Group Buying on the Upsurge

By+staff+reporter+ANAIS+CHAILLOLEAU

LAST month I was invited out for a Ko- rean barbecue by a 23-year-old Chinese friend of mine， Huang Xuesong. I gladly accepted the invitation and we had dinner together. After a good meal， it was time to pay the bill. As I rummaged in my bag for my purse， my friend stopped me： “No， its okay. Ive already paid over the Internet，” he said. I wondered how this was possible. He continued to explain： “I bought the dinner on a group buying site. The prices there are really attractive.”

That was how I discovered the popular concept of tuangou in China， meaning “group buying.” Its principle is very simple： The sellers promote products online at a very low price， but the final offer is decided according to the final number of interested buyers， thus creating a win-win result for both sides– the sellers increase their sales volume and pro- mote their products while the consumers benefit from significant discounts.

A New Shopping Fad

This group buying mode is not popular in Europe， but has taken off in China， especially among people aged between 25 and 35. Wang Wenjie， 31， said， “I buy set meals at restaurants about twice a month. Prices for group buying online are really favorable， with a discount of 30 to 50 percent. My parents know about the concept of group buying but dont know how to use it， so they are really happy when I take them out to eat well for less.”

According to statistics from the China Internet Network Information Center （CNNIC）， around 80 million Chinese people have used online group buying， with total business transactions amounting to RMB 34.8 billion， and the market continues to expand. According to a report from Tuan800， a professional site for group buying services in China，in 2012， total business transactions via group buying in China hit RMB 21.39 billion. During the first half of 2013， the group buying industry recorded a turnover of RMB 14.13 billion. The report also shows that the total trading volume for group buying in 2013 exceeded RMB 30 billion.

Fast Development

The idea of collective buying online was born in 2000 in the U.S. when Microsoft launched Mercata. On this site， the price for a product fell as the number of buyers increased. But the trial ended in dismal failure； Mercata was closed after less than a year in operation.

In China， collective buying websites took off around 2009. The phenomenon probably has something to do with Chinas social environment. Firstly， Chinese people have a tradition of bargaining with sellers – so why not extend this practice to the Internet？ In addition， in daily life when a consumer in China asks a seller if they are willing to lower the price， the seller often asks， “How many do you want？” This proves that the general concept of group buying –that buying in bulk attracts a lower price per unit –is rooted in age-old Chinese customs. Secondly， it is well known that the Chinese generally demonstrate a more collective spirit than Westerners. Finally， China is home to 1.3 billion people， many of whom live in big cities. Such a high concentration guarantees sufficient buyers so e-commerce companies are able to provide more products with more preferential discounts.

“There are many group buying websites in China such as MeiTuan， Dazhongdianping and Nuomi. MeiTuan is quite popular in China， but I cannot tell if it is the leader on the market. For my part， the one that I use most frequently is Nuomi，” says Zhang Peng， an avid Internet surfer in China. Indeed， according to statistics from the China e-Business Research Center， the number of e-commerce shopping websites was 3，652 in early 2012， shrinking to 2，695 by the end of the year. However， the number was just over 100 in early 2010. Based on these data， over 1，000 websites of this category have closed in a year. Does that mean the market is no longer burgeoning？ The answer is no， because the sales volume continues to grow.

Meeting Daily Needs

“I often browse the websites of Dazhongdianping， MeiTuan or tuan.baidu， and I also check the promotions on yhd.com， usually before going to bed，” says Wang Wenjie. In fact， e-commerce giants like Alibaba and JD also offer products for group buying in addition to their regular business. Even social networks like QQ and search engines like Baidu have invested in the group buying business. Therefore， we can draw the conclusion that the group buying market， in spite of keen competition， is still in its infancy in China， and， much like a toddler， is rather unsteady on its feet.

“Ive joined in with the trend of group buying online， but am not an addict. The things I have bought include movie tickets， restaurant vouchers and some electronic items，” says Zhang Peng. That is to say， Zhang mainly purchases services or objects for everyday life. In comparison， Groupon， a group buying site in the West， mainly offers deals on holiday packages or luxury articles， none of which can be considered everyday items for consumers. This is another reason for the success of group buying in China as the promotions here focus on products and services for daily use， such as restaurant meals， film tickets， and haircuts. Moreover， according to statistics from Tuan800， it is those products and services meeting daily needs that attract the most customers. Restaurant vouchers represent roughly half of the sales of the group buying sites， followed by leisure activities， while hotel deals and everyday services account for less than 10 percent each. In China， group buying has the potential to become a shopping habit.

Beware of Scams

But – beware of scams！ Everything has its pros and cons. Consumers often question the credibility of some group buying websites. For example， on some sites there is the usual information such as product description， its preferential sale price， its original price， the discount， the deadline for the offer and the number of “l(fā)ucky” people who have purchased this product. To reassure doubtful potential buyers， some group buying sites explicitly state that their numbers are genuine and that they never falsify sales figures.

Zhang Peng also shared with me an unpleasant experience： “Once I bought a restaurant meal online， but when I arrived I was told that the meal voucher was only valid for a certain time period. And the period of validity is often too short.” Wang Wenjie also warned， “Sometimes you dont have time to use the meal voucher and when it expires， you cant get your money back.” The message – read the small print before making any impulse purchase.

But I dont want to preach. While surfing for information， I came across a tempting offer on Nuomi： a manicure for RMB 30 instead of RMB 160. So， I will stop here and do some shopping from the comfort of my chair.