thoughts on the economics of group buys

[Huw Powell]

> Just a few thoughts on the economics of group buys . . .
> 
> Group buys are cousins of quantity discounts - the idea being if you buy 
> more of them, each one costs less.
> 
> This works very well with commodity items or mass-manufactured items. A 
> perfect example of this is book printing - prices drop the longer your 
> print run is, and the drop is significant. We are talking quantities of 
> 500 to 10,000 books at one whack - and I doubt chips for Audis in 
> quantities of 10,000 get sold on a regular basis.
> 
> This doesn't work with stuff you have to make or do by hand

I can relate to this quite well.  The typical successful group buy is 
where some "real" savings are created along the way, or where the 
product would only be made if there was an order for, say, ten of the item.

Whne it doesn't make sense is when there is no savings somewhere in the 
pipeline.

For example, I make speaker parts and sell them, basically, in 
onesie-twosies.  You'd think the price for a hundred could be a lot 
lower, but at 100, none of my costs go down.  (the "overhead" of the 
sale does, of course).  In other words, unless I was already building 
1,000's or 10,000's, a quantity discount is fairly meaningless.  I 
suspect a business like developing and selling chips & tricks for our 
tiny market is a lot like that.

There aren't zillions of vendors competing for our business, we're 
almost lucky if someone takes the trouble to make something.

> For group buys on this list, my feeling is that we are more toward the 
> appendicitis model than the print more books model. Our quantities are 
> simply not large enough.

I'm not sure appendicitis was the best analogy, but it sure adds some 
color to the story!  Ow, ow, ow...!

-- 
Huw Powell

http://www.humanspeakers.com/audi

http://www.humanthoughts.org/