Group-buying, or collective-buying depending on who you're listening to, is a relatively new online shopping experience, but one that has taken the world, and now South Africa, by storm.

The concept of group-buying made its debut in November 2008 in the form of the American website Groupon and quickly spread across the world. Looking at Groupon's premise it's easy to see why they've become so successful – you get great deals by utilising the collective buying power of the internet.

Today Groupon is one of the most successful ventures in the online world, with analysts predicting that the company will make its first billion dollars faster than any other company in the history of business.

Group what?

So what exactly is group-buying and how can it possibly be so successful? Sites such as Groupon or Zappon offer their members daily discounts on mostly luxury items such as spa treatments, designer eyewear and watches or dining experiences.

Basically it works like this: a business, let's say a restaurant, offers a group-buying deal on one of the myriad of websites available. The deal is spread to the website's members and states that prospective customers can purchase two meals for the price of one for a limited time on the site.

Here the "group-buying" aspect comes in, since the deal will only be made available when a certain number of people agree to sign up for it. If not enough people are interested the deal is off, with users who already purchased their virtual coupons receiving a refund.

This usually creates a win-win situation for both the customer and business, as you get deals for cheaper while the business gets more customers than usual, negating the loss they might take on the deal.

Also in SA

The model has spread across the world wide web propelled by the speed of millions of typing fingers, and now it has made its mark on the South African market too.

Earlier this year Groupon snapped up local company Twangoo in a bid for the local market, while online auction site bidorbuy.co.za recently acquired Cape Town-based UbuntuDeal.co.za for an undisclosed sum. Media giant Avusa also climbed into the ring with their own group-buying site called Zappon.

If you're still unsure of how group-buying works, or you're interested in learning more, sign up to sites such as Zappon.co.za, www.mycitydeal.co.za (Groupon), www.wicount.co.za or Ubuntu-Deals.co.za.

Simply select your city and all current deals will be displayed. Group-buying aggregators such as todaysdeals.co.za is also a great place to look, and offers a simple and useful list of the day's best group-buying deals. 

This article first appeared in the May 2011 issue of TechSmart magazine.