698
8 min 39 sec

Engineer Earns 7-Figures from “Crowd-Purchasing” Project

A product development exec recognizes the need for a group buying platform for electronics and other items. After starting with $5,000, it now earns seven figures annually.
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What It's About

A "bulk-purchasing" hack scores big profits.

Business Model
Service
Skills Required
Crowdsourcing & Purchasing
Complexity
Medium
Profit Potential
High

Words of Wisdom

Ron suggests that you find a good partner and don't go it alone. Warn your significant other that it's going to take up time. Your customers and partnerships are precious.

Fun Fact

The first item sold on GroupGets, a thermal camera component, has over 60 uses. One use for thermal cameras is the attachment to a drone and use in search and rescue efforts. Another is detecting "motorized doping" in bike racing.

Notes from Chris

Episode 698
Back in 2013, Ron Justin was in need of a specialized electronics item that was only sold in lots of 1,000. But Ron didn’t need 1,000—he only needed one. In search of a “crowd-purchasing” platform, he was shocked to discover that no such thing existed. The major crowdfunding sites at the time were only for new product ideas, not things that were already made. So he convinced his friend Kurt to help him build the site GroupGets.

Usually, when an item is bought in bulk, you pay a lower price per unit. Think of when you buy a large pack of toilet paper or paper towels - you pay less per roll than if you purchased just one roll. Now, through GroupGets, people can have this same type of purchasing power for any type of item. With GroupGets, you purchase the item in bulk with your other group members. YOU are only buying one item. Each group member gets their one item at the better, bulk price because they are one in a group.

But Ron and his business partner aren’t selling toilet paper. Their group buys are mostly for new and high-end electronics. Naturally, these items have higher price points—which makes sense, because people are looking for deals on them.

Here’s how GroupGets works: If you want to buy something that is typically only available in bulk or is cheaper if buying in bulk, you can start or join a campaign on GroupGets to purchase the item. Others who might also be interested in purchasing that same item join in and the items are bought in bulk, by GroupGets, at that lower price. GroupGets then divides up the units, collects the money from individual buyers, and ships to the buyers.

For example, the “Zubi Flyer”, an educational toy with a retail price of $130, is listed on the site for $65 with a “target” of 50. So 50 buyers are needed before GroupGets puts in the order. When they reach 50, they order the units, ship them out, and each buyer pays $65 for their item.

The company’s income is generated from a percentage of sales. When a manufacturer ships directly to the buyers, GroupGets takes a 10% cut. If GroupGets does the shipping, they take 20%. Startup costs were $5,000. Since inception, the company is making 7-figures in profits.

GroupGets also sells custom electronic accessories and software. If a product does well on their group buy site, they stock it in their online store. The item may be produced by GroupGets, or by someone else. Very boutique in the electronics world, the store is kept mainly as a convenience for repeat customers who are willing to pay retail and not wait for the group buys.

Ron invested just $5,000 to start this multiple 7-figure business. However, of those costs, $4,000 went to hire a contractor to handle the site’s payment system. His thinking was that if they had the reputable payment logo on their site, this would build user trust.

Ron continues to work his job, which he admits can be a challenge since this business has grown so much. Still, he says, “this is how I’m wired. I don’t want to choose between one or the other—so I don’t.”

 
  MENTIONED IN THIS EPISODE:

  • GroupGets: Learn more about Ron's crowd-purchasing platform.


SEE ALSO:

Inspiration is good; inspiration combined with action is better. Now get back to work!

Yours in the revolution,

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To infinity and beyond,

Chris Guillebeau