Strength in Numbers--The Power of Online Group Buys

As rainclouds float across the darkened winter sky of a mid-February evening, the streets of Banqiao City in Taipei County are packed with cars and people as everyone rushes home from work. Mrs. Zeng, who has an appliance store on Zhongshan Road, has set up a huge table in front of her store as if it were time for the monthly sacrifices to the ancestors, the table full of food of all shapes and sizes.

"Hi Mrs. Zeng, I'm number 43-I ordered a pack of waffles and two cakes." As night falls, Mrs. Zeng's doorway draws an ever growing crowd, everyone lined up with a number in hand, each waiting to pick up their order.

"Wait, an appliance store selling baked goods?" Seeing the crowds gathering around Mrs. Zeng's store, many passersby may be struck by this question. In fact, the crowd is made up of members of a Banqiao-based group that organizes group purchases at least twice a week on popular website Ihergo, and they're queuing up to pick up the results of their latest group buy.

Yuder Seafood is a popular online seller of fish and seafood dishes, and its eel, Korean-style vegetables on rice, and seafood rolls have been tremendously popular for online group buyers.

No going back

"Every time we organize a group, we get a good 50 or 60 people at least, like today-in moments after starting our waffle group and our cheesecake group, each had over 100 people. I know it sounds improbable, but we've been doing these buys for over a year and already we've got over 2000 members," remarks Mrs. Zeng of the Banqiao Puqian Pleasure Group, of which she is head.

The group focuses on buying food from around Taiwan, from savory snacks like luwei, dumplings, instant noodles, steamed buns, kimchi, onion cakes, and hotpot broth; to sweets of all kinds-there's nothing these gourmands don't love. As soon as anyone hears about somewhere selling something tasty, there'll be a group buy set up online. And in order to sample these dream goods, they're happy to wait months and months for them to be ready.

Group member Ms Hong remarks that she and her family all like good cuisine, but it used to be that if they wanted to try some jellied chicken's feet from Taichung, onion cakes from Yilan, Benan pork buns or fresh Chulu Ranch milk from Taitung, shrimp rolls from Tainan, or "explosion buns" (which, when heated, fill with a thick, creamy filling) from Kaohsiung, she would have to get a group together in the office, jaw away for ages trying to get everything all organized-and even then it might not be done. Ever since she found out about online group purchasing, though, getting a group together is much easier thanks to the bigger number of participants, and she's even made some new friends out of it.

"Each day I'll go online and find a group organizing near my home. I buy all kinds of things that way-food, cosmetics, cleaning products, even children's clothes," laughs Ms Hong. "Getting together with a bunch of people to try things, buy things, and share experiences has been great fun too!"

Some of the heavy hitters in online group buys: Taichung's Today honey twists.

Easy as PTT

The origins of this new trend can be found in Taiwan's biggest online BBS, PTT, and their BuyTogether board. Since most BBS users in Taiwan are students who live in concentrated areas, buying clothes, food, and sundries as a group saves on delivery costs as well as-if they meet the seller's criteria-earning gifts, discounts, or frequent shopper points.

Sellers of popular women's clothing like Choya Original, A-SO-BI Fashion Shop, and Ni-kiyo Japanese Fashion House have been warmly received on the BuyTogether board, and often offer buyers the option of becoming a VIP member if they spend a certain amount on a single purchase. VIP members get deals such as 10-20% off or a NT$10 discount off every item they buy next time they spend over a set amount, which has made group buys tempting to student shoppers with small wallets and big things for buying new clothes.

With its surprising savings and students' natural tendency to get their friends in on things, the BuyTogether board took off like a shot, as evidenced by its rocketing into the top 20 most popular boards on PTT shortly after its 2004 launch. Even now, five years later, it is still as popular as ever, with 400-500 groups set up a day on average.

Users of these online group buy boards purchase a myriad of different items, from Japanese and Korean spring fashions and ugg boots, through fake eyelashes, stockings, food seasonings, and kitchen knives, to cosmetic masks, thermoses and even community college courses and "Bossman" soy sauce (made by Pingtung Prison inmates to an ancient recipe). All kinds of things have people coming together in groups to buy them, and the pickups are most often organized on college campuses around Taiwan.

Some of the heavy hitters in online group buys: Tainan's Elate puddings.

Boys bearing bargains

PTT's BuyTogether board has rapidly become a firm favorite amongst penny-pinching college students. While the fact it is a BBS sets a certain technical threshold and the text-only interface may seem cold and uninviting to many, Ihergo is the first website to combine the spirit of the BuyTogether board with Web 2.0-style community building. This is a key factor behind its tremendous growth.

Enthusiastic, bargain-hunting, and shopaholic-many people stereotype female shoppers in such terms. But Ihergo, so widely praised by mothers and others, is actually the brainchild of two 20-something men, Leo Liu and Jeremy Chang. The two met while graduate students at North Carolina State University, and after returning to Taiwan both began working at IBM Taiwan. Seeing the opportunities of the Internet, these two fans of their company's group buys quit their jobs to tap the group buy market.

Liu explains that although group buys have a long history in Taiwan, trying to organize them online was a relatively new concept. Most group buy platforms were organized on a corporate basis, aiming to promote product sales. Those who wanted to find others to buy with had to make postings in online communities. This was unfriendly and inconvenient, so Ihergo was launched in 2007 with the aim of "connecting" potential group buyers.

At Ihergo, anyone can become a "groupmaster" and seek out others to buy with, sharing benefits like free shipping or gifts. While the site itself sells nothing, you can find groups looking to buy just about anything.

Online seller "Mommy Xiaofen" organizes group buys of children's clothes, something warmly received by mothers wanting to get new clothes for their children, but without the expense.

Acting locally

Ihergo went into beta in March 2007 and soon drew in over 5000 members. In October the site officially went live, and in just one month they had hit over 20,000 members. Since then they've continued to grow steadily, and by the end of this February, they had almost 80,000 members with transactions totaling as much as NT$33 million going through the site every month.

Ihergo's other big selling point is its local focus, which brings its users together.

Leo Liu explains that most online shopping is about transferring funds and organizing postage or delivery, with both buyer and seller interacting solely online, neither ever really likely to meet the other. But online group buys require meeting in person, so most buyers will join groups near their homes, workplaces, or other places they frequent to make it easier to pay for and pick up their purchases.

As Liu sees it, the relationship between group members and group leaders is somewhat similar to the upstream-downstream one in marketing. As they meet so often, naturally a community will develop; after every pickup, everyone tends to post about their thoughts on the taste or to share advice on how to use their new gadget, and as other groups see these discussions, they jump in too. One person tells 10, 10 tell 100, and the group buys just keep growing.

"This effective customer reach has caught the attention of businesses, and they've become more willing to offer discounts or trials for group buys. The users get to save money and have fun, our advertising revenue goes up, and everyone's happy," says Liu.

Getting together with a bunch of strangers online to shop is currently the hot new way to get in on group buys. Forming groups based on geographical location, such group buyers regularly enjoy discounts or even free shipping. This picture shows the Banqiao Puqian Pleasure Group distributing a group buy of waffles.

Leader of the pack

At present over 2,300 groups are active on Ihergo, with the largest of these-"Taoyuan Urban Shopaholics Anonymous"-boasting over 3,000 members. The success of such massive buying groups is in no small part thanks to their groupmasters, people like Mrs. Zeng, the leader of Ihergo's second largest group, the Banqiao Puqian Pleasure Group.

Mrs. Zeng, in her mid-forties and operator of an appliance shop, describes herself as a "old biddy with an eye for local bargains." She saw Ihergo mentioned in a newspaper article over a year ago, and joined the site hoping to find some people to share some things she'd overpurchased. She never expected that her passionate involvement, along with the fact that having her own store meant she could offer flexible pickup times, would end up making her the head of such a well reviewed and popular group. Now there are plenty of users that will immediately jump in on a group buy the moment they see Mrs. Zeng's name, regardless what's being bought.

To be a successful groupmaster takes more than just passion-it also demands flexibility and a cool head. Mrs. Zeng tells of a time when they went in on a buy of food from Kaohsiung's famous Dagouding Aloha store worth over NT$30,000, not realizing the store they had found through a search engine was not the main store, but a branch. "When we got our order, it had all gone foul, and a lot of members were very unhappy!"

Mrs. Zeng wrote to the company and ultimately got in touch with the main store and told them what had happened with the branch. Thanks to her dealings with them, out of concern for their reputation Dagouding sent a large free sampler pack to the group, which did much to cool group members' hot tempers.

Taiwanese people all share a certain love for the culinary, and getting everyone in the office together for group buys of cuisine has long been a focal point for office social life.

Hungry for purchases

Under the watchful leadership of their groupmasters, buying groups around Taiwan have become increasingly popular, with online group buyers showing more clout than anyone had imagined. This is particularly so for food, which has a surprising number of people running groups and looking for groups. Thanks to strong word of mouth, food fad after food fad has found its start on the site.

Take for example pudding cakes from Xinmeizhen in Qionglin, Hsinchu. Seven years ago this 50-plus-year-old bakery developed a new cake made only with fresh eggs, vegetable oil, and flour, and no water or artificial flavors. This gave it an almost pudding-like smoothness, leading to the name "pudding cakes."

These cakes were originally only sold at traditional food markets, until a customer from the Hsinchu Science Park bought and loved one, and was inspired to promote it to his colleagues and on his blog. And so began the boom in popularity for these cakes as they became a firm favorite of online group buyers, despite the bakery not even having its own website.

"A lot of people phone in their orders, and right off the bat they'll say they saw our cakes being recommended by this website or the other. To be honest, at first we even thought it was some kind of mix-up," laughs Huang Guoqing, head of Xinmeizhen. Now they're making 700 or 800 cakes a day, and even that's not enough to satisfy the demand; from placing an order to getting your cake can take upward of two weeks.

Other food products that have found fame through online group buys include Kaohsiung's San Lang custard explosion buns, Tainan's Elate puddings, and Taipei's Dou Su Peng puffs and Shunsy cakes. Thanks to Ihergo's "Big Group Buy" event, Dou Su Peng made a whopping 5,908 sales in a single week, while Shunsy once made sales worth an astonishing NT$800,000 in a single week through the site. For San Lang custard explosion buns, business got so good that they actually had to suspend delivery services temporarily to catch up.

Yuder Seafood is a popular online seller of fish and seafood dishes, and its eel, Korean-style vegetables on rice, and seafood rolls have been tremendously popular for online group buyers.

Value in numbers

And it's not only food. All kinds of small sellers in niche markets have found growth through group buys.

Online seller "Mommy Xiaofen" says that when she had just become a mother almost a year ago, she bought all the popular children's clothes like so many other mothers around Taiwan, but the NT$1,000-plus price tags got too much for her. She got together a group of local mothers, found a wholesale supplier, and was able to negotiate prices half those of retail for similar products.

After a few rounds, Mommy Xiaofen began selling children's clothing that was left from over-purchasing through the PCHome auction site Ruten. This January, she began setting up sales and groups on Ihergo, and she has been warmly welcomed by price-conscious mothers there.

"The attraction for sellers of group buys is small profits, big sales. Take this one brand of Japanese children's clothing-on Ihergo I sell them to groups at NT$50 less than I could sell them on Ruten, but even though I make less per sale, I sell much more. Overall my turnover's grown 20%," she laughs.

Some of the heavy hitters in online group buys: Berry Milk strawberry cheesecakes.

A Taiwanese herd effect

Internet observer Liu Weilin calls the purchasing behavior that these online groups' power creates a "team" effect. Unlike e-commerce sites driven by individuals' purchases, sites that create this team effect have user bases that come together to achieve a common goal, which in turn can go viral, creating a synergistic effect.

The reason Ihergo has caught on so strongly, believes Liu, is because the site respects Taiwanese people's more culinary side, and combined with the localized groups, this has been crucial to the site's success.

For people online throughout Taiwan, being able to shop, eat, praise, or tear into things together is a real source of fun. Liu laughs, "Take the US: even though e-commerce has been developing for a long time there, it's still lacking that kind of atmosphere that group buys bring. Maybe it's to do with their lack of Taiwan's snack cuisine culture, maybe it's just the sprawling geography, but there's not the same kind of drive to post online as soon as you try some fantastic food."

As well as pleasing the palate, these group buys have also helped people find strength in numbers to fight off the current economic crisis. The ethereal plane of the Internet has made possible this joining of forces and group buying power, and it continues to snowball all around us.

Xinmeizhen pudding cakes, from the Hsinchu County township of Qionglin, are simple in look and ingredients, with a melt-in-the-mouth quality. The strong reputation these cakes have gained has made them one of online group buying success stories. This photo shows Huang Guoqing, manager of Xinmeizhen, taking a batch of freshly baked chocolate pudding cakes out of the oven.

This May, well-known online flower store FlowerDJ plans to offer gift boxes containing a bouquet of carnations and hand-made cookies, which could well create another boom in online group buys.

Ihergo's 20-something founders Leo Liu (left) and Jeremy Chang (center) were once IBM engineers, but now are responsible for creating a group buy platform that has become the darling of middle-aged women around Taiwan.

Yuder Seafood is a popular online seller of fish and seafood dishes, and its eel, Korean-style vegetables on rice, and seafood rolls have been tremendously popular for online group buyers.

Banqiao Puqian Pleasure Group "groupmaster" Mrs. Zeng (center) often organizes buys of cuisine from all corners of Taiwan. Laughing, she says it was her passion for food and her "busybody" nature that prompted her to take on this role.