| The Bargain Market with Bulk Consumer Surplus | | Print | |
| Written by Amine Hambaba | |
| Monday, 27 February 2006 | |
|
This morning, I read an interesting article in the Wall Street Journal concerning one of the many consumer
tactics in China’s vast market. It is usually generalized that Chinese shoppers are "hard-nosed" bargainers, striving the utmost to get discounts to
satisfy any consumer income. Unfortunately (for merchants), this tactic has been added another difficulty level; bargainers teaming up!
The practice of 'team purchase' or tuangou [1] has its roots in internet chat rooms where consumers with similar interests collaborate on plans on when to buy goods (appliances, furnishings, food, even cars) in bulk. After a plan is agreed, they meet up at the location in masses and basically, start the bargain "attack". The following story was related within the article[1], "On a recent Saturday, Zhang Qinyong, who owns the kitchen-cabinetry shop in this city near Shanghai, found himself cornered against his display cabinets by a team of more than a dozen shoppers. "In Suzhou, no other products are better than ours, I bet," he told the crowd. He insisted that craftsmanship and German materials made his cabinets worth more. "Forget quality. Let's talk about price," snapped one member of the buying group, 36-year-old Guo Yong, an electrical engineer. For the next hour, the shoppers turned aside Mr. Zhang's sales pitches with an unbending response: "Thirty-five percent off!" [Cai Kun]" As with any trend the internet will assist in making it more usefully and known to others in a very short amount of time. With team purchase becoming a new way of getting bulk discounts, it would be of no surprise that for development of sites to cater towards this movement. On website; 51tuangou.com which in Chinese sounds like "I want to team buy" assists consumers in organizing team buys allowing for more and efficient team buys to take place. Midway through the article, I was really surprised how such a tactic could be performed. Of course this due the current environment I am embedded within where consumers buy and that's it; Welcome to America. Then article mentioned that within the late 1990s that several web-based businesses tried to develop websites such as 51tuangou.com (Arrange discounts on group purchases of consumer goods) in US and Europe. The sites never launched or where shut down due to several factors, the following are a few; (1) That consumers where turned off by the amount of time take to complete such tactics. (2) Having to neogatite 'face-to-face' with a merchant for a deal would the last item on the agenda for a US consumer mind. Especially with the whole attitude towards giving a public speech (Public Speaking or Death?). (3) Better deals could be sought through various searches on internet. (Better deals in the US market) [2] Once again 'Welcome to America'. The article brought an interesting situation to my attention; Excessive Demand with Limited Supplies in a Short-Term period. The Excessive demand being the 'bargain team' and the Limited Supplies being the Merchant with supplies at hand all within a short time frame averaging around a few hours ( most of the time on negotiations [1] ). Of course, the quick result that would spring in any individual's mind would be the price increase of the good based on the Demand and Supply economic model, but this is not the case. Instead of the steady rise in price and Producer Surplus a decrease in price is witnessed and the increase Consumer Surplus. As the article relates, discounts result from these coordinated efforts which could stir an individual's understanding of economics, but of course this could be handled with theories from economists and probably has through theories on bids. What I want to emphasize is that the efforts of a unified body can bring results, and that any control on prices can stripped away with any gathering of individuals / entities / etc with set idea of price level to benefit them (a sort of consumer monopoly). Failure of this movement especially in US markets shows the signs of constraints and raises the questions as to why is that so. The power of social communication is rather amazing and when utilized correctly can bring great results whether for good or bad. Sources: [1] Haggles, Zhang. "Chinese Consumers Overwhelm Retialers With Team Tactics." Wall Street Journal 28 Febuary 2006. < http://online.wsj.com/article/SB114106170222284388.html > [2] Kawamoto, Dawn. "Group Buying site Mercata to shut its door." CNET – News.com 04 January 2001. < http://news.com.com/2100-1017-250529.html >
Bookmark
Email This
Hits: 172 Comments (1)
An article well done!
written by Hasnain , February 16, 2008 An amazing article! Very well articulated and carries a socially powerful message. I never knew u had such a strong interest in writing and the working of markets. The website is also designed nicely. report abuse
vote down
vote up
Votes: +0
Write comment
|
Keywords
