Consumer Behavior

Gome Electrical Appliances Holding Limited: The Tuangou Challenge

Group 4 Ashwin Raju (PGP27277) Brijesh Kumar (PGP27213) Kaushal Mathur (PGP27219) Shishir Poonacha (PGP27251) Tapan Bhatia (PGP27256) Vaibhav Kumar (PGP27064)

Introduction and Brief History

GOME Electrical Appliances Holding Limited The largest electrical appliances chain store in China Started as a small electrical appliances store in Beijing in 1987 by Wong Kwongyu To gain a competitive edge, adopted a low cost strategy and to do that by-passed the intermediaries to interact directly with the manufacturers Sold fully imported products along with purely indigenous and joint venture brands

GOMEs Corporate Mission and Culture

Competitive pricing from high volume, customer service comes first Five pillars for GOMEs Corporate Culture Be a pioneer and contribute to society Building customer goodwill and loyalty by providing them with a good shopping experience Maintain competitive pricing by enhancing purchasing power with an expanding retail network and internal improvements Keep promises and be credible Uphold integrity and develop people Hire for capability and hire locally Establish a strong brand and emphasize image

Two pronged approach

Tuangou
A development in consumer buying practice whereby unknown consumers get connected to each other via internet and leverage their collective bargaining power

The groups gather at an agreed time and location and show up unannounced to the stores Various sites like 51tuangou.com, SHtuangou.com, 020twg.com provide such platforms for consumers to register and organize tuangou

Consumer Behavior Characteristics: Tuangou

High involvement purchase decision

Post purchase behavior is existent in the Tuangou groups

External Input Variables in the form of online interaction primarily guides the brand evaluation and purchase behavior.

GOMEs Action
Promotion
GOME launched GOME Tuangou Day Project to tackle the tuangou buyers - a selected day was closed for tuangou shoppers only Tuangou Banquet

Relationship building
Offered some additional advantages to tuangou shoppers tuangou VIP card and minimum 2% discount on any product, a complimentary gift, and Lucky draw offer

Communication
- Shoppers could sign up online, via phone or in person ~ providing personal details, details of desired products

GOMEs Action: Analysis

Merits & Demerits

Control variability and unpredictability

Merits

Increase in bargaining power with manufacturers, with larger market share

Better competence vis-a-vis competitors w.r.t. sales strategy

Demerits

More operation costs; no decrease in management cost Low profit margin further reducing Shift of normal customers to tuangou groups

Options
GOME Service Project NOT for tuangou buyers: Remove added benefits such as money back and exchange to tuangou buyers

Limited products on offer for tuangou buyers: ones with comparatively higher margins

Only selected GOME stores serving tuangou buyers

All offers apart from manufacturer warranty to be void on Tuangou day

Customized products NOT offered to the tuangou buyers

Need to incentivize customers so as to prevent them from shifting to tuangou groups