Retail Giants Swarm into Group Buy Campaign

October 9, 2010 § Leave a comment

Mercedes launched a group buy campaign selling its Smart car at a group discount of 22% off list price and sold 205 in 204 minutes early September. The campaign was a cooperation between Mercedes-Benz and Taobao.com, the leading e-commerce site with a market share of 78% in China.

According to Paul Marsden, a digital marketer, the deal is not bad, considering Mercedes usually sells only one Smart car a day in China. Even with slashed margins, the auto company still has much to earn besides publicity, given the volume of sales.

Retail giants like Metholatum, Mercedes-Benze, and Dell swarms into group buy campaign, once the arena of small businesses.  Nuomi.com, a major group buy platform in China, launched a campaign for Metholatum yesterday, selling skin-care packages at half its retail price and has so far closed 2703 deals. Everyday, Nuomi.com (which literally means sticky rice) brings a new offer that stands for 24 hours. Before Metholatum, products and services that joined the group buy campaign are small business, start-ups that yearn for publicity and reputation.

Nuomi.com was established in June 2010, and has quickly gained popularity on Renren.com (the Chinese version of Facebook), whose users are mostly fun-thirsty threadbare students, who find coupons and offers hard to resist. Offers on Nuomi.com varies from yoga classes to spa and massage services, from hotpot feast to bowling-night-out, and from magazine subscription to musical shows.The most-bidden offer so far has been a movie coupon for two with snacks sold at $6 originally priced at $26. More than 152,000 people bought the bundle.

Group buy first gained popularity on Taobao.com. Say when the factory senses that many people want to buy a certain dress of Marc Jacobs but can’t afford it, it will post a page on the forum, asking how many people want to buy a pirated version of the dress. The amount of bidding has to reach a certain level in order for the factory to make a profit and thus a group of buyers are required. Then the factory will ask its potential buyers to pay a small amount of money, usually 10% to guarantee that they will buy the dress at the settled price when it comes out. Gradually the practice catches on in other areas. And group buy platforms like Nuomi.com sprouts like spring bamboo.

However, it’s the underlying wisdom that unlike small businesses that will grab every chance of earning, big companies do not care about meagre profits skimmed from skimp customers. Apparently, the norm has been rewritten now.

The impact of this is still not clear. But I think that when retail giants start to swarm in, alluringwith chunks of money  platforms that care nothing other than profits and customer flows, small businesses will be eventually marginalized and finally eradicated. On the other hand though, the clientele of students still exist. And if there is a demand, there will be supply. Maybe Nuomi.com should start thinking about setting up different channels to cater to various needs. That’s in their interest of building a large group of audience.

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