Monday, August 11, 2008

It Takes More than Two to Tuangou

"Team buying" has been around for several years, fueled by the Web and by mobile phone communications. The idea of tuangou, as it's known in China, is that groups of consumers who shop together will get better bargains because of their buying power.

An MIT Sloan Management Review article by Dr. Christopher Tang notes that early Web companies like Mobshop tried to get consumers excited about group online buying, but not enough people participated to achieve the lowest prices. Another problem: Groups didn't instantly form, so people who wanted to buy were kept waiting for days or even weeks until more people signed up to buy and both the price and the shipping date were set.

Yet tuangou is growing in China, where crowds arrange to meet at a specified store to shop in person and receive big discounts for volume buying. Now some Chinese Web sites are reviving online tuangou. Ultimately, popular social networking sites like Facebook may be the key to tuangou's long-term success around the world.

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