What Is Group Buying? Why Is It Currently In News?

ByMike Paul

Jan 17, 2021

In economics, any purchase or sale or production which is done in a group is considered more profitable. Group buying is also the same thing. As the name suggests, group buying refers to a group of consumers together buying the products from the seller. This means that person A, B, and C will buy goods for themselves on payment of a single bill. It is also called collective buying. However, the condition is that a minimum number of buyers have to purchase the goods. These minimum numbers can differ from one shop to another.

The origin of group buying can be traced back to China. In recent times, it has become a popular practice worldwide.

Advantages of group buying

• Increased purchasing power. When you buy in aggregate, there are discounts which are offered by the company. As the price decreases with increasing quantity. This, in turn, increases the purchasing power i.e., what you could earlier buy at 50$ now you can buy it at say, $30.

• Membership. Most of these retail companies allow the group to take a group membership. Once you have a group membership, you are entitled to great discounts and offers. Thus, this again increases an individual’s bargaining power.

• Better say. In case, you are not satisfied with the product that you bought, the chances are high that your concern will be addressed quickly. In the case of individual purchase, no major action may be taken.

• For Sellers. Group buying is not only beneficial for buyers but also for sellers. This is because when groups buy the goods, it reduces the delivery and other related costs. This helps the firms to increase their profit margin.

Why in the news?

Despite these well-known advantages of group buying, lately, the practice has been targeted in China. There is a closer look by Beijing at group buying and big tech. Big tech companies like Ali Baba, Pinduoduo, Tencent, and others have been called into question. These are the leading companies that facilitate group-buying while selling their product. In China, group buying as a practice is not only questioned in the grocery sector but also in housing, gaming and others. Reports point out that the reason behind such an action by the Chinese government is that group-buying leaves the consumer at risk. This is because group-buying is believed to be used for creating monopolies, influencing price-making, and pricing tactics.

Moreover, under group buying, big tech companies usually sign a contract with the local manufacturers and market regulators. However, in China, entering into such a contract is prohibited by law. Group buying is also considered as a tool to flood the market with goods of a single company and thus increasing its market share. This can leave the other sellers at the foot of big companies.

Therefore, to understand the ground realities of group buying, China has recently summoned 6 companies. China is aimed at eliminating any tactic of creating an anti-competitive market.

Leave a Reply