Bargaining in Macau’s street markets is almost a lost art but consumers are increasingly using the power of collective purchasing to win a cheap deal. It is a simple idea: to aggregate demand in order to negotiate discounts from goods retailers and service providers.

The practice is already established in wholesale buying of industrial products – in the auto industry for instance. But since 2009 group-buying websites have emerged as a powerful force in the online shopping business. This segment is among the fastest-growing in web commerce.

Although Hong Kong websites have occasionally offered deals that apply in Macau, group buying is a rarity here. A few players are now trying to make their way into the market, including Renabees.com, which launched earlier this year.

They are entering a highly competitive international market, increasingly being led by internet giants. In December, Amazon.com invested US$175 million (MOP1.4 billion) in start-up LivingSocial, which has said it expects to generate more than US$500 million in revenue this year. Google has begun testing its new Google Offers service in some United States cities.

Last month e-commerce site Groupon Hong Kong joined forces with ferry company Macao Dragon to create the biggest group-buying campaign involving Macau. More than 60,000 one-way tickets for the Macau-Hong Kong ferry service were sold at a 54 percent to 70 percent discount on standard fares. The four-day offer generated more than HK$4 million in revenue, according to Groupon.

If the gain for consumers is obvious – cheaper fares – what is in it for the service providers? The answer is volume. The seller supplies the product or service at the announced discount rate only if a minimum number of customers buy it, ensuring that he seller does not make a loss.

Herd mentality
“We have chosen to work with Groupon, the global leader in daily deals sites, as our partner in our initiative to boost our consumer base through the fast-growing power of social media,” says Francis Liang, director of the ferry company. “We are pleased with the tremendous response we have seen so far, in terms of the number of vouchers sold and of the social media presence.”

Mr Liang says the idea behind the partnership was to create a buzz around Macao Dragon. “Groupon has the PR and are experts in developing huge exposure for brands and companies of all sizes. Our goal was to create tons of new customers which, in looking at the results, we have definitely achieved.”

The deputy general manager of Macao Dragon, Connie Lai, says the company teamed up with Groupon “to start a new marketing channel and to promote Macao Dragon’s service in a fresh and innovative manner, having had a previously successful experience in online marketing with BeeCrazy,” another popular group-buying platform in Hong Kong.

Ms Lai says Macao Dragon and Groupon are planning more promotions, offering different travel packages. “With Groupon’s promotional and internet marketing skills, Macao Dragon will be able to reach a far larger customer base and thus continue to improve constantly on its service to passengers,” she says.

Groupon Hong Kong chief executive Danny Yeung stresses these types of promotions can boost brands.

“From the customer point of view, such offers have great appeal because they have the ability to offer huge discounts on products and services. The deals are definitely a great way to get people in the door. We help create buzz, and in 24 hours you cannot establish this type of phenomenal response with any other type of marketing,” he says.

“The main goal is that we create a win-win situation for our merchants and our consumers.”

Since it was set up in June last year, Groupon Hong Kong has seen its profits rocket, despite competition from at least 30 other collective-purchasing portals in Hong Kong alone. Hong Kong consumers have bought more than 610,000 group buying vouchers and saved more than HK$160 million, according to Groupon. The site’s customer database has more than 600,000 names and more than 200,000 consumers have benefited from its offers.

Group buyer beware

While offering appealing goods and services at big discounts, group-buying websites have been a source of disappointment for consumers.

According to the Hong Kong Consumer Council, there has been an increase in scams reported in Hong Kong, with buyers either dissatisfied with what they get or, worse, getting nothing at all.

The Macau Consumer Council “has received no complaints or inquiries about online group purchases this year,” a spokesperson told Macau Business.

Even so, the council advises locals to beware of scams.

“Online group purchase equals online purchase and the same caution applies. Consumers should pay special attention to overseas websites and be aware of purchases which require money transferred between banks in advance. Consumers should take precautions against this kind of prepayment,” the spokesperson said.

Money mechanics

Collective-buying platforms negotiate heavily discounted deals with retailers or service providers, and advertise a daily deal online. The concept originated in the mainland and is known as “tuangou” or team buying.

Deals can be completed only when a set number of consumers purchase the product or service. Once sufficient interest is secured, credit cards are charged and coupons are sent to buyers’ inboxes.

Bargain-hungry consumers can have their fill of cut-price services and products, with the added thrill of a time limit on each day’s deal. Meanwhile, both the collective-buying platform and its merchant partner see a surge of interest.

At every stage, shoppers can spread news of their new-found bargains to their friends and family, using the likes of Facebook and Twitter, to add the power of viral communication.

By Kim Lyon