Taobao, China’s largest online retail platform, is experimenting with the social shopping business model pioneered by U.S. Web sensation Groupon and so far the results are surprising. Groupon and its clones usually offer limited time discounts on a set number of low-end items, such as restaurant dinners and concert tickets, to consumers who download e-coupons (think flashmobs for tightwads). But when Taobao on Sept. 9 staged an online group sale of Smart microcars, made by Mercedes-Benz, all 205 of the vehicles on offer sold out in under three and a half hours. The cars were sold for 24% less than the China sticker price of RMB176,000 ($26,177).
Taobao in March opened its group shopping website, called Juhuasuan (rough translation: cost-effective for groups), to sell consumer goods, such as home appliances, food and clothing, at prices of RMB100 or less. The Smart car promotion, held on the new website, was unusual because conventional wisdom in China holds that you can’t peddle expensive stuff like cars on the Internet, let alone on group shopping websites. Taobao originally thought it would take some 20 days to unload the vehicles. More than a million people viewed the online Smart offer in three days. A Taobao spokeswoman said the company is planning an encore promotion: a flash sale of 100 Smart cars for RMB1 each to lucky consumers who click a “buy” button at the right time.
Such marketing gimmicks have proven to be useful for boosting local brands and generating temporary buzz around specific products and local businesses, but it’s far from clear how social shopping will evolve in China. Groupon’s success has spawned more than 400 copycat Chinese websites, according to Analysys International. Trade volume induced by group shopping will reach RMB980 million ($146 million) in 2010, the research group predicted.