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GOME Electrical Appliances Holding Limited: The "Tuangou" Challenge                                                                                                                                                                                     
Product Ref: 06/313C Company: GOME Electrical Appliances Holding Limited

Product Type: Case Industry: Retail & Wholesale

Related Product(s): Teaching Note
Authors: Benjamin Yen   Andrew Lee
GOME, founded by Wong Kwongyu, had grown from merely a 100-square-metre store in Beijing in 1987 to being the industry leader in electrical and home appliances retail in China with 259 traditional stores and 4 digital stores in 2006. Its success stemmed from its low margin, high volume strategy, which was complemented by its striving for service quality and innovation. In 2006, GOME faced the new challenge of tuangou, or group purchase. In order to amass bargaining power to demand for discounts from retailers, consumers with similar needs in China were united by the internet and would show up en masse at retailers at pre-agreed times and dates. The crowd would put relentless pressure on retailers and would press for greater discounts. This emerging consumer behaviour had spread like wildfire in China and retailers had different reactions. Some yielded to the pressure and offered greater discounts, some only entertained tuangou that had been pre-arranged and/or pre-registered, and others refused to give in with a fixed-price policy. It was up to GOME to determine how best it could deal with this new phenomenon.
Functional Area : Marketing

Issues: The case is designed to facilitate a discussion on (a) how one should go about understanding an emerging consumer behaviour, and (b) the process through which a company should determine how it should deal with an emerging consumer behaviour.Consumer behaviour, marketing planning, retail, consumer electronics, supply chain management.
Length: Text: 9 pages
Exhibits: 4 pages
Country: China (People's Rep. of)

Pub. Year: 2006 Level of Difficulty: 3
This product type is available in the following language(s):      English   Simplified Chinese
Related Information: N/A
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