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Groupon readies for battle in China

  • Staff Reporter
  • 2011-02-27
  • 17:06 (GMT+8)
A Guangzhou college student browses products at an online store. (File Photo/Xinhua)

A Guangzhou college student browses products at an online store. (File Photo/Xinhua)

As deal website Groupon rushes to prosper around the world, China may become its most desirable market, albeit the most formidable one to tap.

The Chicago-headquartered company, a website selling discount products and offering group-purchase services, on January reportedly set to launch a joint-venture site called Gaopeng.com in China with the country's largest internet service, Tencent, with the aim of securing a share of the world's largest internet market.

According to China-based group-buying search engine Tuan800.com, transaction volumes for such enterprises is set to exceed 16 billion yuan (US$2.4 billion) this year in China, the Wall Street Journal reports.

However, the seemingly promising partnership is not going smoothly as its China portal www.gaopeng.com went online on Feb. 15 but was pulled down less than 24 hours later by its joint venture partner Tencent, according to Chinese media reports.

Industry watchers said the launch confusion may stem from Groupon's eagerness to show investors its expansion into China as it gears up for a public offering this year, while Tencent, in contrast, wished to wait for "a more appropriate time."

Yet another report contends the incident resulted from an engineer's error.

Over the past few weeks, the expanding company has reportedly opened a Beijing office and begun the process to recruit up to 1,000 staff, offering wages three times higher than local rivals.

Views as to whether Groupon will succeed in China are split since plenty of US companies have failed to establish a foothold in the growing market, including Google, Yahoo and eBay.

A report from CNNMoney.com said that if Groupon wants to succeed in CHina, it must build a formidable sales force like it has developed in the US. However, "the job posting from the company may be placing too much emphasis on academic credentials and consulting experience and not enough placed on knowledge of the local terrain," the article said.

Another big concern for Groupon will be ensuring that local companies are legitimate. While censorship of online content is strictly enforced in China, business practices are not. Big, effective organizations like the Better Business Bureau, which gather information on a company's transactions and report fraudulent activity, do not have Chinese counterparts, the report cited Forrester analyst Sucharita Mulpuro as saying, adding that many smaller businesses operate illegally in some way.

Furthermore, local reports said the heads of several local group-buying sites including Lashou, Manzuo and Ftuan earlier held an emergency meeting to form a defensive alliance, declaring Groupon their biggest rival due to its huge cash reserves and partnership with Tencent.

One of the harshest stipulations they agreed upon was to never hire a former Groupon employee in an attempt to negate the high salaries Groupon is offering new staff.

Holding a positive view of the partnership between Tencent and Groupon, which plans to pour a significant portion of the US$950 million in private capital it recently raised into its China operations, is Zhang Yi, chairman of iimedia Research, who said that the major challenges for the cooperation would come from communication and coordination between two giants as well as the threat posed by local rivals.

References:

Tuan800.com 團800

Gaopeng.com 高朋網

Tencent 騰訊

Lashou.com 拉手網

Manzuo.com 滿座網

Ftuan.com F團

iimedia Research 艾媒市場諮詢

Zhang Yi 張毅

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