How Group Deals Can Be Damaging For Retailers

The "group deals" scene in Australia continues to flourish with new entrants on an almost-weekly basis. Everyone loves scoring a bargain, but do retailers risk long-term damage if they sell experiences or tickets through a group deal after already selling some of them at full price?

One obvious way where group buys can go wrong is if the offer proves so popular that the advertiser can't supply everyone who wants to sign up, but there isn't an adequate system in place to ensure that customers don't keep trying to buy. That happened to Cudo last year in an incident which might lamely be referred to as Cupcakegate.

That sort of issue can be managed by ensuring that if there's an upper limit on a potential deal, it gets removed from the site. But as Lifehacker reader Kanthan pointed out to me recently, some group deals can leave a bad

Kanthan wrote in last week to point out that music festival Good Vibrations was selling half-price seats through Spreets. The Sydney event has come and gone, and the allocation to Spreets sold out.

As Kanthan put it:

This is a massive slap in the face for the loyal supporters who bought early at double the cost. It's one thing having discounts with retailers during not so busy periods, but when there are other people out there who have bought the identical product at a higher cost, it just tells the loyal supporters that the business does not care.

Discounted tickets for entertainment events are nothing new; I'll freely own up to having gone to concerts in the past purely after getting an email announcing a new and lower price. But that has always been for seated events. At least in those cases the people who paid up earlier might have the satisfaction of knowing they got a better position.

That doesn't work with music festivals, where as a rule all the tickets are essentially equivalent. The fan who buys on the first day of sale gets the exact same service as the bargain hunter who buys two days out. Having a large crowd helps with atmosphere, but having a bitter segment of that crowd doesn't.

As well as annoying people who were willing to pay full price, selling tickets this way could kick off a vicious cycle of unprofitability. Fewer fans will buy up front, assuming there'll be a discount at some point, and the whole thing could collapse. Large department stores like Myer often complain these days of customers not buying goods at full price because they expect a sale to come along soon; it would be a shame if the music festival business went the same way.

Obviously, businesses are free to choose any legal strategy they like to promote their goods, and to sell them at whatever price they want. A group buy approach might seem appealing, but businesses need to be mindful of the consequences in terms of how they are perceived by all their customers, not just the ones which score a bargain. Thanks Kanthan for the tip!

Lifehacker's weekly Loaded column looks at better ways to manage (and stop worrying about) your money.


Comments

    I'm a happy beneficiary of $75 Good Vibes tickets, but I can sympathise with people who pay the full price for tickets to events, after all they are the loyal supporters who are forking out big amounts of money to support it, however there is also another way of looking at it..

    Until a day before the event, there was never knowledge that the tickets would be put on sale for half price. You could think in the case of Good Vibes, that if you paid full price, the extra $75 was an "insurance policy" against the tickets selling out. If someone was to wait to try and buy the cheaper tickets, they may never have been put on sale, or the tickets may have sold out, and they would have missed out on the event. That extra $75 guarantees you entry to the event.

    In hindsight of course it would have been better if you waited, and in hindsight I didn't need to spend the $700 I paid for comprehensive car insurance last year, but it was still worth it to cover myself in the chance I did crash my car.

    Dylan

    Given that most concerts that sell out have early bird ticket discounts, and release more tickets for higher prices, letting such a site have that many tickets to resell at discount prices, indicates that the concert may not have been selling out as much as they organisers would like, and this was a drastic measure to get more people in. It is damaging to the value you place on attending a concert if tickets were offered at a much cheaper price, it means that not enough people want to go, and if people don't want to go, then maybe it might not be that good anyway.

    I don't see the problem. Promoter could not sell all tickets, so they're better off discounting the tickets to get people in the door. In New York I went to get the famous half price on the day Broadway tickets, there were none available for anything I wanted to see, so i missed out. I could have paid more and been guaranteed a seat but i took the risk of getting tickets late.

    The way festival tickets sell these days, if you really want to go to the festival you're mad to not buy tickets on the morning that they come available... although with Good Vibes & BDO not selling out, maybe Sydney has become Festivaled out!

    We have all become festival-ed out! Its not a bad thing to have more and more acts coming though the nation on big tours, but in little old Perth you NEVER get any sideshows - so the only opportunity to see that one act you really want to see, is to fork out over $150 just for that pleasure.

    I picked up $60 tickets to GVF in Perth this weekend, and I couldn't be happier. There are only a handful of acts I wanted to see, and I couldn't justify the full $160 price tag.

    Sure its a kick to the face for those who purchased tickets earlier, but from my many years of festival going, I can tell you that most people go to festivals to be seen shirtless and take lots of drugs, not to listen to the music. Good vibes has become renown for this, and in Perth at least, it seems to be bang on the money.

    There are exceptions to the rule, but no one can argue there isn't a lot of douchery at good vibes.

    Discounting last minute tickets is sensible enough, but how does it fit with the whole Group Deal thing ? If the organiser has, for example, 300 tickets left, there's no point in them saying they'll only sell them if they can get at least 200 buyers. They have to allocate those 200 out and can't sell them elsewhere.
    I think the Group Deal agents have more to loose if people start to see them as a chute for spam ads for products near or past the sell by date.

    The Group Deal is better suited to new products and vendors who can reach a large number of potential customers who otherwise might not have heard of it, plus get them to hook their friends in, and then (hopefully) keep them as ongoing customers.

    Yeh, I think that both the group buy sites and festivals have one thing in common here.. just getting to be too many of them. So no suprise that sales were low for the festival tickets. Perth and Qld have half price tickets from the vendor now, and existing purchasers can bring a friend free.

    I agree that sales are a risk, and usually indicate that sales are not going to plan.

    I also think it speaks in volumes that maybe,just maybe, the cost of going to events is too high to begin with these days. I see some concerts and think I'd love to go see that, then I see the several hundred dollar price tag and think, "Eff that." As the cost for maybe 2 hours of music is too steep. Especially when I was younger you went to see the band and hear the music, and many "concerts" have become full blown circuses.

    So the solution? Start with a realistic price from the outset. Only problem is as always, there are those who are rich enough to just rush out and blow their cash giving organizers a free run to keep on upping prices for events.

    It's the same with the bit about Myer, if items were not so over priced at the outset people wouldn't wait for sales, and more items would be sold allowing them to make more profit, which also highlights another problem with the commercial world, how much profit is too much or not enough?

    Prices keep going up,participation keeps going down, when will businesses learn?

    Just to make my point clearer, company has 100 tickets for $100 dollars,they only sell 50. leaving venue half filled.

    Same company sells tickets at $50, sells all 100, venue is filled and they still make the same money, and probably increase interest in future productions.

    On the other hand, Many of the businesses that use our site to run group deals are small businesses that sell products like electronics and auto-parts etc. For them group deals help get rid of excess inventory and bring in customers when times are slow. They've been doing this for years.

    The tickets were over priced at $150. They did not get the sales so they flogged tickets off. I bought tickets 5 months before thinking they would go up.

    I won't pay $150 again and I won't by ahead again.

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