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Group-buying bingo for bargains

FAMOUSLY price-savvy and thrifty Shanghainese have discovered that group buying online offers huge discounts and great bargains. Tan Waiyun logs on.

Everybody loves a bargain, and 200 smart shoppers in China just got what might be the deal of their lives: A 176,000-yuan (US$25,993) Smart car by Mercedes-Benz for 135,000 yuan - a 41,000-yuan discount.

They bought the trendy car last week in a tuan gou (collective buying) sale on Taobao (, China's biggest online seller.

Two hundred people were needed to slash the price, the website announced on September 7. The sale was closed two days later.

This Benz bargain is the latest sensational example of online group buying, a craze that has swept China.

Young bargain-hunters in Shanghai addicted to tuan gou that provides big discounts on candle-lit dinners, massage, gym memberships, movie tickets, KTV, even cars and parking spaces.

Group buying has been popular for years in the United States and elsewhere, and the thrifty, price-savvy Shanghainese are catching on.

Discounted services are especially popular because service industries are low on cost and high on profit, making deep discounts possible.

In June another sensational Shanghai tuan gou case made news: became famous in June by making a movie package deal with 150,000 online buyers within a 24-hour period.

Buyers paid 40 yuan for a deal worth 176 yuan - for two movie tickets, two sodas, a bag of popcorn and an ice-cream. It generated 6 million yuan in sales in one day.

Discounts on some products can be as deep as 90 percent, shoppers say.

"The first thing after I get to work is to click open my favorite tuan gou websites to see if there's anything cheap that I like," says Han Qiuxia, a 25-year-old interpreter in a Shanghai-based US healthcare company.

She has purchased piles of "so cheap" stuff through group buys that have included imported snacks, spa coupons, skincare products and a photo album for her five-year-old nephew on his birthday.

Two different approaches are popular: One is a buying club formed by friends or colleagues, with a leader negotiating with online sellers; The other is a random collection of strangers visiting tuan gou websites that offer daily deals with big discounts.

Han first heard about group buying from colleagues who set up an MSN chat group online to post various snack items for sale.

She has been hooked since May.

She has bought spa coupons priced at 99 yuan for treatments regularly costing more than 1,000 yuan, and eye creams discounted by 80 percent.

"Sellers are clever. The discount is cost of their advertisement, so they don't lose anything. They get hundreds of customers," Han says.

She got it right, says Shen Boyang, director of, the hot tuan gou site making the big movie deal in June.

"Most buyers are women from 20 to 40 who love socializing, shopping and discounts," says Shen.

China has reportedly more than 400 collective-buying websites. Price wars are being waged.

"'Tuan gou' websites mainly offer services like dining or spa treatments, because the service industry is low in cost but high in gross profit, about 40 to 50 percent," says Zhu Xiaohu, a partner of a venture capital company.

Profit model

The business model is explained by Guo Gang, founder of, a website based in Beijing.

Generally, the website works with the seller to decide what to sell and what discount to offer, depending on the website's daily visits and its popularity.

Take the 150,000-buyer movie ticket deal. It generated sales volume of 6 million yuan. According to industry practice, the website gets around 10 percent, or 600,000 yuan.

But it's not over yet.

After a buyer transfers 40 yuan to's bank account, the website sends a short message with the coupon number and the password to the buyer's mobile phone. The coupon is valid for three months.

So how does the cinema close the account with the website?

Experts say this is decided by actual consumption. In other words, the 6 million yuan is kept in the website's bank account and the cinema claims the money, 40 yuan, each time a buyer sees a movie.

"Most sellers on tuan gou websites are new to the market and badly need to brand themselves as fast as possible," says Shao Wei, a 28-year-old software engineer, who has purchased interior decoration materials, dining coupons and movie tickets. They want to make a splash.

"Tuan gou customers receive the same treatment as other customers, they just need to reserve in advance," he says.

Based on his personal experience, Shao says many shops or restaurants are located in less desirable locations, often hard to find, as in an office tower. Their prices tend to be higher, and they need publicity.


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