More group buying sites in China close, but market goes up in value

The number of group buying sites in China has more than halved over the past two years

China's group buying market continues to shrink, with the number of players in operation declining by close to 1,000 sites over the past year.

At the end of 2012, the total number of group buying sites in the country fell to 2,695, down from the 3,652 websites at the beginning of the year, according to a new report from the China e-Business Research Center.

The country's group buying industry boomed in 2010, when the first websites came online and modeled their business after Groupon in the U.S. In total the nation has generated 6177 group buying sites.

But over the past two years, more than half have closed due to fierce competition, with profit margins for the businesses low, according to analysts. Others have merged with rivals, including Groupon's own Chinese site, GaoPeng, which joined forces with local player FTuan last year.

Despite the shrinking number of sites, China's group buying market is growing in value. In 2012, total market transactions on the sites reached 34.8 billion yuan (US$5.5 billion), up 61 percent from the previous year.

About 42 percent of those transactions are being made from sites that use group buying as an additional business to their own larger e-commerce activities. This includes the Chinese companies Alibaba Group and 360buy. Groupon's Chinese site grabbed 7 percent of all transactions.

About 83 million people in China use group buying sites, up from 64 million at the end of 2011, according to the China Internet Network Information Center.

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