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."

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuespersonnelMergers / acquisitionse-commerceTencentGrouponinternet

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

Michael Kan

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?