Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Sun May 18 2014 20:38:05

Facebook Co-ops: Opportunity or Threat for Online Sellers?

By: Kenneth Corbin

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In Monday's NewsFlash, I report on the emergence of Facebook co-ops, secretive groups on the social network where shoppers sign up in the hopes of scoring bargains.

The groups are invitation-only, each run by a host who reviews and accepts applications on a case-by-case basis. In theory, they operate by leveraging the buying power of the group, so enterprising hosts arrange wholesale-type deals with suppliers, and then offer the merchandise for sale through their Facebook group at steep discounts.

But what happens when the manufacturer isn't in on the arrangement?

We started looking into this story after hearing from a handbag maker who said she has been struggling to keep her products out of the co-ops. There, she says, her bags are being sold without her permission and at prices that undercut what she and her channel partners offer to the retail consumer.

Facebook co-ops are a relatively new phenomenon, a very loosely governed frontier in the ecommerce world. Caveat emptor is the law of the land. So one of the challenges in reporting this story was getting a sense of how big the co-op segment actually is.

One Facebook group where co-op hosts post deals and buyers make inquiries - i.e. "Anyone running wooden jigsaw puzzles?" - counts nearly 12,000 members. In the context of the overall retail market, that's barely a rounding error.

But they're growing. The administrator of the Co-op Deals and Reviews Facebook group has acknowledged the proliferation of new co-ops, and has been implementing new policies in an effort to bring some oversight to the sector, including a requirement that groups register with something called the Better Co-Op Bureau.

Fred Felman, chief marketing officer at the brand-protection firm MarkMonitor, noted that Facebook co-ops are just one facet of the larger phenomenon of social commerce, a channel that has been growing rapidly and shows no signs of slowing down.

"I think it's super clear that social media is a venue where goods are being promoted and sold and the level of influence that social media has over online sales is increasing dramatically. And we expect that trend to continue, and to that end, it's no great surprise that people are trying to capitalize on that in creative new ways," Felman said in an interview.

But Felman doesn't see much upside in the co-ops for brands, nor does the manufacturer we spoke with.

Are they right? Or do the Facebook co-ops, if managed properly, offer sellers a new channel to expand their presence and reach new customers?

We'd also like to hear from co-op hosts and shoppers. Are the concerns that the manufacturer shared with us valid? What policies or procedures are in place to keep unauthorized merchandise out of your groups?

Let us know in the comments section!

About the Author:
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.




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Readers Comments

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

This user has validated their user name. by: Ming the Merciless

Sun May 18 21:58:29 2014

We have already learned courtesy of ebay that a business model of secrecy creates fraud, distrust, hostility, lack of accountability, and lawsuits.

There are a handful of ways that manufacturers can control distribution and prices without "price fixing."

Legislators and courts are still dealing with MySpace cases so it could be a while they get around to helping craft a body regarding internet sales.

As ebafia well illustrates, the online e commerce world is the Wild West run by the Gambino family seemingly operating outside of the law without consequences.

To me this just screams of potential fraud waiting to happen by those who thoroughly understand the typical ebay buyer who demands everything for nothing plus a rebate.

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: pace306 This user has validated their user name.

Sun May 18 23:01:53 2014

None of this is anything new with internet sales. Manufacturers STILL try to control every aspect of the sale "from stem to stern" ignoring the FSD and Lanham.

Yes manufacturers can write all kinds of contracts that say all kinds of things - most times people just sign them and go about their business - ie sell the items anywhere they can to whom ever they can.

Its never going to stop, nor in my opinion should it. Take Apple goods. Apple knows that they go all over the place - but Apple makes a boatload UPFRONT so they dont care - and EVERY piece moves out of their wharehouses and gets sold. Its win win.

The other side of the coin are the dummies like SONY. Sony who looses money every quarter is so obsessed with controling who sells what - cant manage to make money at all.

Instead of being happy that people by their Alpha DSLR instead of a Canon or Nikon, they bust anyones chops who resells their stuff via Netenforcers (who eBays VERO dept is in bed with via verowatch.com)(lots of money changes hands dear sellers).

So Apple makes money, Sony looses - whos smarter? (its like Amazon vs eBay)

Of course its as plain as the smirk on JDs face ... that in each and every contract written the words "NO eBay" are there in bold and is up front and center.

If people have found a way to use facebook to make sales, make money, go around the abusive contracts - more power to them.  

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: Tiffee Jasso This user has validated their user name.

Mon May 19 01:47:46 2014

All that is needed is for the manufacturer to have two tiers of wholesale prices. Lower prices for valid department stores and higher prices for small retailers. Personally, I would be more concerned that these closed groups are gold mines for someone selling fake merchandise for the real deal.  

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

This user has validated their user name. by: Rexford

Mon May 19 06:21:30 2014

I think these covert sites could be a threat to the Right of First Sale Doctrine, that is, if manufacturers' make enough noise.

We already know that corporations "own" our politicians, so if they make enough noise, laws will be changed.

These manufacturers need to realize though that, in today's world, once merchandise is out the door, anything goes. Black markets have likely been around for thousands of years.  If there is a demand, there will be a buyer.  

eBay would tell eBay sellers "It is the cost of doing business".

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

This user has validated their user name. by: Basset

Mon May 19 06:30:58 2014

The terms ''invitation only'' and ''exclusivity'' turns me off - even when applied to co-ops.

What those words bring to mind for me are country clubs, sororities & frats, Ladies Clubs, membership only elite golf clubs, secret societies, and so on.

Don't know what got programmed into my DNA but all my life I have shied away from social groups that require members to ''be accepted'' or somehow audition for approval.  (and yes, I know many nice and good people belong to these groups)

I guess I just like to think that one person who wants to join any group, co-op, club, or organization has the same chance as the next.



Are rejections from the FB co-op arbitrary and subjective or based on concrete factors applied equally to all who seek to join.

Is it similar to Sam's or Costco? They are ''clubs'' I guess, but I'm under the impression that anyone who has the annual fee can join.

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: KathleenJohnson This user has validated their user name.
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Mon May 19 08:33:07 2014

These Co-Ops are not new at all. It has been evolving over a long period of time as Facebook has evolved.

Facebook is losing out "more" on this deal, quite frankly, than anyone else and I am predicting that "selling" on Facebook, pretty soon, both on personal Timelines and Groups, are probably going to find this avenue throttled so it fiscally benefits Facebook.

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: CAROLINASGIRL This user has validated their user name.

Tue May 20 07:43:38 2014

I think alot of these comments are missing the mark. Brick and morter stores are the losers here. These co-ops are taking the walk in customers and selling the same item at cost. It is your mom and pop stores that once again take the hit
As far as a manufacturer, unless you are one, and understand the trials and tribulations related to your brand, there is no way one could make a statement regarding these co-ops and accurately state the issue.

If you have worked and spent thousands of dollars to develop your brand, you certainly do not want it diluted by the likes of co-ops.

So to further the point - many of the co-ops clearly state, ''gift'' me the money so pay pal does not charge me. Others say, do not put co-op in your payment info. So they get away with no fees, that the rest of us pay. Do those of you commenting in favor think this is ok as well?

All of us who are professional sellers and do not ''hide'' the fact we sell, have costs associated with being in business. Do you not think the reason they are secret is because most manufacturers do not want their items being sold like this and they would be found out if they were selling outright and not hiding?

From screen shots people have sent me, I personally was astounded at how these are run and some of the things I saw.

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: sickandtired This user has validated their user name.

Wed May 21 21:01:23 2014

Trying to figure out what is even really allowed on FB is problematic in the first place. They will figure out a way to monetize this, then will have to regulate it in some way.

I may be way behind the times, but I just found a group (run as a private group by a lady I know) that is actually an auction "site". She lists a bunch of stuff with an opening price, sets an end time and I assume that only those in her approved group can bid.  

This opens up a huge can of worms as far as I'm concerned.....she is not a licensed auctioneer, I don't think FB has stated that it is a "venue" for buyers and sellers to connect as ebay did in the beginning.  

On the plus side, there is complete openness because if you want an item you just type in your "bid" in the comment line. BUT - how do all the group members know if the "bidder" is legit, not just a buddy of the seller.....there is no transaction record.

This goes way beyond joe public selling his own stuff on ebay, kijiji or at a yard sale.

This person is a "real" seller - does, or did ebay, had a shop at home and a booth in a multi dealer market. Don't know if income is declared, taxes paid etc.

This may be unpopular, but I have no objection to people making a few extra bucks on the side, but we certainly don't need another way for legitimate business people to get scr**ed.

Perminate Link for Facebook Co-ops: Opportunity or Threat for Online Sellers?   Facebook Co-ops: Opportunity or Threat for Online Sellers?

by: Abernathy This user has validated their user name.

Fri May 23 18:19:54 2014

True co-ops are an extension of pooling orders with friends, which is a great way to save on shipping costs and take advantage of bulk deals without injuring the seller or manufacturer. Essentially, co-op buying removes the additional expenses and overhead of packaging and filling individual orders, and transfers the work and distribution cost to the co-op members. I've arranged that type of order for friends before, with no loss to the manufacturer or supplier--but then, we weren't purchasing designer items. This type of purchasing works with friends when there are items we're all ordering and it's generic enough to work for everyone--food staples, for instance. I've also arranged combined orders for items that I knew how to buy, but my friends didn't.

There are always possible issues--making sure the payment is recovered if the merchandise doesn't arrive as scheduled, for instance. Sometimes the interests of an individual in the group are at odds with those of the whole group--the whole order can be returned without much loss, but returning one or two items is hardly worth it, and the group has to decide ahead of time whether the group will send everything back, reimburse the individual's loss, or individually accept the risk. Including someone who is impossible to please in the order puts friendships and relationships with vendors at risk. When ordering from out of country, there are issues with customs fees and regulations if the order is large enough. Pooling orders to take advantage of wholesale pricing makes sense to me, but the person organizing the order has got to know what they're doing, know the vendors, and have a backup plan.

If someone is buying in bulk and reselling at a profit, that isn't a true co-op. It's a de facto discount club that's probably not following a lot of rules about things like sales tax and customs fees. ''Co-op'' owners who are dishonest with the manufacturer when they're obtaining the merchandise won't be honest with their own customers either.



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