Crowds Matter

kunalYou’ve all hear of Li Ning, the Olympic gymnast who soared above the crowds at the Beijing Olympics to light the flame, making his eponymous sportswear brand a household name in a blaze of glory.

But have you heard of Ning Li? The 28 year old, born in China and educated in France and the UK, has launched a business that is growing by 50% every month, and has attracted an investment of GBP 2.5 million (USD 3.88 million). His company, Made.com has been able to more
than halve the price of contemporary furniture by cutting out the wholesaler and the retailer. The website showcases furniture designs and holds public votes, with the most popular designs going into production. Every voter gets a discount voucher worth GBP 20 in return for their participation in the selection process. The exact number of items ordered are then manufacturered in China.

Ning Li has unleashed the power of crowds, both in creating demand, and then producing and selling the designs the crowd wants.

It had to start in China. Young shoppers have a name for this phenomenon: tuangou.  Combining the power of the Internet to compare prices with the tactics of a mob, they are putting pressure on retailers which is simply irresistible.

In the first week that Swedish retailer H&M opened its store on Shanghai’s Huaihai Road, a young office worker posted a notice on a BBS. That weekend, at an agreed upon hour, 80 young women turned up and successfully negotiated up to 25% off on the merchandise. It took another young lady, named Ellen (CNN covered her story) just two weeks to find another 54 people on the Xcar BBS to be able to negotiate RMB 30,000 discounts on the Toyota Yaris from the Toyota dealership. And the phenomenon continues to grow – recently, 200 people nabbed RMB 41,000 discounts on Mercedes-Benz’s Smart car in Shanghai. Of course, this time it was Mercedes-Benz which triggered the frenzy by announcing that they would provide the discount to the first 200 who signed up. Gome, the consumer electronics retailer, has partnered with the Shanghai BBS site KDS to launch a service to attract crowds of buyers.

In Beijing, websites like nuomi.com and aggregator site 1000tuan.com both offer Beijing specific subsections with dramatic savings on restaurants, cinema tickets and other services. But it is those companies which take the idea of crowd-sourcing beyond bargain-hunting that truly change the game. Ning Li’s Made.com is one. Volkswagen is another.

Last year, Ogilvy launched an ‘Art Car Contest’ inviting artists and those simply with an affinity for the New Beetle car to try their hand at painting the car in designs of their choice. Visitors to the website could vote on their favorite designs. Within two months, 27,598 designs were submitted and 122 million votes garnered. The company took the top ten designs, painted them onto New Beetles and put them on the road.

Designers appear to be divided on the practice. Under pressure to keep costs low and with talent hard to come by, some western design firms are throwing open client briefs to the public as assignments or design contests, with winning designs awarded as little as USD 200. While the purists fume, calling them ‘Barbarians at the Gate’, businesses like 99designs and Threadless design are reaping the rewards. Melbourne-based 99designs acts as a middleman between business owners and graphic designers, hosting contests in which clients post their needs — website design, logos, print packages — and designers compete to fill them. Threadless runs design competitions on an online social network whose members submit their ideas for T-shirts — hundreds are sent in each week — and members then vote on which shirts they like best. Threadless now has thousands of members who buy tons of t-shirts at USD 15 each.

So, the next time a crowd appears at your store demanding a discount, ask them for ideas that might help you create a more interesting product line or experience before agreeing. Your firm will be richer for it, both financially and creatively.


Reproduced with permission from China International Business magazine.  

Date: January 12, 2011