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What is a Group Buy?

daguin

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I have recently been dealing with members' frustration over the time that has passed between when they gave someone their money and when they got their merchandise. It appears that there are a couple of things at work here. First, some people do not understand how a "Group Buy" works. Second, some people are using the label "Group Buy" for other actions.

To help clear this up, I will explain the different kinds of ways in which you can buy something on the forum

Feeler vs. Group Buy vs. Pre-Sale vs. For Sale

FEELER -- A Feeler thread is when a member is considering a group buy (or sometimes a For Sale thread) but wants to know if there are enough people interested in the item to warrant the work needed to do a Group Buy (or sale). The member starts a thread with general to specific info about the item and the potential prices to get feedback. If enough people show an interest, the member MAY move on to either a Group Buy or a For Sale thread. NO MONEY CHANGES HANDS IN A FEELER.

GROUP BUY -- A Group Buy is when a member arranges a better price than the general members could obtain individually, buy buying in bulk. This is usually done as a service to the community. The member posts a thread in which he states the price (or the price at a different numbers of units). He will state how many it will take to get the price and trigger the purchase. Once he is confident that enough will be purchased, he begins to collect payment from the members. ONLY after the members have paid will the items be purchased.

After the money is collected, the items are purchased, After the items have been received by the person running the Group Buy, he will ship the items to the individual members. The person running the Group Buy is generally rewarded for all of his work by either getting the "wholesale" price for himself as well, if the item is fairly expensive (i.e. $500 diodes), or by getting one or two of the items themselves for free (i.e. $20 sleds).

A Group Buy gets the members the best price generally available. HOWEVER, it also takes the most time and involves the most risk. There can be a significant length of time between when one pays for the item and when it is actually received. Not only do you have to wait for all the money to be collected, but you also have to wait for shipping time from both between the supplier and the person running the Group Buy AND from the person running it to the buyer. In addition, since this is NOT the persons' "business" things in their personal life may take precedence over getting the Group Buy completed.

Finally, it involves the most risk. Sometimes people loose control of their lives. If this happens while they are in possession of your money while collecting for a Group Buy, your money is in limbo along with the life of the person running the Group Buy. Another risk is that you are trusting the person running the Group Buy to have both done their homework with relation to what the item is AND if they have found a trustworthy supplier. If the supplier rips off the person running the Group Buy, where does that leave everyone?


PRE-SALE -- A Pre-Sale is when a person gets members of the forum to help him start a business. Some people say (or think) they are running a Group Buy when it is actually a Pre-Sale. In a Pre-Sale, the member collects money up front like in a Group Buy, but is selling the items at retail prices. In the Group Buy the person is rewarded with a lower price (like everyone else) or gets a unit or two for free. In the Pre-Sale, the person is rewarded by turning a profit off of each unit (just like a For Sale). The difference is that this member cannot afford to buy (or doesn't want to risk his own money to buy) the stock needed to sell.

Instead of selling at his cost (or very close to it) he sells at retail price. This person, essentially, gets the members to "loan" him the money to get started. He collects full retail price from each member and when he has enough to buy the items at the wholesale price, he orders the items. Then he charges full retail price for each item.

This gives the seller the most profit with almost no risk. The buyers deal with much the same risk as in a Group Buy. It takes time AND you are risking the loss from the same things as in the Group Buy.


FOR SALE -- A "For Sale" thread is run from the Buy/Sell/Trade board. In a For Sale thread, the seller buys the items at "wholesale" cost and then offers the items at a fixed price to the members. In a For Sale thread, almost all of the risk is assumed by the seller. The items are "in stock" and are shipped quickly. The reward for the risk to the seller is a higher "profit." The reward for the buyer is no wait and little chance of a loss via any of the risks stated in the Group Buy section above.

Bottom line --

Feeler = Just researching interest in an item with no risk

Group Buy = The best price, with the longest wait and the most risk to the buyer

Pre-Sale = Retail price, with the same wait and risk for the buyer as the Group Buy

For Sale = Retail price, with little to no wait and very little risk to the buyer

Yes, sometimes a Group Buy will turn into a For Sale, but usually, this is simply that the person running the Group Buy realizes that the market could sustain a For Sale and just buys the next batch with his own money. There should be a significant difference in price between a Group Buy and a For Sale thread. Otherwise, it was probably just a Pre-Sale to begin with (or the seller is just one helluva nice guy ;) )

Peace,
dave
 
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Morgan

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Great description and I think sticky material for the GB section. [EDIT: Already stickied]

I am running my GBs on just these lines. After all is considered, yes, I do get a couple of units but it isn't a business and I feel the risk is mostly mine as I had to buffer the buy on one to hit the deadline. I'd have to buy more to drive the price lower and then it could become a business, if I could fund it, but others are in the game for that. The higher the numbers then the lower the price.

This distinction is very useful.

M
:)
 
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hakzaw1

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I added the following to this great sticky--
(since my thread only got marked as a stinky--lol) I have edited it so please read it too, if you are not familiar with GBs.

I thought I would add this post to clarify some things about Group Buys, from my point of view. Just mine-- I only speak for myself.

Above by Dave is a thread about what a GB is- this, IMO, is what it is not.


It is called a group buy as it is done as a GROUP. With a forum member organizing or if you will, 'hosting' it.


If a 'feeler' is started, there is no problem responding that you have interest, but hopefully a little more than just casual interest.

Once this moves to a list of those who wish to go forward from this point, those who do not or can not go in on the GB should not add their name to that list but instead out of courtesy post or PM that they are passing on the GB for now.

And you should certainly NOT add your name the the list if you are not truly interested in doing the GB. If for a good reason you cannot pay it is important that you make this clear to the host ASAP via PM.


Since these sometimes end when a certain low or high number of units for the GB --WHEN the next step is reached is not always possible to say ahead of time.... exactly when the list will move to the 'Time to Pay' step is often an unknown.


But when it does if would be nice if you let the person who is organizing/hosting the GB know that you cannot be ready ATM.

My last two GB were fine however those who asked for last minute changes caused the rest of those on the list a few days in shipping. The shippng is one of the elements that makes a GB possible. Therefore asking special treatment like early or direct shipping is not fair the the others.

Not unlike 8 people ordering food and after the plates are nearly ready to be served, one person changing thier mind and asking for another menu item . In most cases, all the others will have to wait on you food.


If one gets earlier shipping then all should ---------which is not possible.

And going around the host of the GB and asking the Company who the GB is buying from for special treatment is not fair. No harm in asking for a change , but the person that should be asked is the organizer/host.


I asked for all interested in the GB to contact the maker about what is available(in stock) and the GB price ONLY.

I was to handle the gathering of funds , the payment, and the re-shipping after the items were delivered to me.

There may be some who say that I am being unreasonable-IMHO, if they hosted a GB they would feel different about this.

I feel that this is only fair considering the organizer is bacically doing the others a favor already. Every member wants to get thier units as soon as possible. If you cannot wait you are not in the GB -instead just wanting the GB price.
I eagerly await feedback on this thread---Thank you------------hak
__________________





hak sez- hope this helps-- if so please help the forum w/ a donation...T Y >(^U^)<
 
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hakzaw1

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Recently I have found other aspects of GBs that some may not understand.

The GB host is not always an 'expert' on the item- and sadly the source in some cases may not be much of an expert either.

Asking for more info is a good idea especially before you send the host your money-
The host may not have an expert answers to your Qs. he should be very wiling to help but may need to consult with others including the source- but some hosts are very savvy and can help -- its just not fair to assume.

Also know this- there are things that can happen with a GB that many are not aware of-- like a DOA item- a good host will NOT send it out- He may have to keep it as the one he bought or in the case of an extra unit keep it.

A good host will not allow any GB member to request 'cherry picking' or do that for himself- I do a random assignment before any tests(If that can be done) after testing the only changes I make are involving DOA or poorly performing units. Hosts should not be expected to test much beyond basic functions. Take 445 diodes for example- most will partially remove the diode array- turn the projector on and see that all the diodes are working and that none are looking like zombies. this is a VERY easy test to do- it SHOULD be done EVERY time but to expect the host to test every single diode - do graphs etc is for many not something they can or should be expected to do.

some other things that the GB buyers may no take into consideration are the time spent-the 'extra' expenses like gas to make many trips to send out the payment- to cash checks- the packing supplies,, ETC these can nickle & dime the host to death. If you forget to include the bank charges to wire money right there the host is stuck witha bank fee between 30 to 50$$

Paypal fees-- who pays them?- well if these are not 'built into' the price paid by the GB members of course the host is left to deal with those.

same goes with needed insurance- I sometimes make that a highly recommended option . Or even insist in the case of a very expensive item-

same for delivery signed confirmation-stuff happens boxes get left at the wrong address- so signing is the best way to go.

Customs- that can be a huge PITA-while seizure is no fault of the host many expect another item to be shipped as a replacement- If that is expected then the buyer should also expect and understand that the host MUST charge more just for that rare occasion.
This may help you wrap your head around the need to prepare for that.

Your car is down- your mechanic replaces your bad widget and along with the labor cost, he charges you for the widget itself- you find that you could have purchased your own widget for less- sometimes MUCH less-- is this your mechanic being greedy or ripping you off// SURE seems that way!!

until you understand this- IF your new widget fails you do have the right to ask the mechanic for a do-over- IF he does he will need another new widget and must use about the same amount of labor a second time. His rep depends on taking good care of you in such cases- so along with the mechanics price break he gets, there is often something added still to the parts price'

for your mechanic to do the same work a second time- he will in many cases not profit at all --but rather lose $$-- but to expect the mechanic to never charge any extra for these rare occasions is unfair. The time spent for the do-over is time taken away from doing new repairs at a profit.

he may not need to do many this very often and thus you should not be charged double ...but for every X times there is never a needed do-over there still can be one occasionally.

being a host of a GB or being a GB buyer is NOT for every one.
 
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DB8088

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I know this is a late reply, but I'm now in my first GB. I'm very thankful to hakzaw and Morgan for their posts. One thing stuck out for me in particular...the do-over analogy. Not something I had thought about....but I am grateful you put it in this thread. Just something else to consider. Thanks again for a very informative thread!
 

madmacmo

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Many may think of it as only common sense but I want to plunk down my 2¢ on this whole GB thing:

I believe the best way to understand the nuances of GBs here at LPF is spending sufficient time up front browsing the Group Buy Forum to see firsthand other member's previous GBs structure, constraints and style. Look both at members having multiple GBs under their belt, as well as search out for those few GBs that did not go well so that you may learn from other's mistakes to avoid making them yourself.

First and foremost anyone taking on a GB should understand that Trust is the basis for making any GB possible. Anyone starting a GB should fully appreciate the importance of the trust being placed in you by each member that chooses to participate in your GB. Your participants are explicitly trusting you with their money to meet the expectations you have given them. Know well the risk of something going wrong, and thereby succinctly state to begin with what they are to expect from you if changes occur causing delays, addition expense, or loses. The participants by their trust in you will have an inherent expectation that you will have their bests interests in mind at all times. Keeping your participants informed and involved in decisions that affect the whole group is critical.

If for any reason their trust in you is cause for doubt you will probably have only a short window of time in which to shore up their trust by providing honest, open, and transparent disclosure to quell their doubts. If participants perceive you as being culpable of misusing their trust then it will be up to you to do what is necessary to regain their trust. Ultimately it is your GB and your participants will look to you for solving problems in an evenhanded and just fashion. If your GB goes south from there, all I can wish you is good luck.

Personally, if my words or actions lead participants to question my trust worthiness I would start with an apology and ask the whole group how I can make it up to them, and would do so even to the point of personal cost. – but that’s just me.
 
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hakzaw1

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WELL SAID MAC

+5 When I can..

Pitfalls are always a possibility and a smart GB host does his best to walk that thin line between covering his ass as few are willing to help if something does go wrong- later.


EVERY TIME (12 SO FAR) I send the funds I spend many sleepless nights praying for all to go well-

BTW if 20 widgets are ordered and ONE arrives DOA--who gets THAT one?? the host of course- till you walk in my shoes you have NO fricken IDEA!!

GBs are NOT for everyone nor is hosting one-

lots of homework goes into finding the best sources--
and finding something that LOOKS better- well....


see the last two lens GBs to see what I mean--

>300 posts for 200 lenses!!
 

CDBEAM777

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VERY will stated Mac. GB's have MANY pitfalls. But, with due diligence and complete transparence, poorly run GB's can be avoided and problems minimized.

My hat is off to those that run a GB !

IMO,the final take away is, With Responsibility, comes Accountability-concerning the course of a GB.
 




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