law school, and spend hard time as a corporate attorney in NYC for a few years. There was a modest level of intellectual stimulation in that. There was also a lot of logic and thoughtfulness about value investing, which I also pursued for a few years. But the problem-solving just wasn’t on par.
So I felt reinvigorated with excitement about 10 years after college when I was watching social media sites like Facebook explode in popularity out of the college segments and into more of the mainstream. I realized a new wave of Web-enabled group buying concepts were possible, since more people could drive demand from their own personal networks. When I saw The Point testing a concept called “getyourgroupon” in 2007, I stopped in my tracks. It (Groupon) was brilliant and simple: Unlock transactions once the minimum size group had formed, and help them spread the word to grow the group.
I immediately started my own company called BuyWithMe because I wanted to make it work better for my own situation, a little less about college kids (Groupon’s core target at launch) and ultimately geared it to go after a big vision of “amazing opportunities that won’t exist if we don’t all want to buy them, together.” My favorite idea was something like a “Bird vs. Jordan 1-on-1 game only if we get enough tickets sold!”
[Ironically, we quickly found ourselves down a different path, and I believe Groupon was a huge vision, totally misapplied. It’s not the point of this commentary to delve into how on earth Groupon and BuyWithMe wound up pursuing a vision of hyperlocal mobile discounts, which is basically the complete opposite of group buying; but in part it was the fact the economy was so poor, we felt we could help local businesses acquire new customers and that attracted huge VC dollars and a massive race to grab market share and an IPO. We never got on the path back. Instead, we sold the company to Gilt Groupe in 2011.]
Then, about three years ago, I returned to CustomInk to help launch Booster (@BoosterLLC), an idea that really hits the whole concept out of the park: empowering individuals, groups and nonprofits to sell t-shirts and generate support from their own circles and hit minimum thresholds of demand to make orders profitable without risk, generally for causes they care about. This “community buying” is a subset of group buying , in my view — there’s just a clearer connection between the participants who are all benefitting a fund recipient. CustomInk also acquired Represent, working with big influencers in a similar way. GoFundMe, KickStarter and others are really big mainstream examples at this point, too. This is one direction CustomInk is headed, and it’s awesome.
There are too many cool ideas to mention, such as Zola, a popular new wedding registry concept backed by former Gilt folks which allows shared purchasing of items in a super smart way. WeWork is another example: the office spaces are essentially devised in a way that individual lessees can share a workspace thanks to a group aggregation. That is variant I happen to find powerful — where there is more “curation” on the part of the platform operator to drive those dynamics. That’s the direction BuyWithMe could’ve headed.
And, in fact, the #2 fastest growing company on the Inc 5000 this year was “PaintNite” which does exactly that sort of curation. They describe themselves as focused on the “girls night out” . All over the country they are crowdsourcing demand for a fun night out into excess space at bars and restaurants. Central to the whole concept is that a class of at least 15 people must gather to make it work. The latest event called “PlantNite” is already catching on, and more ideas lay behind that one. It’s actually a huge vision, and I hope they are able to unlock all the potential there.
Incidentally, I also love the aspects of BuyWithMe and PaintNite where they not only aggregate demand, but they also utilize excess capacity. There are some great businesses working purely on that concept, like HotelTonight, ClassPass, GolfNow and Breather.
Popular concepts like vertical integration, on-demand, social commerce and others are to some extent at play in these business models, too. Ten years from now, we’ll see there were applications forthcoming for AI, drones, and chatbots, I am sure. I’m not smart enough to understand and apply any of that.
But I see as many opportunities now for aggregating demand in savvy ways to unlock new win/wins. It’s been longer since college than I wanted to admit, but I am more excited now than ever about all the ways group buying can be applied.
~Andrew
