Discounting to Win? The Impact of Team Purchase on Seller Performance

Abstract

Team purchase is a novel form of group buying that encourages customers to purchase deeply discounted products together with friends or family members. Over the past few years, team purchase has emerged as a compelling marketing strategy for online sellers to acquire new customers and enhance their visibility on e-commerce platforms. However, whether and how team purchase affects the sales and profits of sellers remain an open question. We answer this question using a dataset from an e-commerce platform, which started to allow sellers to enroll their products into team purchase since September 2019. Our empirical analysis reveals that engaging in team purchase has a positive spillover effect on the sales of sellers’ other products, and the effect varies substantially across different types of sellers. Specifically, the positive spillover effect is larger for diversified sellers and high-end sellers. The latter finding is surprising because conventional knowledge suggests that deep discounts tend to attract price-sensitive customers who are less likely to purchase high-end products. We further investigate the underlying mechanism and find that team purchase attracts more new customers for diversified sellers and high-end sellers. Additionally, we examine the impact of team purchase on profits and find that team purchase increases the overall profits of sellers, though they typically incur losses on the team purchase products.

Keywords: team purchase, spillover effect, diversity, market positioning, sales, profit