Groupon targets China

17 February 2011

BEIJING: The online group buying sector is witnessing increased competition in China, a trend likely to be enhanced by Groupon's anticipated entry into the market.

Having already purchased existing sites in Hong Kong and Singapore, Groupon intends to launch in China "very soon" via a joint venture, Danny Yeung, ceo of its Hong Kong operations, said.

"We want to dominate the market in China," he told Bloomberg, adding that the company will expand its local headcount from 120 staff to 1,000 employees in the coming months as a means of achieving this goal.

It has been reported the US firm might ally with Tencent, the owner of popular properties including instant messaging platform QQ, to create Gaopeng.

This name draws on the Chinese expression "gaopeng manzuo", which can be broadly translated as a "gathering of distinguished guests."

James Roy, an analyst at the China Market Research Group, suggested this move may prove sensible for the American start-up.

"Foreign internet companies can't ignore the potential of China's huge active online population," he said. "But when they come here, they find there are major local players doing well in the domestic market."

"Groupon's partnership with a major Chinese internet company can help it understand the Chinese market better … Tencent's massive QQ following could also help boost Groupon's business in China."

However, Guo Quji, Google China's former chief strategy officer, sounded a note of caution concerning Groupon's prospects.

"Many US companies are too ambitious and optimistic when they arrive in China, and become pessimistic when they meet obstacles here and complain about China's business environment, and finally leave China with disappointment but pretend they know the market well," he said.

Feng Xiaohai, chief executive of Manzuo, a possible rival to Groupon, similarly asserted a unique approach is essential in the fast-growing economy.

"Groupon can't use the same mentality when it comes to China," he said. "If they don't execute well, then they will be at a disadvantage.

"A lot of business-making here depends on having good relationships. Just because you sign a contract, doesn't mean the other person will carry it out."

Feng cited a wider problem of integrating Chinese and international management, and a more specific issue linked to Groupon's controversial Superbowl TV spot, which made light of the complex situation in Tibet.

"I was the first to get inspiration from the Chinese idiom gaopeng manzuo and use Manzuo as my website's name," he added.

"Now Groupon uses the idiom to show its understanding of Chinese culture, so we will keep an eye on it in case its promotion affects our reputation."

Another matter requiring attention is serving consumers across China, and has specialised in offering collective deals to shoppers in second- and third-tier areas.

"China's market is complicated," said Gong Wenxiang,'s ceo.

"These foreign giants always outsource market research to [a] multinational consultancy, hire senior managers with an overseas education … and working experience, keep pace with their headquarters closely, and focus mainly on big cities and white-collar workers."

Hu Chen, co-founder of price aggregation site, also argued customers expect extremely high discounts, often reaching 66%, as well as demanding exemplary service.

"Group buying is an internet business that really focuses on localisation of the experience," said Hu.

The China Internet Network Information Center reported in January that 18.8m netizens visited group buying sites in 2010, and predicted interest is likely to grow further in future.

Data sourced from Bloomberg, PC World, Global Times; additional content by Warc staff