Tuangou: Chinese Consumers Group Together For Bargains

Posted by Joel

The China Observer’s post about human flesh search earlier this month examined how Chinese netizens utilize enabling communication technologies for organizational purposes. We found that these manhunts begin online, but often conclude in a real world interaction with the target of the search. tuangou, otherwise known as “group purchase” or “team buying,” is another part of mainstream Chinese internet community culture that blurs the line between the virtual and online worlds.

What is team buying?
Team buying is a phenomenon in which Chinese consumers organize online to decide to buy the same product. The group receives a discounted price through its collaboration, because the end result is equivalent to making a wholesale purchase.

In-Store Team Buying:
Take a moment to think about your last trip to a favorite chain store like IKEA home furnishings. Imagine a flood of patrons from a town over three hours away suddenly storm out of a tour bus and into the store. The massive crowd immediately disperses throughout the store as each member proceeds to seek out the products on his or her IKEA wish list. After a set period of time elapses, a voice over the store loudspeaker announces that it is time for everyone who came on the tour bus to check out.

In-store team buying can happen in one of two ways. The first takes place when participants choose a location and a set time to meet (decide beforehand online) and then rely on the persuasive influence of the group to receive a discounted price once on site. The second situation occurs when participants negotiate with the store manager ahead of time  for a group discount before they make their store visit.

Out-Of-Store Team Buying:
Out-of-store team buying is most common at Chinese college campuses and offices. One person, referred to as the tuanzhang, is in charge of the entire group buying process. The tuanzhang posts the product information online, participants place their orders, and, in the final step, the tuanzhang distributes the merchandise and collects payment.
The following chart displays the tuanzhang group buying process:

Because the tuanzhang goes through so much effort to successfully execute the team buying process, he or she usually adjusts the price ahead of time to make a small profit.

What Do People Buy?

Chinese consumers will buy almost anything through team buying.
Here is a list of just a few products/services:
-Specialty Foods
-Wedding Related Services
-Real Estate
(For more check out this site)

What are cultural factors behind the team buying consumer trend?

Sam Flemming, CEO of CIC, a Shanghai-based research and consulting firm that monitors blogs and BBS message boards to find out what people are saying about certain products, wrote this post about team buying. I think Sam correctly identifies the two main reasons for the popularity of team buying in China:

1) In China, netizens are accustomed to organizing online around brands. For example, owners of the same car model often discuss topics related to their car on online message board forums. Group buying is a natural extension of this trend, because forum participants can easily collaborate to buy a product that enhances the one that they all already own.

2) Bargaining is a way of life in China. Group buying allows participants to bargain for products that they would usually bargain for themselves, besides they can receive better deals by leveraging the persuasive purchasing power of the group.

The Observer’s Thoughts
Team buying has quickly developed into a component of contemporary consumer culture in China. Its success is due in large part to the cultural factors mentioned above from Sam’s post. Not everybody wins when it comes to team buying outside of stores though. A problem that continues to hurt legitimate producers in China is the widespread availability of counterfeit products. When a tuanzhang buys products off of an online marketplace like Alibaba’s Taobao or through a middleman agency it is too often the case that the product is a fake. Team buying is a powerful way for Chinese consumers to purchase quality products at affordable prices, but they should be careful to make sure that they get what they order.