Groupon's China site faces strong local competitors

The website GaoPeng ranks below the top ten group buying sites in China, according to studies

Under pressure from entrenched local competition, Groupon, a late comer, is lagging in the Chinese group buying market. A focus on hiring local managers, and possible acquisitions, could however see its fortunes pick up, analysts said.

The company's Chinese site, GaoPeng.com, had as yet to enter the list of top ten group buying sites in the country by sales revenue in May, according to research from Tuan800.com, a group buying aggregator that offers an online portal to group buying sites.

"Some of it just gets down to marketing and exposure," said Mark Natkin, managing director of Marbridge Consulting in Beijing. "An amount of time is needed for early users to have a chance to use the product and tell their friends about it." GaoPeng has been offering discounts for only the past three months.

Groupon has risen to become a leader in group buying in the U.S., but the company still has a long way to go in China, where competition continues to be fierce. The country now has about 4,500 group buying sites, Tuan800.com said.

Another report released this month by Dataotuan, also a Chinese group buying aggregator, also showed that GaoPeng was not in the top ten group buying sites by revenue in May.

GaoPeng generated about US$693,000 in sales revenue in May, a three-fold increase from the $200,000 in the previous month, Tuan800.com said. But GaoPeng's sales revenue pales in comparison to the $11.6 million generated in May by Meituan.com, one of the country's most popular group buying sites.

GaoPeng ranked 15 in China by monthly sales revenue, said Hu Chen, co-founder of Tuan800.com. "In the Chinese market, GaoPeng is steadily improving, but if it wants to be competitive with mainstream customers, GaoPeng will have to redouble its efforts," he added.

Tuan800.com based its analysis on sales data that is publicly available. Both Groupon and GaoPeng did not respond to requests for comment on the growth of its business in China.

Groupon, a company that started in the U.S. in 2008, has helped popularize group buying, a new kind of e-commerce that revolves around offering discounts. Group buying sites operate by offering daily deals on restaurant meals and spa services, to even discounts on products like wine or comic books. Once enough consumers buy into the deal, the discount is given to all who participated.

Groupon's Chinese site is, however, positioned to grow, analysts said.

The site is already doing better than when it first came into the market, Natkin said. "From the outset, they were still finding their feet and they were a little heavy on having so many foreign managers," he said. But now GaoPeng appears to have cut down on the number of foreign executives, in an effort to bring in more local managers who understand the Chinese market.

"Many foreign companies new to the China market are still overly focused on duplicating their overseas schemes," he added. "They assume it will be the right fit for China."

Su Huiyan, an analyst with China-based iResearch, said GaoPeng's position in the market is gaining. "We see that user visits to their site are steadily going up," she said.

But GaoPeng's rivals are growing as well. Competitor Meituan was launched in March, 2010, and now has more than 10 million users. Currently, many Chinese group buying sites are on a spending craze to advertise their businesses, said Meituan's CEO Wang Xing. Meituan has been largely relying on word-of-mouth marketing to attract new customers. It holds prize drawings and ensures customers are satisfied, and more likely to tell their friends about the site.

"China's group buying users are sensitive to the service and the trustworthiness of the group buying site. So we have to really take care of the users' enthusiasm and confidence," Wang said.

Meituan rigorously checks out vendors to ensure that they can provide good service, before deciding to partner with them to provide discounts on the site. In March, Meituan also announced a plan to refund users who had bought discounts that had later expired. This has helped create a "no worry group buying" system that has gotten approval from many users, Wang said.

Growth in China's group buying market was flat in May, with the sales revenue reaching to about $100 million, according to Tuan800.com. This represents a slight dip by about $155,000 when compared to figures from the month before. Executives with group buying sites and analysts expect the competition in the market to begin to level off this year, as the top sites expand.

Natkin said GaoPeng will try to focus on expansion by buying up smaller group buying sites. " If you have satchels and satchels of money, you can go out and acquire smaller group buying companies to quickly expand your presence," he said. "A company with deep pockets and an already well established brand is well positioned."

Tags business issuespersonnele-commerceMergers / acquisitionsTencentinternetGroupon

Recommended

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Michael Kan

IDG News Service

Comments

Comments are now closed.

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?