Consumer-driven group buying: a treat or trick to the retailers

Abstract

In today’s market, the consumers are more informed about the product features. The advancement of the Internet facilitates information dissemination and network creation, incubating a significant change in the purchase behavior of the consumers who can form informal groups and utilize aggregated bargaining power to negotiate with the retailers for the lower prices. It is interesting to note that recently such phenomena are prevalent in China which has a collectivistic culture. The issue is that the group-buying (GB) consumers, who unexpectedly show up at the store and even propose a price for the retailers, will disturb the normal operations of the retailers. Additionally, the GB consumers may also impact the behavior of store’s regular consumers as the GB consumers can get the same products with deep discounts if the deal is successful. In practice, many examples have showed that this Consumer-driven GB has become the way of life in China, where thousands of websites have cropped up to organize trips to various retailers. This form of GB has already become a phenomenon that retailers could not ignore, although, till now, it is debatable among the retailers as to whether GB is a treat or trick. Unfortunately, this special form of GB has received little attention in the academic field. This paper attempts to bridge this gap by deriving the decision guideline for the retailers to follow and making sense of the implications on business performance with the existence of GB.