Why Group Buying Could Never Find Many Takers in India Group buying is a very popular business model in China. Some of its prominent startups in the space include Pinduoduo, Meituan, and Didi
By S Shanthi
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Some years back, the hype around Group Buying was huge. It was considered to be the next big thing in India's online grocery space. It was a promising and upcoming business model, that would change the way we shop for groceries. However, the business model didn't find found takers.
What is group buying?
This form of buying, also called the community group buying (CGB) model, is one of the different business models of e-commerce such as quick commerce, live commerce and social commerce. Price is the differentiating factor in this model.
In this, buyers come together and buy a particular product in bulk and at throwaway prices These products are listed on a grocery platform. When bought in scale, the price can be bargained and kept low. The concept works like cooperatives, where a large number of people buy from a merchant.
Group buying in China
Group buying is a very popular trend in China. Some of the prominent businesses in the space include Pinduoduo, Meituan, and Didi. In this model, the consumer benefits because of reduced prices, and vendors benefit from the easy reach and the increased number of transactions and aggregators from the commission they get.
These Group Buying aggregator startups first negotiate cost with merchants and then list the products on their platform. The deal is usually available for a short time and customers are notified about the same. Franklin Templeton's article on Group Buying mentions that 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%.
Group buying in India
Bengaluru-based DealShare started this model in India in 2018. While talking to a news platform, the founder of DealShare mentioned that India does not have the digital savviness required for the success of the model. "Sometimes, users in India fail to grasp concepts like using the same link as their group to earn group incentives. They will use a different link to make the purchase and will then wonder why they did not get the incentives or discount," Sourjyendu Medda, co-founder, Dealshare told BusinessLine. Recently, the company pivoted to a hybrid model from an online-only model. Other platforms that tried and pivoted the model are the B2B commerce platform Udaan and the social commerce turned e-commerce platform Meesho.
The primary reason the China's success couldn't be replicated in India was the dominance of cash on delivery in India. However, even though the pandemic changed that behavior, it is still not a model that investors are betting on. Experts say that there is skepticism because of the model's failure in the initial days. Also, in India, discounts are a common affair across offline and online retail models. So, these platforms do not necessarily give any edge over others.
In the US too, the reason it has not picked up the way it has in China is its vast offline grocery network. For instance, one can find a Walmart or a Target within 10 to 15-minute drive In each town.
Additionally, even though India is a price-sensitive market and group buying offers huge discounts, it could not take off because there is diversity in customer preferences. With the increasing migratory crowd, the requirements of different families living in the same vicinity or socieity is different at any given time.
