GroupPrice Targets SMBs For Group Buying

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Smaller businesses already sell on group shopping Web sites, but will they buy from them, too?

That's what Van Jepson, CEO of GroupPrice.com, is banking on. His site is essentially a business-to-business translation of the group-buying boom, but it's not serving up spa treatments and romantic weekend getaways. Rather, GroupPrice's merchants deal in products and services that target the SMB market.

While group buying, couponing, and social commerce have fed a much-hyped consumer craze -- with sites like Groupon and LivingSocial leading the way -- the business-to-business model has no household names. So the question is: Will it work?

"We feel that the business-to-business side will start slowly and grow," Jepson said. "We believe that 2011 will be the year for breakout of maybe the top three to five [business-to-business] suppliers."

In its startup stage, GroupPrice is going after businesses with up to 25 employees. The company plans to gradually increase its target profile to 100 employees, but Jepson believes focusing on a smaller cut of the SMB segment will help GroupPrice get its post-launch sea legs.

"Right now we're having to be very focused as we mine the sweet spot in the marketplace, getting traction, and proving the model," Jepson said.

GroupPrice isn't sharing much in the way of data yet; Jepson did say that traffic on the site has grown five-fold since leaving beta in early January. The company is initially marketing only to Web-based businesses, largely ignoring companies that do most of their sales offline. A scan of current and recent deals on the site included services such as SEO/SEM, Web video production, .psd-to-HTML/CSS coding, custom blog design, and Web analytics. The site also features some more administrative or office-related offers, like bookkeeping and payroll services. Services that fall under the umbrella of Web site marketing have out-performed back-office and other functions so far, according to Jepson.

"We started with a hypothesis that people would want products, software, services, supplies, " Jepson said. "What we found [in beta testing] was that the focus that people took was on those Web applications and services that enabled their businesses to grow online."

Jepson noted that other phases of the online business cycle -- such as pre-launch site building -- are not central to GroupPrice's current plans.

"We focus exclusively on 'grow online,'" Jepson said. "In time we'll branch out, but as a startup we have to focus like a laser beam."

While GroupPrice wants to capitalize on some established practices of its higher-profile counterparts, its CEO said there are some fundamental differences in group buying for SMBs. Though GroupPrice's slogan is "Daily Deals for Your Business," the company has found that business buyers in fact need longer than a day to make a purchase decision. As a result, most of the site's "daily" deals run for week, launching on a Monday and expiring the following Friday. Purchases typically peak on Tuesdays and Wednesdays, according to Jepson.

"In business-to-business, they need ample time for the deal to stick around," Jepson said, as opposed to the daily deal approach common in consumer models. "There are some unique characteristics that small businesses need that consumers don't."

Another example: There is often more than one person involved in SMB purchase decisions -- business buyers are less trigger-happy as a result, which reduces "Hurry! Offer Ends Soon" tactics. Still, Jepson said that GroupPrice rotates its longer-running offers on and off the homepage to give the appearance of daily deals.

Group buying for SMBs has a theoretical logic behind it: If smaller companies band together to get the products and services they need, their collective purchasing power more closely resembles that of larger enterprises. It has some precedents elsewhere. There have been several attempts at health insurance purchasing pools for smaller firms, for example, and a similar concept underlies the health care exchange provisions included in last year's federal reform. But there's a conspicuous lack of noteworthy, large-scale success stories.

A site like GroupPrice may only be as good as the deals it generates -- while the Groupons of the digital world can cash in on impulse buys, there's no such thing for cost-focused SMBs. Exhibit A: The fact that GroupPrice runs its deals for five days instead of one. Consumers -- bless them -- buy plenty of things they don't need. Businesses -- especially smaller ones -- do not, or they are not in business long.

For the business-to-business application of group buying to succeed, sites like GroupPrice will either offer the best price on a product or service that a company actually needs, or hear a chorus of like-minded SMBs: No deal.