China's younger generation losing interest in bargaining

Advent of credit cards and higher paychecks means younger generation happier to pay up and not haggle

Everything in China is negotiable, so goes the 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 "habitually" haggle over prices during shopping.

But the younger generation is gradually losing interest and the ability to negotiate a better deal.

According to the survey, 54 percent in the "post-1980" generation, or those born after 1980, said they seldom or never 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 "post-1990" generation.

Apparently, the habit of bargaining has been diminishing over the past two decades.

The shift in attitude is the result of rising incomes and changing lifestyles.

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

With fatter wallets, young people who never experienced war or shortages seldom bother to spend 10 minutes at a roadside booth cutting the price of a hairpin or cellphone cover by 1 yuan.

For them, living from paycheck to paycheck and spending with credit cards is now the norm.

Saving for a rainy day and making good use of every penny－values held dear by older generations－no longer seem necessary.

As a matter of course, bargaining is out, in an increasingly affluent society.

In this sense, bargaining is a product of poverty. But its relationship 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 extraterrestrial when I sought something at half the price. They shook their heads and halted 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 like to give discounts only if one buys in bulk.

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 changed into the market economy.

In the late 1970s and the entire 1980s, when a dual-track pricing system was implemented, there were at least two major types of prices for the same product.

One 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.

This dual track, together with high transport costs and limited production capacity, led to the scenario in which 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 difficulty of ordinary buyers getting a 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 could.

The situation improved as of the late 1990s after China increasingly embraced the 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 mass communication.

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, where no bargaining is needed, product information can be gained easily.

In 2005, supermarket sales accounted for a quarter of all retail sales. As shopping became as simple as putting products in carts and paying at the cashier, bargaining turned out to be a thing of the past for many.

Nowadays, the popularity of e-commerce has improved pricing transparency to the extreme.

With the click of a mouse, all kinds of information on a product can be found, with users' comments helping new consumers make decisions. With the Internet, it is also easy to compare how a product is priced in China and overseas.

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.