By Bill Bittner, President, BWH Consulting
An article in Tuesday's Wall Street Journal describes how retailers in China are being swamped by consumer gangs in search of better prices.
According to the piece, Chinese consumers have caught on quickly to the internet and their voracious appetites for previously forbidden brand name products, low wages and semi-fixed currency exchange rates have driven them to seek ways to get the most for their money.
Their answer has been in a practice called "tuangou" or team purchasing. It involves a group of consumers who usually meet on the internet to identify items of interest and then combine their purchasing power in order to get greater discounts.
According to the Journal report, "Group purchasing is catching on in booming cities such as Shanghai. On the Web site 51tuangou.com -- in Chinese, the name sounds like 'I want to team buy' -- consumer teams formulate plans to bargain for products ranging from Buick automobiles to Panasonic television sets and refrigerators. Dozens of other Chinese Web sites offer similar services. Ebay Inc.'s Chinese site offers potential bulk sellers of goods an option to solicit team bids."
Apparently, Chinese retailers are used to haggling with consumers but the internet has provided a whole new way for consumers to form partnerships and gain an advantage in their negotiations.
The team meets ahead of time to plan strategy and may even visit potential retailers individually to establish starting points. Then they all show up en masse to negotiate a deal.
Moderator's Comment: Do you ever see team purchasing taking hold in the United States? Will retailers be willing or even able (because of accounting and business processes) to negotiate unique retails for certain customers? Would there be a competitive advantage for a retailer to promote team purchasing as its primary way of doing business?
I thought this article was interesting from a couple perspectives.
First, it opens up the whole idea of whether American consumers have become more aggressive in their shopping habits since the internet made pricing information so easy to obtain. Do consumers negotiate more?
Second is the question of team purchasing, which makes a lot of sense from a consumer perspective, but I don't know if it can take hold in the United States. Maybe a smart retailer will facilitate the creation of consumer teams (kind of like having multiple frequent shopper programs) and learn to segment their customers by purchasing team. The members of the team would theoretically feel their captain is negotiating the best price for them independent of the retailer's traditional discount program. - Bill Bittner - Moderator