Mike Bastin with Tsinghua University specializing in marketing and management [Photo: CRIENGLISH.com]
"They (Groupon) come here with well-established brands, ample capital and global management expertise, but local providers can be very, very competitive, and it may be a very, very difficult market for them."
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The US company Groupon is to launch a Chinese version of the discount website famous for its "deal-of-the-day" business model in a joint venture. It will formally join forces with Tencent, an internet giant in China, this week.
But the company's entry into the Chinese market has not been as easy as it had expected. Its strategy of acquisition, which had succeeded in many other countries, didn't work when they planned to reach the Chinese mainland last year, as local providers preferred to remain independent, increasingly backed by their own venture capital providers.
Although the joint venture with Tencent was finally announced in January, Groupon will still find many difficulties in its operation in China, said Mike Bastin with Tsinghua University specializing in marketing and management.
"I think some of the issues they're going to face, the difficulty is the control of demand - obviously with China's huge population," said Bastin. "There may be sudden surges in this deal-a-day demand which local providers may not be in a position to satisfy at the moment."
Rumor says that the launch date of Groupon in China might be further delayed to March because "deals for products from local businesses have just began and everything has yet to be settled," MorningPost.com.cn cited an anonymous source close to Groupon as saying.
On the other hand, the competition with local group purchase websites in China is fierce. By the end of 2010, there were 2,162 domestically run websites for group buying in the country.
"They (Groupon) come here with well-established brands, ample capital and global management expertise, but local providers can be very, very competitive, and it may be a very, very difficult market for them," said Bastin.
Many Chinese group purchase websites have begun to promote themselves with advertisements in the face of Groupon's entry, Beijing Morning Post reported.
Even the domain name of the US company has been subject to conflict. The ideal names for its business in China - groupon.cn and groupon.com.cn - have both been registered, so it will be known as gaopeng.com. The name appears to be derived from a Chinese phrase meaning "cherished friends sitting around the table."
In addition, new platforms for the group buying market have also been boosted in China. Taobao, China's biggest online retailer, launched its group purchase platform on Wednesday and welcomed all the group purchase websites and providers to use the platform for promotion.
On the same day, Qihoo 360, a search solution provider on the Internet and mobile platforms in China, also launched its group purchase guide platform with over 200 domestic group purchase websites joining forces.
Not worried about the foreign company's entry, Chinese group purchase website heads called for innovation, localization and fair play in the group buying market at the 360 platform's launch ceremony.
According to the China Internet Network Information Center in January, e-commerce has become the fastest-growing Internet activity in China after the number of online shoppers increased by almost 50 percent to 160 million last year.
The number of China's netizens hit 457 million, continuing to be the largest globally, according to a bi-annual report released by the organization.
The domestic research company Analysys International said that in terms of sales, the online-shopping market grew by more than 370 percent year-on-year, reaching 520 billion yuan ($78.79 billion) last year.
Launched in November 2008, Groupon is being called the fastest-growing company ever by Forbes. As of October 2010, Groupon serves more than 150 markets in North America and 100 markets in Europe, Asia and South America and has amassed 35 million registered users.
Its Asian foray began last year when it acquired daily deal websites in Japan, Singapore, the Philippines and China's Taiwan Province.
