November 24, 2014: Since they are now a product reseller and I know we'll get asked about this frequently, discussion and linking to Massdrop's sales is allowed.
In general, group buys and group builds (of DIY products) are not allowed, except for hard-to-obtain DIY parts or special DIY one-offs (such as circuit boards). These still require permission from an admin before they can be approved, however.
Recently a number of people have asked why we don't allow group buys or discussion of groups buys on other sites. While we understand that people wish to buy items as cheaply as possible, a number of very serious issues have come up with group buys that have made us expand the rule to include group buy sites.
1. Predatory pricing
The following is an extract from a PM Jude sent to a member as to why group buys on Head-Fi are no longer allowed (with the exception mentioned above):
Years ago, we were more open to allowing group buys. After one particular group buy, however, I changed the policy to what it is now. Here's what happened in that group buy:
- The group buy was for an in-ear headphone that was just being released (at the time).
- The organizer of the group buy contacted one dealer, and asked for a group buy price. That dealer responded with a group buy price.
- The organizer then contacted a second dealer (and subsequent dealers) and worked to get the price lowered with each call.
- If a dealer was willing to beat the current lowest price, then the organizer contacted the other dealers again to let them know.
- To make a long story short, one of the dealers decided that, in order to prevent any one of his competitors from fulfilling the order, he was going to sell the headphone at a loss. This is when I decided to change the policy, and told the group buy organizer there would be no group buy for this product on Head-Fi.
Why? In case the reasons are not yet obvious, my reasons included (but were not limited to) the following:
- I saw it as abusive (even though the organizer obviously had no intent to be abusive). In having a dealer sell an item at a loss to secure the deal is to tell that dealer--for the cost and risk of acquiring the product in question, packaging it all up, shipping it all out, answering questions and servicing customers, and dealing with subsequent returns--that his services and support were not only worth little to nothing, but that they'd actually have to lose money, and, thus, pay for the privilege. This, to me, is predatory. (Of course, I am definitely not suggesting that being predatory is your intent, or that it would necessarily be the outcome here, only that group buys--depending on how they are arranged--can be predatory, whether by intention or not.)
- Just about every product that this community might have strong interest in could be had cheaper if we allowed group buys. So where does one draw the line? To me, the fairest line was (and still is, in my opinion) to simply not allow them, unless absolutely necessary. I don't think that muscling dealers into cutting their margins to wafer-thin levels (or worse, taking a loss) for the sake of having one dealer monopolizing the sale of a particular product to this community is healthy for the ecosystem we have here.
- As a community, there has to be at least some support for the dealers who will be here for the long haul--dealers who are regularly picking up good lines and daring products specific to our hobby to sell and service. I don't want to promote a dealer's monopoly of an item's sale to this community who may be doing it as a purely mercenary, one-time measure. For example, I'm not even familiar with the dealer in question, nor do I see them mentioned regularly here by the community.
2. People losing money from overwhelmed vendors and members who offered to build DIY products.
Due to the size of Head-Fi, a product gaining a sudden huge interest can cause serious issues for a vendor. In similar cases, a vendor has been overwhelmed with requests and, as orders were significantly delayed as a result, they have been overwhelmed with emails asking where their item is or wanting a refund. With no more money coming in after numerous people start complaining and filing Paypal complaints (resulting in their account being frozen) the vendor is run into the ground and not only cannot fullfil orders, but is unable to refund people. The result is usually a great many people out of many thousands of dollars. Even if they have money, they can end up legally inundated, wiping out any remaining money they have on legal fees.
Vendors can even suffer this if they are small. Of half-a-dozen very popular 1-2 person cable-making companies, one had extreme weather destroy his workshop and from there his business altogether, leaving his customers out a great deal of money. A second is so popular he had a 1 year waiting list at one point. That is how overwhelmed a company can become even in spite of a group buy!
The following are three of many examples where this has happened:
- A group buy was started for the Thunderpants T50RP mod. The modder, Smeggy, ended up so overwhelmed that, 2 years later people still have neither received headphones or a refund.
- A number of people had asked Billavideo to make them wooden cups. When he was suddenly hospitalised with a back condition everything went down the drain and he disappeared under an onslaught of people who had lost money.
- A new IEM company, having been refused a group buy here went ahead with it on another forum. Despite the forum being only a tiny fraction of the size of Head-Fi, the vendor was overwhelmed with orders and many customers only received their IEMs many months later than expected.
- A group commissioned someone who looked competent to build a number of electrostatic amps for a couple of thousand dollars each. That person has now run off with over $6000 of peoples' money.
- Another group commissioned a member to build a number of boxes for adapting speaker amps to headphones. Likewise they suddenly disappeared with the money. Due to the delay after the members had paid being longer than 45 days, Paypal refused to deal with the situation. It wasn't until federal agents got involved and paid a visit to the member and threatened him with prosecution for wire fraud that the money was refunded.
3. Fakes, unauthorised sales and faulty products.
A very famous, well-known audio company contacted us about a group buy on another site that they hadn't authorised. This company has long been the target of fakes. There was a good possibility that the group buy was actually with a company that manufactures the fakes or is an un-authorised distributor. That would mean that either a: people got a fake product or, b: Got the real product, but would be refused warranty service if it failed.
Members who participated on another group buy received headphones that had been opened and the serial numbers removed. In some cases, the headphones arrived with neither their serial number or box. The site claimed that the group buy was done through manufacturer, but the manufacturer told us that this was not true and would certainly never authorise products sent without serial numbers or boxes.
We've also observed companies, in desperation to prepare products in time for group buys, have sent out untested and faulty products, resulting in lost money for customers who end up having to pay for return shipping. If the company doesn't pay for it themselves (and lose a lot of money in the process) there goes some or all of your savings on the regular price!