Scandinavian e-commerce start-up Letsbuyit.com’s announcement last week that it has chosen Abbott Mead Vickers.BBDO and the BBDO network to handle its $100m (£63m)-plus global ad account is remarkable – more for the scale of the budget than the agency’s selection.
The business model behind the international roll-out of the Letsbuyit network is intriguing, if not compelling. By aggregating requests for a wide range of consumer goods, suppliers offer stepped price discounts which increase as the volume of customer orders rises through a time-limited sales period.
At its best, this “co-shopping” mechanism gives consumers a site which can drive prices down to near-wholesale levels.
But, as so often in new media, the challenge for Letsbuyit and its newly appointed agency is to convert a back-of-an-envelope brainwave into a day-to-day business reality, and match that reality to the proposed heavyweight marketing drive.
Tracking the goods on offer at Letsbuyit’s UK site in the run-up to Christmas, and beyond, showed that – for the time being at least – the cupboard is relatively bare.
The list of goods on offer within the 12 or so categories, such as gardening and leisure or toys, have often numbered fewer than 12.
Often the number of co-shoppers required to hit the maximum discount level can be as low as four, five or six. This suggests that, as yet, there is little in the way of genuine co-shipping muscle to convince suppliers to heavily discount goods.
Letsbuyit executives are no doubt aware of these issues and will be working to expand the range of goods and depth of discounts to ensure more visitors are enticed to make bids, or at least intrigued enough to return and check out future deals.
Spending $100m to promote the site network would be remarkable, but not beyond the bounds of possibility in a market that is becoming more and more advertising rather than content-led.
But Letsbuyit and its agency face a further strategic problem with the business model, even assuming the venture succeeds in achieving a critical mass of goods, audience and brand awareness. While most goods suppliers are happy to offer heavy discounts to individual, marginal customers, they don’t like advertising the fact.
Meanwhile, a range of sites in the US, such as Priceline.com, are developing an alternative, consumer-led model. Consumers simply lodge a set price they are prepared to pay for a defined good, such as an airline ticket or hotel room, and it is then up to a range of suppliers to decide whether to tender for the sale.
The deal is effectively struck behind closed doors.
It may be that sites that permit secretive discounting, rather than bulk discounting, will prove the most popular among bargain-hunting consumers on the Web.