The Study On The Pricing Strategy Of The Group-buying Platform Based On The Two-sided Market Theory

Group-buying in China has begun its rapid development since Groupon model introduced in 2010. Although the number of group-buying website rises soon, showed a disordered state of development gradually. The consolidation and closure of the group-buying platform become normal in this state. The failure of group-buying is related to malicious competition and homogeneity. Part of the group-buying sites in response to the vicious competition in the industry、in order to open the market and to raise their awareness charge a low price to the bilateral users, which leads to negative long-term profit、shortage of cash flow and insolvent, finally they have to leave the market. Therefore, the group-buying platform should choose appropriate pricing strategy. Neither uncontrolled low price nor unique high price is the best choice for the platform.Because of the unique nature of its operations, there exists great difference between group-buying platform and traditional single market in profit model. The group-buying platform charges fees to both the buyers and sellers, which indicates the group-buying platform has a significant two-sided market characteristics, thus it is a typical bilateral market structure. This paper analyzes the two-sided market characteristics and the main factors affecting the profitability of the group-buying based on the study of the phenomenon of domestic and foreign group-buying and the theory of the two-sided market. In particular, this paper studies the best pricing strategies of grouping-buying platforms combined with the China group-buying model and based on the theory of the two-sided market. Especially in the case of the monopoly market and the duopoly single-homing market, under the assumption that the platform only charges transaction fee to the bilateral uses, the group-buying platforms should choose what kind of pricing strategies and profit model to maximize their profit and long-term stable operation. Then this paper finds that:In the case of monopoly platform, the platform should adopt asymmetric pricing strategy; and the transaction fees charged to bilateral users should decrease with the increase of the number of transactions. In the case of duopoly platform, firstly, platforms could obtain price advantage by distinguishing their own characteristics; besides, the transaction should also decrease with the increase of the number of transactions and the network externalities of the bilateral users.Then, this paper chooses the largest group-buying site-Meituan as a typical case to study based on the total theoretical analysis. We hope to prove the reliability of the theory through real cases. In this part, we first analyze the frequently used profit model by Meituan to maintain its market share and to realize its own profit-maximizing level. Then summarize current issues exist in the development process of the group-buying platform. And finally predict the prospect of the future trends of the group-buying industry.