Should I Buy Together with Everyone Else in a Group? The Deployment of Online Technology to Foster Interdependent Procurement Actions

Number is power. The knack to aggregate product demands has been associated with the ability to negotiate better deals, e.g., lower product prices (Sandler 1992). Group-Buying Institution (GBI) is an online exemplar of this belief by consolidating small-order buyers’ demands for the same product so as to obtain price discounts (Geoffrion and Krishnan 2003). By gathering a sizable number of buyers, GBI is capable of generating sales in a faster and more voluminous manner than selling the items individually. The values created by such a system for both consumers and sellers have led to optimistic prediction about the coming popularity of group buying websites as a new way of selling to consumers.However, since their advent in the late 1990s, GBIs have experienced rise and fall in the west. Two of the earliest GBIs, Mobshop and Mercata, even had a patent squabble about this innovative model (Gottlieb 2000). They and most of their followers, such as www.actBIG.com, www.zwirl.com, and www.shop2gether.com adopted a business model that is similar to the Business-to-Consumer (B2C) model. These GBIs operate much like an online store offering various products to consumers and are responsible for the purchase transactions and shipments. The boom however did not last long. In 2001, Mobshop and Mercata ceased their operation in succession (Flynn 2001; Sandoval and Kawamoto 2001). Interestingly, a growing interest in group buying can be seen in the east, particularly in China, at around this time. The first Chinabased GBI, liba.com, was founded in 2003 and remains in good operation today. In contrast to the earlier GBIs, the Chinese GBIs function more like an intermediary for consumers to make collective bargaining directly with the sellers or product manufacturers. In Hong Kong, we are also witnessing the rapid emergence of GBIs with uBuyiBuy.com and funshare.com being launched in June 2010. The popularity of group buying in the east (e.g., Hong Kong) has stimulated interest from the researchers and entrepreneurs alike in trying to understand this phenomenon (e.g., Arredy 2006; Tang 2008). Concomitantly, there seems to be a revival of GBIs in the west recently, e.g., Groupon.com and LivingSocial.com in the United States.The above begs the question as to what are the GBI mechanisms and market differences that can lead to sustainable business venture in GBI. In other words, this project seeks to answer this question:How to promote and facilitate the sustainable commercial viability of online GBI through positive consumer responses?To do so, this project pivoted on the Interdependency theory (Rusbult and van Lange 2003) to propose an overarching tenet that GBI by attracting and gathering the high-affinity consumers to procure through GBI, would yield a sustainable service system that generates sustained commercial values for its stakeholders of the consumers, merchants and service providers. Our study will consist of two parts. Part I will focus on 1) the development of the theoretical consideration of the GBI (including the review of the technological and institutional progression of the GBI from past to now and from west to east), and 2) conducting an empirical investigation (in Hong Kong) focusing on understanding whether and how different GBI mechanisms can have varying impacts on the consumer responses to GBI procurement. Part II will use the results of Part I to conduct a large-scale field experiment to further understand the impact of the GBI mechanisms and their combinations on the consumer responses (in Mainland China). Finally, we derive managerial implications for merchants and service providers in Hong Kong (but not limited to) who are seriously considering the deployment of GBI and seeking ways of achieving sustainable GBI business venture.