China’s next export: group shopping?

Scott Tong Jan 22, 2010

China’s next export: group shopping?

Scott Tong Jan 22, 2010


TESS VIGELAND: We all know the concept of volume discount. You know, Costco and Sam’s Club and their ilk, buy 50 pounds of chicken and hope you have a lot of friends to go in on the deal. Well here’s a twist on the idea: What if you and your friends all showed up at a store and negotiated a discount, on the spot? That’s a big consumer trend — in China. And who knows, a version of it may find its way here.

Marketplace’s Scott Tong has our story from Shanghai.

Scott Tong: If you shop on the streets of China, be prepared for one question afterward: “What’d you pay?”

Culturally, it’s not nosy, as it would be in America. Chinese friends and coworkers just come out with it: How much was your haircut? Your apartment? Or in my case, your adopted Chinese daughter?

It all tells you a couple things about consumer culture here. Number one: He who gets the best price is the superior human being. And number two:

Sam Flemming: In Chinese culture, you always bargain.

Sam Flemming is the founder of Shanghai consultancy CIC. It tracks online chatter about brands and consumer preferences in China.

Flemming: A lot of the clothing stores, you bargain in price. And even at the big department stores, the sort of Best Buy-type of retailers, you can, uh, usually get the price down a little bit.

To get the price down a lot, shoppers go in groups. It’s called “tuangou,” group shopping.

Here’s how it works: First, you gather a couple hundred shoppers — in this case new apartment owners all hungry for a good deal on fixtures. They’re in the back hall of a Shanghai appliance store. Everyone here met online, on a social networking Web site for apartment owners.

Flemming: The community’s already there. So all it takes is for someone to virtually raise their hand and say, “Hey let’s organize.”

Shouts from the lead organizer Yu Li Ping

The lead organizer of the buyers is Yu Li Ping. She’s wielding a microphone, haggling with the enemy, seller Lan Yue.

Shouts from the lead organizer

Up for sale? Ceiling material: A package of ceiling tiles, recessed lighting, moulding, brackets, etc. The list price is $400. The initial round of combat brings it down to 310. At which point the lead buyer asks her comrades: Do we want more off?

Crowd: Yao!

Yes. The seller then offers a free upgrade: better moulding and better brackets.

Lan Yue: You won’t find a better price. I can go out on the street and get 200 orders for this price!

Now she’s filibustering: she talks, she appeals, she asks “Do we have a deal yet?” OK? Or as they say here, “OK lah?”

OK lah?

Not ok, lah. The lead buyer says no deal. Get out. Xia qu!

Yu Li Ping: Xia qu! Xia qu!

Seller stays. And offers to come down another three dollars.

Crowd laughs

The laughter is derisive, and the group smells blood. And you can tuangou all kinds of things in China: diamonds, vacations, nose jobs, as in cosmetic surgery.

There’s even… We’ll let grad student Xian Li tell you.

Xian Li: There are a regular group who purchase chicken feet.

Chicken feet, for those late-night student munchies.

Li: Every month there will be someone says “I miss the chicken feet, I finished all mine, so can we do another one?” And then there will be someone to organize it.

They organize online, do their research online, and then go straight to the wholesale seller. In other words, they bypass the physical store.

Again, internet consultant Sam Flemming.

Flemming: What good is the store, right? You can do all the research, you can talk to 10,000 other people who already have the product and give you their personal recommendation. It’s fundamentally changing the rules of commerce.

Flemming thinks group shopping could eventually be the next Chinese export to America. He says the Chinese are doing it first, because their Internet culture of web as community is more developed.

Back at the bargaining, the ceiling tile seller’s now gone from $400 to $285, plus several upgrades. Finally, she comes down another 15 bucks. And throws in the hyperbole for free.

Yue shouting

It all comes out to about 30 percent off. Quick survey of consumer sentiment?

Crowd claps

We have a deal. Afterward, the seller tells us group shopping is thriving, in this penny-pinching recession. And the buyer notes tuangou can save apartment owners 300 bucks on a small home project. Enough, she says, to buy brand name toilet bowls all around. What better laurels to rest on?

In Shanghai, I’m Scott Tong for Marketplace Money.

Vigeland: Staff researcher Cecilia Chen contributed to our report.

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