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Shanghai Group Purchase

Author: Cate Newnessmith
Published Date: 20 February 2008

Group purchase is an activity organized throughthe internet platform,where groups of consumers who have same commodity in mind, bargain and purchase from suppliers through bulk buying. In this way, the distribution system between consumers and suppliers is simplified, benefiting both.

With the internet asa key platform of information exchange, consumers provide the organizer with their personal information and orders. Then theorganizer bargains with the suppliers for lower prices and better services (like wholesale) as the representative of consumers. After that, the consumers are informed of the prices of products and services and confirm or reject the bargain. An exchange meeting is then organized to allow suppliers and consumers to bargain face to face.Group, rather than individual bargaining, is an advantage for consumer groups.

Consumers generally have poor access toinformationabout suppliers, (thoughsuppliers know both the product and the market). Especially withlarge individual purchases like home decorating products,domesticappliances, cars, whichconsumersbuy only a few times over their lives,they tend to be naïve and insecure when buying. Group purchase helps consumers to become stronger and more self-reliant when facing suppliers.

Group purchase is developing fast in many cities in China. The key innovation isinidentifyinghow distributionbetween consumers and suppliers works, so as tobenefitboth by decreasing the cost of distribution and the risk of bargaining.One of the social benefits of group purchase is enhancing consumer capacity and understanding of consumer rights and the benefits of bargaining.Group bargaining also relieves the psychological pressure of risk of purchase for consumers.

The main purpose of group purchase is the economic benefit to each actor in the system. For the consumer, it is the benefit of higher quality products and services and the security of a lower price. The supplier benefits from a highly efficientefficient distribution approach and a rapid increase insales volume. For theorganizer, the benefit lies in developing adistribution system that isbeneficial toboth consumers and suppliers.