Debate: Group-buying shops

Three experts present three different views on group-buying websites.

Zhao Jingqiao

Regulation needed to ensure honesty

China has reached a critical stage where it's transforming into a consumer society. Fueling domestic demand and stimulating consumption have been the goal of the Chinese government since 2008, when the global economy entered a gloomy phase. This policy helped push the annual retail sales of social consumable goods to more than 10 trillion yuan ($1.572 trillion) in 2008, 12 trillion yuan in 2009 and 15 trillion yuan in 2010.

Transformation and upgrade of consumption are today important aspects of the economy, and online shopping has become popular among mainstream consumers, especially after group-buying raised netizens' consumption fever last year.

But even before online group-buying was introduced to China, service-based companies lacked effective online channels to promote their businesses. Food producers, medical and education services, and entertainment companies were highly localized and limited in size.

Large-scale group-buying lowered the threshold of e-commerce for individual consumers and substantially improved the situation for buyers and sellers both, accelerated the transformation of economic structure and helped promote domestic consumption.

As Chinese people's "needs" change from enough food and clothing to leading a comfortable life, people both in urban and rural areas are spending a lower proportion of their incomes on food and clothing and more on other needs such as education, medical care, housing, cars, recreation and entertainment. Although low prices play a key role in increasing people's group-buying urge, the corollary is that more services offered through group-buying portals help transform people's consumption pattern, meet their needs, and optimize their consumption structures.

This process has not only benefited consumers, but also the service providers, because group-buying offers them a freeway to expand and attract more customers. Besides, as more e-commerce enterprises join and thus expand the group-buying industry, they will act as catalysts for innovation, and help transform and upgrade consumption.

The booming e-commerce sector has been praised extensively, but equal attention should be paid to its defects and the problems it faces. Its greatest problem is honesty, or the lack of it. Since any company can enter the group-buying market, the sector has been flooded by websites providing commodities and services at wildly varying prices. There are too many group-buying websites and the market lacks the basic standards for ensuring the quality of goods and services.

The entire industry has been in a bubbling state. All websites, after a golden period of fast expansion and huge capital infusion, are facing fierce competition - which could lead to integration.

Almost all the group-buying portals offer food products or entertainment facilities only, with a few providing services related to education and medical care. This means there's still room for the market to diversify and expand.

Another problem is the increasing number of complaints filed by consumers, which is partly the result of competition between websites offering group-buying services. To get more business, some websites ignore the basic requirements from and restrictions on sellers, some of whom may be involved in foul play.

To tackle the last two problems and improve the situation, greater but healthier competition is needed in the market. And to deal with the problems of honesty (or the lack of it) and a bubbling industry, the government has to issue regulation and guidelines for consumers as well as business enterprises.

The author is a researcher at the Institute of Finance and Trade Economics, Chinese Academy of Social Sciences.