Group buying, or community group buying, is referred to as a form of e-commerce where the minimum number of consumers buy goods and services at reduced prices.
Also known as collective buying, the model works like cooperatives, where a large number of people buy from a merchant. Making the sacrifice of small profits for more frequent turnover, merchants can offer discounts for group purchases below retail prices.
This group buying form of shopping became especially popular when Covid-19 began to spread across China in early 2020, a period during which millions of Chinese people relied on a group of community workers to purchase fresh produce and life essentials on their behalf.
Didi was one of the first major Chinese tech companies to catch a whiff of the changes in consumers’ grocery shopping habits and hop on the trend with its own community group-buying platform called ‘Chengxin Youxuan’.
Fellow Chinese tech giants Alibaba Group, JD.com, Meituan and Pinduoduo have also seen its enormous potential and invested heavily in the concept.
According to market estimates, the size of the community group buying market could already exceed RMB500 billion this year, and the five-year compound annual growth rate (CAGR) may reach close to 100 per cent.
As the community group buying market shows great traction in China, Singapore companies are also jostling to join in the race.
Tech giants in Singapore are also exploring this model
Among the tech giants in Singapore, Shopee is probably the first to pioneer group buying in the e-commerce space back in March 2021, when the Covid-19 outbreak was at its peak.
Shopee adapts to evolving consumer needs, ensuring we consistently provide users with the best shopping experience possible. We launched group buying to bring users convenient access to their favourite products, especially amidst the pandemic. Since then, group buying has remained popular amongst our users who enjoy its convenience and cost savings.– Shopee spokesperson
According to Shopee, the bulk of its group buy orders came from the Food & Beverages category at the start, though it has since expanded its product offerings to include other categories such as Health & Wellness, as well as Toys, Kids and Babies.
Although a wider variety products have been made available for group buying on Shopee, fast-moving consumer goods like food products and necessities have become more popular among Singaporean shoppers.
On Shopee, users are allowed to create their own groups and then invite others to join so all members of the group can buy products at lower prices.
However, if the group fails to complete the deal at the end of the promotional period, Shopee will automatically close the group and refund all members who have made payment.
But if the order is successful, the items will be delivered to individual locations in the group, as opposed to a centralised location — this is something that highly differs from the typical group buying process, in which goods are delivered to the “community leaders“, who would then organise a mass meet-up for self-collection.
Shopee’s rival, Lazada, has also experimented with group buying in Singapore. It used to be a permanent feature before switching to making it ‘seasonal’, offering it only during festive seasons like Chinese New Year. The reasons for this move however, is unknown.
Grab, another tech giant in Singapore, has also dipped its toes in the group buying waters. It had rolled out a one-month beta trial in January 2022, which was only available to Punggol residents.
Instead of on-demand orders, users can only pre-order (up to a week in advance) food items, including baked goods, and collect them from a nearby pick-up point. Users can enjoy up to 30 per cent savings on the discounted offerings, and there are no delivery fees involved.
The service is now no longer unavailable, and Grab has declined to share further details on the trial or if it will ever be a future feature on its app.
Companies from different verticals are adopting group buying
Beyond tech giants, smaller companies are also jumping on the group buying bandwagon. What’s interesting is that they all hail from different verticals, and are not predominantly from the e-commerce sector.
Many of them target homeowners, dishing out bulk discounts on things that one would typically need for a new home.
Various companies like HipVan and IUIGA offer group buys on their furniture, and home and living products. What’s interesting about HipVan is that it offers group buy only for selected condo and BTO estates, with savings of up to S$1,080.
For IUIGA, its group buy is currently only limited to its furniture products. Customers can save on delivery fees, as well as enjoy discounts of up to 12 per cent.
Besides free delivery, all furniture orders also enjoy free assembly and free one-month storage.
According to Jaslyn Chan, Chief Growth Officer of IUIGA, the rollout of its group buy programme was a part of their innovation strategy to better meet customer needs.
Customers had shared feedback on the high shipping costs of S$7 with every purchase. To evade such costs, many of them came together and pooled their orders to hit the S$88 minimum spending to reduce shipping costs.
We [eventually] launched the group buy function in 2018, [but] it was not successful back then as the products we are retailing are already very affordable. The amount of discounts we could offer were also limited as our margins are very lean to begin with.
We decided to pause the group buy marketing and only brought it back after we launched furniture in the midst of the pandemic in 2020.– Jaslyn Chan, Chief Growth Officer of IUIGA
With IUIGA’s controlled profit margins, detractors may question how IUIGA can offer such discounts with its group buy.
“By tapping on the power of social network,” explained Chan. “With the help of social network and peer-to-peer review, we minimise IUIGA’s marketing costs [and] this allows us to sell our products at even lower prices, without making a loss.”
Due to its lean business model, IUIGA takes in bulk purchases as an add-on order in its supply chain. By partnering directly with branded manufacturers under its Original Design Manufacturers (ODM) model, it can sell directly to consumers and bypass the middlemen without incurring unnecessary costs.
“The prices you see on our website are honest costs we incur from materials, labour, tax and transport. This will help to understand why we do not offer significant discounts even if the order quantity is higher,” she added.
Since its inception, group buys have contributed to 30 per cent of IUIGA’s total revenue.
Commenting further on the group buying trend, Chan sees it as a “win-win” model for both consumers and businesses. Consumers get to save more with lower prices, and businesses get to enjoy greater economies of scale, better negotiating power, as well as eliminate the redundancies in supply chain.
Similarly, megastores like Gain City, Harvey Norman and Courts also offer group buys, albeit making it a “by-invite only” event for new homeowners. They can get bundle deals, promos and discounts off smart home gadgets and appliances, including air conditioners, refrigerators, washers, furniture, mattresses and more, all under one roof.
Beyond furnitures and appliances, companies are also offering group buys on other home essentials like electricity and broadband.
For instance, Union Power offers “bulk incentives” for those who are looking to switch their electricity retailer. The only requirement is that “a minimum of 30 people” from a particular condominium or organisation needs to be gathered to enjoy the perks.
The discounted rates are not available on its website. Instead, it will provide a quotation within three working days once an enquiry has been submitted to them.
Additionally, local telco StarHub offers group buy for its two-year broadband packages, which includes free Disney+ subscription. Subscribers also get to enjoy a free Samsung Soundbar for any of its 2Gbps plan sign-ups.
Group buying as a core business model
One particular company, WEBUY, uses group buying as a core business model.
First launched in August 2018, it is a social e-commerce platform that seeks to bring back the “kampung spirit of sharing and caring” through group buys.
Vincent Xue, co-founder and CEO of WEBUY — who is also the co-founder of international shopping platform ezbuy — previously told Vulcan Post that the business idea came from one of his investors who is also an early investor of Pinduoduo and a community group buy platform in China.
WEBUY aims to give both merchants and consumers an opportunity to source and provide novel food and beverage items, while helping small and medium-sized enterprises across Asia expand their business opportunities.
Last month, WEBUY became the first in Singapore to expand into the travel group buy market, offering private and customisable travel group buy packages.
Unlike travel agencies, WEBUY allows users to travel in their own groups without the need to mix with others for a group tour.
If a travel group reaches the minimum headcount of 15 to 20 people, they’re able to pick which airline to fly in, which hotels to stay at, and which landmarks they’d like to visit.
All of WEBUY’s travel packages include air-inclusive international packages “at the cheapest rates” to popular destinations such as Switzerland and France. It will progressively introduce other destinations in the future, including Italy and the Netherlands.
“While the Covid-19 pandemic continues to make a profound impact on travel and tourism, WEBUY remains hopeful and positive that the travel industry will recover,” said Xue.
As the Singapore government continues to relax travel restrictions, he sees it as a timely launch and hopes to eventually expand this group buy model into different industries in the year ahead.
Featured Image Credit: WEBUY