Published on 26 May 2023

Buying into group buys

From cooking hobs to cookies to character cards, what else can group buys deliver?

AT THE height of Covid-19, group buys were an affordable way for stay-home Singaporeans to get char kway teow, fresh fruit or ready-to-eat pasta delivered to their doors - or at least to their neighbours'. Even before the pandemic, canny homeowners were reaping the benefits of collective buying. But now that Covid constraints are gone, are group buys still a bargain?

Group buys have long been relevant for homeowners. In 2015, home appliance retailer Gain City opened its Sungei Kadut megastore to the first such group. Twice or thrice a month, 100 to 200 customers at a time are invited to such events, where they get exclusive prices and vouchers with a minimum spend of S$2,000.

First-time homeowners aged 25 to 40 are "highly price-sensitive" and prefer to inspect big-ticket items in person before buying them, explained marketing director Candy Cao.

Since then, a rising trend has been for neighbours to band together. More estate-based groups have been reaching out to Gain City for exclusive events, Cao noted.

Home retailer Harvey Norman joined the trend in 2016, offering group discounts and gifts to Forestville condominium residents at its Millenia Walk flagship store. It continues to invite other housing projects today.

Brands often market themselves via estate group chats on messaging apps such as WhatsApp and Telegram, directly or through hosts. First-time Build-To-Order (BTO) flat owner Aloysius Sng, for example, organised a group buy in his estate for bathroom fixture and home appliance retailer Homus Singapore, after learning about their "special discounts" of up to 40 per cent.

Group buys help homeowners save on research, too, providing a reference for the range of products available, said second-time flat-owner Ivy Lim. Feedback from buyers also informs her decision-making.

"Thirty years ago, we had to go shop by shop and really see everything by ourselves," she said.

Beyond big-ticket items, group buys range from curtains and blinds to fans, lights and even electrician services - "everything, basically", said Sheryl Yeo. She and her husband run YouTube channel Sherbooga, known for its home renovation videos.

Businesses benefit not just from larger order volumes but also lower operational costs, as many items can be delivered together, said Homus co-founder Kyler Tan.

Homus launched its group-buy programme last year, to ride the wave of accelerated BTO completions after Covid-era delays. It now works with 27 BTO projects. Estate group buy customers often visit Homus' showroom, where they can examine the products while still receiving group discounts.

Besides discounts, it has bundles of kitchen fittings that are only available via group buys or directly from suppliers. These are offered in collaboration with manufacturer and supplier BSH Home Appliances.

In its first foray into group buys, BSH Home Appliances aims for a "double-digit sales percentage increase" in sales via Homus, compared to 2022, said its go-to-market specialist Kelvin Leong. It plans to offer freestanding products such as washing machines and refrigerators in future group buys.

On Homus' end, group buys contributed 40 to 45 per cent of business revenue from February to April 2023. Tan expects group buys to endure even after BTO momentum fades, thanks to the brand awareness and market share captured during this peak.

For Gain City, the BTO pipeline is cause for optimism. Though its group-buy programme has contributed less than 10 per cent of revenue in the past three years, Cao noted that the BTO backlog is expected to take about two years to clear.

"We believe that Gain City's group-buy programme will continue to attract more customers, particularly new homeowners who may have been affected by these delays and are looking for cost-effective solutions to furnish their homes," she said.Waning hunger for mass food orders

Group buys for food, however, may have had their heyday.

Their Covid-era growth was likely influenced by the trend towards e-commerce, said Professor Sharon Ng, head of the division of marketing at Nanyang Technological University's (NTU) Nanyang Business School.

In 2019, e-commerce platform Lazada allowed users to start or join groups to share discounted bulk orders. During the pandemic, Shopee introduced a similar model.

Covid-19 also saw the rise of community-based group buys. Neighbourhood hosts collated orders and organised collections from their homes, liaising with sellers directly or via group-buy platforms.

There were even island-wide group buys. Group Buys SG, for instance, organises mass orders, works with volunteer hosts, and partners delivery companies for fulfilment.

Group buys are attractive due to discounts - important during times such as Covid-19, "when financial resources are maybe a little bit more scarce" - and the ability to share orders with a large minimum quantity, said Prof Ng.

Group Buys SG founder Winson Lee started the business after getting neighbours to share an order of Tai Cheong egg tarts, which his family had been craving while stuck at home.

"The vendor said that to even qualify for delivery, you need to hit S$200," he said. "It's not possible for a single family."

Further rounds of group orders snowballed, from his condominium block to neighbouring blocks, then the estate, and then beyond.

"We started to have orders to the point where the vendor couldn't take in any more," he said. "The moment you throw out a group buy, within five minutes, you'll see the maximum, you see your Excel sheet get populated, and then people start paying straight away - that's when we realised that there's actually this gap in the market."

Given the order volumes, he changed the primary business of his registered management consultancy to wholesale trade instead: "We wanted to do it properly."

Annual revenue from group buys has been in the six figures, though the business is not yet profitable. As Lee's immediate goal is growing their market share, he is keeping prices low. Group Buys SG works with famous brands and smaller businesses alike, for products from frozen fish soup to Japanese chestnuts to popcorn.

For Chelsy Liu, group buys were a godsend when borders were closed. She runs two companies, and often travelled abroad to get foreign snacks as corporate gifts.

In December 2020, while considering what to get for clients amid travel bans, she discovered a Group Buys SG order for Batam kueh lapis. This helped her save on administrative effort and labour while getting the cakes for "about the same" price as before Covid-19.

Poh Qun Hui, who started Pasir Ris Group Buy in March 2020, saw demand grow during the "circuit breaker" period in April to May "because people weren't going out, but still needed to get their supplies and still wanted to try new foods".

Hawker food, heat-to-serve food and snacks such as bubble tea were particularly popular, she recalled.

Patrick Sze, who runs hawker stall Snow Mount in Clementi 448 Market & Food Centre, used to receive bulk orders for his char kway teow and goreng pisang from residential halls in NTU. These came twice a month pre-Covid, and picked up during the pandemic.

At ABC Brickworks Food Centre, Linda Oon's Penang cuisine stall received a Covid-era order for over 100 packets of food, while family business Wow Wow West saw a group order for more than 340 portions of its Western dishes.

But as the pandemic stabilised and Singapore reopened, enthusiasm waned. Sze has not received a group order for half a year, while Oon's last group order was in late February.

"When there was little business and I got group-buy orders, they did help," said Oon in Mandarin. But she is sanguine about their disappearance: "As long as I'm making enough to survive, it's fine."

Besides home furnishings, YouTuber Yeo used to join group buys for perishables such as fresh fruit and vegetables. She has noticed recent rounds struggling to meet the minimum order quantity: "Initially, there was never this worry."

Interest from vendors, too, has cooled. "Previously, a lot of vendors would come to (Group Buys SG) because they really don't get a lot of footfall," said Lee. With the return of dining-in, food and beverage outlets are back to focusing on that, he added.

Still, even as community group buys come down from pandemic peaks, Prof Ng expects them to remain more popular than pre-Covid. Consumers will retain habits picked up during Covid, and have been sensitised to the convenience and discounts of group buys, she said.

Large orders still come to Eugene Ng's roast meat and satay beehoon stalls in Clementi. Though they have slowed from weekly at their peak to about monthly, he received an order for 600 packs of rice just this month.

Pasir Ris Group Buy works with 80 to 100 buyers each week, though interest in meals has fallen. Now popular are frozen ingredients or novelty snacks such as TikTok-famous circular croissants.

For Group Buys SG, Chinese New Year was the last busy period, with five figures' worth of bakkwa sales alone. Yet while orders have slowed, the company has no issue filling two to three group buys weekly, said Lee.

For last December's festive corporate gifts, Liu brought back Nutella cookies from Italy. But she still intends to use group buys for the convenience if the products catch her eye.

Group Buys SG is striving to position itself for the long haul. Ideas include analysing customer data for market insights; becoming an "influencer" or negotiating commissions; new concepts such as sample boxes; and using TikTok as a transaction platform.

"We don't want to deviate too much from where we started," said Lee. "But we will want to turn some profit for the company, and it will keep it sustainable for the next five, 10, 15 years."

Group-buy participants feel satisfaction when others buy the same item as them, and they themselves want to buy similar things to others, said Prof Ng: "From a consumer psychology perspective, group influence is huge."

Yeo admitted that her purchase of a S$3,000 water dispenser might have been motivated by "Fomo" - the fear of missing out. The item initially felt like a gimmick, but she eventually rationalised the purchase based on advantages such as its design. NTU's Sharon Ng says: "From a consumer psychology perspective, group influence is huge."

Beyond possibly encouraging consumers to spend more freely, another risk in group buys is entrusting strangers with money.

In home furnishing and estate group buys, it is common practice for buyers to make full or partial payment before the product is ordered.

"Potential legal issues may arise in relation to consumer protection," said Tay Eu-Yen, director of business advisory and dispute resolution at Drew and Napier.

"It may be difficult for a consumer who is part of a group buy to sue for any unfair practices or other unlawful conduct by the supplier, including if payment is made to the group buyer but the product is not received."

Much may depend on contractual arrangements between the parties involved, she added. A contract may be written or oral, but generally requires an offer and an acceptance, as well as an exchange of promises.

Some group buys have indeed gone wrong. In 2019, a teenage group order manager was arrested after allegedly scamming buyers of S$2,400, becoming uncontactable after receiving payment.

The purchases in that case included merchandise of K-pop band BTS. Such fandom interest-based group buys - often for K-pop or anime merchandise - are hosted on digital platforms ranging from Carousell to Telegram channels.

In these less formal group buys, payment is not always collected in advance - so the host bears the risk of being left with unwanted purchases.

But advantages outweigh the risk. Cost-sharing is especially important as these group buys often involve overseas purchases.

"A lot of Japanese websites only offer free domestic shipping if you spend over a certain amount, like 10,000 Japanese yen, which is like S$100," said Cheryl Low, manager of anime Telegram group-buy channel one hundred rilakkumas.

The shipping cost within Japan can be half the price of an item, or even more. Then there are proxy fees - for middlemen that secure and handle some of these group orders - and international shipping costs.

International shipping for a small number of items can be exorbitant, said K-pop and anime fan Christal Toh. The project coordinator once paid S$15 to ship a single photo card.

Another benefit is being able to "split" orders for goods with multiple components: a set of keychains each featuring a different character, or photo cards with different K-pop group members, for instance. Buyers can choose the exact characters or members they like, instead of having to buy the entire set.

And while group buys come with risks, they also nurture a sense of community.

"We are very collectivist ... that entire mindset fits the group-buy mindset," said Prof Ng. "I think the idea (of coming) together as a community to buy something aligns very much with Asian values."

People might have felt isolated during Covid-19 and thus sought out connections through group buys, she added.

Low looks up unfamiliar buyers to check for suspicious activity, but is happy to grant payment extensions to repeat buyers. Her channel also doubles as a space to chat about anime. Cheryl Low sends "arrival proof" photos in her Telegram channel, to reassure buyers that overseas packages have arrived and are being prepared for collection.

Sisters Kam Jye See and Kam Min See recall staying up till 5 am to pack items for group orders on their channel, inomaki's mart. While tiring and stressful at times, the joy of helping people find the items they want is genuinely fulfilling, said Min See.

Added Jye See: "Another reason why we actually continue this channel is to make friends with our buyers." They have deepened connections not just through online exchanges, but hanging out when members gather to collect their purchases.

The ties forged are one reason Poh maintains Pasir Ris Group Buy. Through small talk, she has gotten to know buyers better, even receiving parenting tips when she was expecting. One year, some members got together for a Christmas potluck.

Said Poh: "When people do not know you, definitely they do not trust you with their money." But through recurring interactions, group buy hosts can build reputations and gain buyers' trust - and perhaps even friendship

Source: The Business Times