Date
24 September 2017
China's younger generation is less inclined to haggling over prices at shops, compared to the elders. Photo: Bloomberg
China's younger generation is less inclined to haggling over prices at shops, compared to the elders. Photo: Bloomberg

Bargaining is not such a big deal for younger Chinese

Everything in China is negotiable, so goes a saying, reminding foreign travelers to be on guard and avoid getting ripped off. Foreign tourists are often advised to learn some bargaining skills so that they can evade paying outrageous prices.

Generally speaking, bargaining is an art and an important part of people’s life in China. A recent survey by Shanghai-based Universal Consultancy showed that about 60 percent of Chinese consumers of all age groups from 16 to 70 tend to “habitually” haggle over prices during shopping.

But the younger generation is gradually losing the interest and the ability to negotiate a better deal. According to the survey, 54 percent in the group of “post-1980s”, or those born after 1980, said they seldom or don’t bargain when shopping for goods. They either don’t like, or don’t know how, to bargain. The percentage rose to 82 percent in the group of “post-1990s”.

Apparently, the habit of bargaining has been diminishing in the past two decades. So, what is the reason behind the change?

First of all, rising incomes and changing lifestyles can help explain this phenomenon. 

In China, disposable income for urban residents jumped at an annualized 13 percent in the past few decades. Excluding the inflation factor, the growth rate hit more than 7 percent.

With fatter wallets, young people, who had never experienced war or famine, would not bother to spend 10 minutes at a roadside booth cutting the price of just a hairpin or a cellphone screen protection film by one yuan.

For those young, living from paycheck to paycheck and spending with credit cards is their style. “Saving for the rainy day” and “making good use of every penny”, values held dear by old generations, are no longer worshipped by youngsters. As a matter of course, bargaining is out in an increasingly affluent society.

In this sense, bargaining is a product of poverty. But its relevance with income is not absolute.

In many countries, where residents’ incomes are much lower than in China, bargaining is not popular at all.

I can still remember my failed bargaining attempts in Africa and Indonesia, where vendors looked at me as if they saw an ET when I sought something at the half the price. They shook their heads and stopped the negotiation. Later I was told by friends, who had been staying there for years, that bargaining was not part of local commercial culture. Sellers would like to give discount only if one buys in large quantity.

This experience shows that bargaining can be caused by something else.

The theory of information asymmetry, which deals with the study of decisions in transactions where one party has more or better information than the other, can well explain this.

In China’s case, sellers often have more and better information than buyers, prompting buyers to haggle for lower prices amid great mistrust toward sellers.

This was particularly true during the years when the planned economy transformed into the market economy.

In the late 1970s and the entire 1980s when the dual-track pricing system was implemented, there were at least two major types of prices for the same product. One type of price was set by the government as a legacy of the planned economy while the other was determined by the market. The latter was usually higher.

The dual track, together with high transport costs and limited production capacity, led to the scenario where a product could be priced very differently among regions and even among different types of sellers, for example state-owned retailers and private sellers.

The hardship for ordinary buyers to get full picture of the market at a time when travel was inconvenient, and information spread slowly, added to the information asymmetry.

Afraid of being ripped off by vendors who took advantage of this systemic fault, buyers turned to the old wisdom of bargaining whenever and wherever they did shopping.

Situation improved since the late 1990s after China increasingly embraced market economy by eliminating government-set prices on most commodities. Price differences narrowed among regions and various types of retailers, and consumers had wider access to market information with the popularity of radio, TV and other means of media.

China’s entry into the World Trade Organization and the ensuing opening of its retail market earlier this century brought full competition to market participants including producers, wholesalers and retailers. With supermarkets mushrooming everywhere, product information can be gained easily. As shopping became as simple as putting products in carts and paying at the cashier’s counter, bargaining turned out to be a thing of past.

Nowadays, the popularity of e-commerce has improved pricing transparency to the extreme. With a click of the mouse, all kinds of information on a product can be found, with users’ comments helping new consumers make decisions. With such transparency, overpricing becomes less frequent and bargaining is not a necessity for shoppers.

In this sense, reduced bargaining activity can be seen as a sign of China’s progress toward a more mature economy.

– Contact us at [email protected]

RC

The writer is an economic commentator. He writes mostly on business issues in Greater China.

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