Group buying, also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. Origins of group buying can be traced to
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, where it is known as Tuán Gòu (), or team buying.
In recent times, group buying websites such as Pinduoduo in China have emerged in the online shopping business. Typically, these websites feature a "
deal of the day
Deal-of-the-day (also called daily deal or flash sales or one deal a day) is an ecommerce business model in which a website offers a single product for sale for a period of 24 to 36 hours. Potential customers register as members of the deal-a-day w ...
", with the deal kicking in when a set number of people agree to buy the product or service. Buyers then print off a voucher to claim their discount at the retailer. Many of the group-buying sites work by negotiating deals with local merchants and promising to deliver a higher foot count in exchange for better prices.
History
In 2000, with financial backing from
Microsoft
Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
, co-founder
Paul Allen
Paul Gardner Allen (January 21, 1953 – October 15, 2018) was an American business magnate, computer programmer, researcher, investor, and philanthropist. He co-founded Microsoft Corporation with childhood friend Bill Gates in 1975, which h ...
started an e-commerce start-up called
Mercata with a business plan dubbed "We Commerce". The website offered high-end electronic deals to shoppers online. Individual web shoppers would sign up en-masse to buy the same product and the price of the product would fall as more people signed up to buy it. However, the website was shut down in 2001 as it could not compete with websites like
Amazon.com
Amazon.com, Inc. ( ) is an American multinational technology company focusing on e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence. It has been referred to as "one of the most influential economi ...
.
Recently, group buying has been taken online in numerous forms, although group buys prior to 2009 usually referred to the grouping of industrial products for the wholesale market (especially in China). Modern day online group buys are a variation of the tuángòu buying that occurs in China. Under tuángòu, an item must be bought in a minimum quantity or
dollar
Dollar is the name of more than 20 currencies. They include the Australian dollar, Brunei dollar, Canadian dollar, Hong Kong dollar, Jamaican dollar, Liberian dollar, Namibian dollar, New Taiwan dollar, New Zealand dollar, Singapore dollar, U ...
amount, otherwise the seller will not allow the purchase. Since individuals typically do not need multiples of one item or do not have the resources to buy in bulk, group buys allow people to invite others to purchase in bulk jointly. These group buys, often result in better prices for individual buyers or ensure that a scarce or obscure item is available for sale. Group buys were, in the past, often organized by like-minded online shoppers through
Internet forums
An Internet forum, or message board, is an online discussion site where people can hold conversations in the form of posted messages. They differ from chat rooms in that messages are often longer than one line of text, and are at least temporar ...
. Now these shoppers have also started to leverage the group buying model for purposes of buying other
consumer durables
In economics, a durable good or a hard good or consumer durable is a good that does not quickly wear out or, more specifically, one that yields utility over time rather than being completely consumed in one use. Items like bricks could be consid ...
. Group buying sites are back in demand as small businesses look for ways to promote their products to budget-conscious consumers in a weak global economy. Group buying is also used for purchasing real estate properties. Real Estate Group Buying is very popular in India where websites like Group Bookings offers group deals on various properties.
In China, group buys usually happened when dealing with industrial items such as
single-board computer
A single-board computer (SBC) is a complete computer built on a single circuit board, with microprocessor(s), memory, input/output (I/O) and other features required of a functional computer. Single-board computers are commonly made as demonstrati ...
s.
China had over 1,215 group-buying sites at the end of August 2010 compared with only 100 in March of the same year.
English-language group-buying platforms are also becoming popular. Online group buying gained prominence in other parts of Asia during 2010 with new websites in
Taiwan
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the nort ...
,
Singapore
Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, borde ...
,
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
,
Thailand
Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is bo ...
,
Malaysia
Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...
and the
Philippines
The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no),
* bik, Republika kan Filipinas
* ceb, Republika sa Pilipinas
* cbk, República de Filipinas
* hil, Republ ...
.
Google
Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronics. ...
launched their own daily deals site in 2011 called "
Google Offers
Google Offers was a service offering discounts and coupons. Initially, it was a deal of the day website similar to Groupon, but it later changed focus. Rather than a small number of prepaid offers, it instead offered many smaller discounts. It ...
" after its $6 billion acquisition offer to
Groupon
Groupon is an American global e-commerce marketplace connecting subscribers with local merchants by offering activities, travel, goods and services in 13 countries. Based in Chicago, Groupon was launched there in November 2008, launching soon af ...
was rejected. Google Offers functions much like Groupon as well as its competitor
LivingSocial
LivingSocial is an online marketplace that allows its registered users to buy and share things to do in their city. Formerly headquartered in Washington, D.C., LivingSocial had roughly 70 million members around the world in 2013. The company shra ...
. Users receive daily emails with local deals, which carry some preset time limit. When the deal reaches the minimum number of customers, all the users will receive the deal. The business model will remain the same.
Facebook's 'Facebook deals' application was launched in five European countries in January 2011. The application works on a similar group buying model.
Business model
If subscribers to a discount website are tempted by a discount offer, they enter their payment details online and wait. When a minimum number of people sign up for the same offer, the deal is confirmed and a voucher is sent to their inboxes. Shops, restaurants and other retailers that partner with these discount websites have to take hefty price cuts. But it means they have instant access to a whole new group of customers. The online group buying market is fragmented among hundreds of smaller players worldwide. The model has little barriers to entry and has gained attention from shoppers and businesses alike globally...
According to
SmartMoney
''SmartMoney'' was ''The Wall Street Journal''s magazine of personal business. The finance magazine launched in 1992 by Hearst Corporation and Dow Jones & Company. Its first editor was Norman Pearlstine. In 2010, Hearst sold its stake to Dow Jone ...
, by August 2010, there were more than 500 group-buying sites worldwide, including local sites that cater only to a single city in some instances.
Origins of tuangou
Tuangou, which translates as ''team buying'' or ''group buying'' (also known as ''store mobbing''), is a recently developed shopping strategy originating in the
People's Republic of China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
. Several people - sometimes friends, but possibly strangers connected over the
internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...
- agreed to approach a vendor of a specific product in order to
collectively bargain
Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The i ...
(
haggle) with the proprietor as a group in order to get discounts. The entire group agreed to purchase the same item. The shoppers benefitted by paying less, and the business benefitted by selling multiple items at once.
The tuángòu phenomenon has been most successful in mainland China, where buyers have leveraged the power of group buying, which has led to
English language
English is a West Germanic language of the Indo-European language family, with its earliest forms spoken by the inhabitants of early medieval England. It is named after the Angles, one of the ancient Germanic peoples that migrated to the is ...
media, such as
msn.com
MSN (meaning Microsoft Network) is a web portal and related collection of Internet services and apps for Windows and mobile devices, provided by Microsoft and launched on August 24, 1995, alongside the release of Windows 95.
The Microsoft Net ...
, profiling the tuángòu buying process. The popularity of the strategy in China is often attributed to the Chinese tradition of bargaining for the purchase of goods of all types. Tuángòu buying also ameliorates a traditional distrust of goods purchased from unknown sellers as individual members of the buying group can vouch for a particular seller's quality to the rest of the group.
See also
*
Economy of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables a ...
*
Group purchasing organization
In the United States, a group purchasing organization (GPO) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members.
Many GP ...
References
{{DEFAULTSORT:Group buying
Purchasing consortia