China's newest shopping craze: 'team buying'

Last month, Fiona Li did what millions of Chinese shoppers do to find a bargain: she went online.

A few clicks later, she had a lead on where to buy the consumer goodies her brother wanted for his new apartment. Instead of reaching for her credit card, though, she jotted down a time and a place: 8 p.m. at a downtown electronics store.

That evening, Ms. Li and her brother joined 15 strangers at the store to demand a group discount on a new television, refrigerator, and washing machine. Salespeople grumbled at the tactic, but the group refused to buckle. After two hours of haggling, and several walkouts by group members, the store manager agreed to a 10 percent markdown on the three items.

Li, a marketing assistant, went home with a smile on her face. "We wanted to save money, and finally we did it," she says. "It's in our nature, whether we're rich or poor, and if we can save money this way, why not?"

Welcome to China's newest shopping craze, tuangou, or team buying. By combining the power of the Internet to compare prices with the stealth tactics of the flash mob, team buyers are driving hard bargains in the world's hottest economy. Dozens of team-buying websites have sprung up to catch the trend, which first began in online forums and chat rooms.

Typically, shoppers looking for the same items find each other online, then band together offline to negotiate special deals on electronics, home furnishings, and automobiles. Some team buyers approach store managers beforehand, others simply show up and flex their collective muscle.

Bargaining is a way of life in China. Shoppers treat sticker prices as a starting point for negotiations, and it's a point of pride to strike a tough bargain or walk away if unhappy.

This habit of face-to-face haggling is one reason why regular online shopping is only slowly catching on in China, which has more than 110 million Internet users, second only to the US. E-commerce was worth around $1 billion in 2005, according to Beijing-based research company iResearch. Many shoppers, though, prefer cash-on-delivery or checks to online payment systems, and credit cards aren't widely used.

Internet surfers are also wary of 'one-click' shopping because they want to be sure what they're getting, and what happens if their washing machine stops spinning. In a market awash in fakes, there's plenty of skepticism about branded goods and the promises of distributors.

"Online shopping has been around for a few years, and Chinese people realize that it's quick and easy, but there's a crisis of trust and honesty. How do you know whether to trust the seller?" asks Ouyang Jixing, deputy director of www.020tgw.com, a team-buying website in Guangzhou.

The answer, says Mr. Ouyang, is to join forces with other team buyers using a website like his, which has signed up 10,000 members since it launched last year. The aim is to bring together distributors of branded goods with potential customers and earn commission from successful team buys. It also hosts several web forums, which is how Li found her team.

On a recent Sunday morning, website director Liu Xincheng squeezed into a tiny camera store on the second floor of an electronics mall. It was a tight fit because Mr. Liu had brought along 20 team buyers who wanted a discount on a $310 digital camera. The store manager, who had spent the previous week negotiating with Liu, was throwing in a free tripod and extra memory, and most of the buyers were happily testing their potential new toy.

"It's good for people to get together like this," says Jessie Wong, a first-time team buyer in the group. "I'm also thinking of buying a video camera, because I want to film my [university] graduation ceremony."

By joining a trip arranged by the website, shoppers have a much higher chance of success compared with unannounced team buys, says Liu. The camera buyers already knew the likely discount, so there was less friction at the store. He plans to replicate his website in other cities in China and wants to eventually list on NASDAQ. "This is a new concept. Those who are brave enough to take on the new ways can reap the rewards," he says.

Behind the bravado, though, the final markdown on the camera was only $12, an amount that didn't impress Zhou Wei, an engineer in the group. Last year, he joined five other team buyers and successfully lobbied for a four percent discount on an $8,750 Chinese-brand sedan. But he admits that it's more time consuming to arrange a team buy without a website organizer.

Website organizers say they also can give peace of mind to shoppers by accompanying them to the store to make sure that branded goods are genuine and that vendors provide after-sales service on electronics. That's one reason why Ye Zhenggang, a law student, reckons he'll do it again. "There's more power in the group because the vendors won't cheat us."