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14.11.2011
This case is about a Gome electrical appliances which is a largest retail chain store of home electrical appliances , how its managing director Mr. Wong Kwongyu laid the foundation of its success upon certain principles and strong values which made it the largest retail chain store of electrical appliances in China. This case also discuss a new kind of buying behavior of consumers and that is Tuangou and how Gome Electrical appliances get effected by this tuangou shopping.
Gomes Strategy :
Gome focused mainly three types of strategy and it helped them to achieve their corporate mission and gole. 1. Low price and low cost: Products available in Gomes store were priced at 10 or 15% lower than those at conventional stores. This low price strategy helped in attracting large chunk of customers and generated a large sales volume. High sales volume helped Gome to increase its bargaining power over its manufacturers. With greater bargaining power it was able to negotiate more lower prices and it helped more price reduction in its products. It worked as a downward spiral. 2. Exclusive selling rights : To secure a low price and high volume strategy they started taking exclusive selling rights for certain products from manufacturers. Which helped in improving its ability to sell at low prices and generate high sales turnover. Products with exclusive selling rights accounted for 10% of total products carried. 3. High quality Service: Gome rolled out a large scale quality service campaign with name Gome service project. Thay also started so many campaigns like this to attract their customers like moneyback guarantee, complaint award, Mysterious shoppers, Shopping from afar. Depending upon the spending pattern of the customers they were invited to join as rainbow, silver, gold, or platinum card members.
TUANGOU:
Tuangou is a Chinese term and can be referred as team buying or group purchase. Consumers who were unknown to each other joined together via internet and leveraged their collective bargaining power. Their were numerous websites dedicated to this tuangou only like 51tuangou.com, Shtuangou.com, 020tgw.com etc. Tuangou was the natural extention of Chinas bargaining culture. Onlne shopping was not that much popular in China due to lack of trust and honesty. By the end of 2005 tuangou had become a way of life for Chinese web surfers. Now customers were able to get huge discounts on the products than the normal market price.
Consumer Behavior:
From this case it is clear that tuangou is a very different kind of consumer behavior in which a consumer is a rational decision maker. Initially Chinese customers were concerned about the price only but later they started giving attention to good quality and sales service. Because of this buying pattern it was clear that consumer started to believe that anything that is low or cheap in price can not be good. This concern for consumers towards quality product in low prices encourages them for tuangou shopping.