I go gaga over sales (and I’m not talking about the singer).
This appreciation for sales probably goes back to a very young age. My grandmother would pick me up everyday after school and often she would take me shopping. She introduced me to the wonderful world of consumerism. But, she was not only an avid shopper she also had a sixth sense for sales and bargains. She was skilled. Thanks to her, successful bargain shopping was a fundamental part of my formative years. Today, sales are my addiction. My appreciation for items has a direct correlation to the percentage off regular price that I paid for it. Nuts? Not really, everybody likes stretching his or her dollar or in the case of China, their yuan.
CNN’s Eunice Yoon couldn’t have said it better. In a country were labor rights are forbidden, the term collective bargaining takes a whole new meaning. The new trend is group buying or, as known in Chinese: tuan gou.
You might be thinking, where is the innovation in that? The United States has Groupon, Living Social, Buy With Me and tons of others group buying websites that offer great deals. Well, this is a somewhat different approach. I bet you’ve never seen a Groupon with a $1,500 discount on a new Audi. If you see the report by CNN linked above, you will meet office worker Jin Fen, 26, who says he spends an hour and half every day looking for bargains on the web. Last October he grouped with four other strangers and managed to save over $1,500 when buying a new Audi.
This is basically a flash-mob-meets-shopping strategy that stems from the Chinese tradition of bargaining for the purchase of goods. It’s simple one buyer connects with other buyers who want to purchase the same product and agree approach the vendor as a group. These groups are sometimes acquaintances or can also be groups of strangers that connected through online forums. By “bulk buying” consumers are able bargain a lower price and businesses simultaneously can sell multiples of one product. Everybody wins.
Chinese online innovators are leveraging this trend as a business opportunity and developing group buying sites much like the ones we know. This new business model is now a huge trend in China and it’s getting massive consumer support.
In fact, according to SinoTech Group, group-buying sites grew dramatically in just two years (early 2009 to December 2010) going from four to nearly 1,700 and quickly increasing in numbers. Most of these businesses will quickly tank because of lack of consumers, lack of vendors or lack of credibility but quite a few have managed to become emerging leaders in the industry.
The real innovation on this new business model is that Chinese consumers are known to prefer cash-on-delivery or checks to online payment systems. Online shopper Fang Hua said: “I usually opt for cash-on-delivery. But I have succumbed to impulsive buying on group purchase websites, because the prices are so low!” Today, one in 10 Chinese consumers are shopping online, changing consumer behavior in China.
Will this trend live on in China? I think e-commerce has taken its time but is now steadily developing in this country. Plus, a good deal is a priceless commodity that never gets old, no matter where are you from. Will it substitute the in-person bulk buying approach that the Chinese consumer has mastered? Highly unlikely. Bargaining in China is more than a strategy; it’s a way of life. Take it from a bargain aficionado, there is nothing like the thrill of a negotiation and the control you feel when you walk away from what you consider a bad deal.
It’s about increasing your purchasing power. Many consumers around the world are no longer satisfied with the usual retail experience. This consumer behavior will continue to influence the market and new business models will be developed considering this. Consumers need to take the power and run with it. It’s about time the weight starts shifting in our favor.
Lessons learned? The Chinese have a point…don’t buy retail.