Demand Factor And Pricing Analysis Of Online Group Buying Suppliers

With the development of Internet and online paying, online group buying hasbecome a trend and fashionable buying method all over the world. Since theestablishment of Groupon, online group buying site, receives hot popularity. When thisnew business model was brought into China, it experienced a crazy increase. Till June2012, there are6069online group-buying sites in China. However, behind this insanedevelopment, there comes up quite serious problems, such as fierce competition, lack ofrelated laws and homogeneous items. For the main participants-websites, suppliers andconsumers, how to get the maximum benefit from online group buying is the ma in issueof this study. The previous research suggests that pricing is the primary factor influencingbuying process, so price setting was focused on in this study.Based on a large amount of literature review analysis, differences were found outbetween this new group buying business and the traditional one, as well as that betweenfixed pricing method and dynamic pricing method. Common and unique factors thataffect the price setting for online group buying suppliers were identified, such as couponprice, price discount, average expenditure, average expenditure square, featured or notand duration time. Then according to Undercut-Proof Equilibrium, which is appropriateto homogeneous market, the theoretical model was established to find out the optimalprice of items.Data was collected from55tuan.com of hotpot items in Shenzhen, from November25,2012to December31,2012, four times a day, with8740observations totally. ThenStata11.0statistical analysis software was used to estimate double hurdle regressionmodel and compute optimal price with undercut-proof equilibrium.The results show that in the first step of double-hurdle regression, coupon price,price discount, average expenditure, average expenditure square, featured or not andduration time are all significant, which suggest that all factors statistically significantly influence consumers‘participation decisions. In the second step of double-hurdleregression, only coupon price, featured or not and duration time are significant with dealsize. Therefore coupon price is the most primary factor influencing online group buyingconsumers‘buying decisions and how much to pay. So then optimal price of supplierswas calculated by undercut-proof equilibrium, which is the optimal price not onlyattractive to consumers but also brings the highest profit.