Power to the people

Power to the people

Bulk buying is back with a bang, as Andrew Mernin discovers in an interview with the man behind the latest digital phenomena to sweep the SME world.

Away from the throng of job cuts, bank failures and corporate casualties, there are some positives to take from the downturn – like better customer service and clearer financial transparency, although both have much room for improvement.

Also in the ascendancy is people power. Not in the political or industrial action sense. The site of armies of public sector workers taking to the streets is nothing new and will probably be around for the foreseeable future at least.

But the power of the consumer as a collective force is a relatively recent phenomena which only shows signs of spreading its reach into new markets and territories.

The emergence of bulk buying among individuals is perhaps most obviously embodied in Groupon, the digital deals site that allows shoppers to get cut-price offers if enough people join them in the deal. Save for pockets of customer unrest when the odd deal falls through, the site has been an overwhelming success.

At the latest count, analysts predicted Q4 2011 billings to be up 224% - a figure which, remarkably, is significantly lower than previous quarters last year that surpassed the 1,000% mark.

In the UK, one particularly opportunistic entrepreneur is now aiming to transfer the bulk buying boom to the business world.

Tom Michaels is the driving force behind DealJungle.com. The site offers SMEs and entrepreneurs deals on both the big budget professional services and the daily essentials that keep the wheels of business turning. And, despite being in its infancy, it has already built up a following of more than 20,000 members in the UK.

“I’m a lawyer by training and was shocked at the costs involved in setting up on my own, both in terms of the day-to-day expenses of running a business and marketing our offering,” he says.

“It’s a really frustrating process, but ultimately one which helped me spot a gap in the market for a website devoted to cutting costs and increasing client numbers.

“There are always the obvious costs like taking on staff, finding premises and if you’re in retail, buying stock. It’s the other, more mundane items and services that it’s easy to overlook. One of the most obvious problems is how to find new customers without a massive investment in marketing. I realised that if I could find a way of guaranteeing new customers to a business I would be on to something.”

Since its recent launch, the site has largely targeted SMEs, given that it is, according to Michaels, the sector which has the highest demand for cost cutting.

A month of PR with a 67% discount, 73% off legal costs or heavily discounted PA and ‘lifestyle management’ services are examples of the types of offers available on the site. And such incentives are beginning to attract the interest of bigger corporate players.

“Larger companies are now expressing serious interest in using our service, some on an exclusive basis,” he says.

Michaels believes the economic downturn has undoubtedly aided the growth of his business. “With SMEs in particular feeling a real squeeze they have been looking not only to cut costs but also to increase revenues.

“When money is tight one of the first things they cut is their marketing budget. By using the site they can harness the power of the internet to advertise without risking their money. If their deal does not bring in the required amount of revenue and business then it won’t go through.”

As with most digital industries, DealJungle exists in a space which is vulnerable to cowboys and copycats and benchmarking is a crucial part of running the business.

“We don’t get involved in some of the more underhand practices associated with daily deal sites – for example we never spam people.

“Many other companies will charge a percentage of the total product value, anything from 30% -60% which means suppliers find it hard to make money. We simply add a small charge onto the final cost. The more we sell the more we make which suppliers appreciate that as they know we are incentivised to help them sell as much as they can.

“I’m a great believer in the idea that for a deal to be considered a success nobody can leave the table hungry and that everyone must feel they have gained something.”

As more businesses get involved in DealJungle, the challenge for Michaels will be to find a balance between expansion and maintaining the quality of services on offer

In the meantime he remains a shining reminder that it is not just pound shops and charity stores which have been able to take advantage of the adverse current conditions.