Group Buying Loses Some Luster in China

on May 10 2012 | in Digital Retail | by | with No Comments

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China’s group buying market is overcrowded. In December 2011, 3,909 Groupon-like group-buying websites existed in China. Now, half of them have shut down, and experts say only the top 10 will survive an ongoing shuffle.

A recent report from tuan800.com, a leading group-buying service navigation site in China, says that more than 2,000 of the sites in China closed in the past year. The top 20 sites accounted for 96 percent of the market share, while the other 3,000 and counting sites fought over the remainder.

Many of the sites are closing because of poor customer service, or because fake or low quality offers have chased buyers away. On dn3t.com, a Nanjing-based group-buying website, buyers rushed to purchase coupons for Haagen-Dazs, only to find that the offer was fraudulent after the group-buying site shut down. In Jinan, Shandong province, buyers of Pizza Hut coupons were likewise scammed.

Even deals that pan out for the consumers aren’t necessarily satisfying. “Usually group-buying services set a time limit for using the coupons and, in many cases, the service is not as good compared with a full-priced deal. It seems that you have to expend extra energy and time for the money you have saved,” said Chen Shousong, an analyst with the research firm Analysys International. Chen believes that the most successful group-buying sites are those that use their services as a new way to play the role of matchmakers for local businesses.

Last December, e-commerce giant Alibaba Group Holding Ltd changed its group-buying site into an open-platform, allowing other sites to sell their goods. It also promises to set a standard for the industry in best practices. Juhuasuan, which means group bargains, plans to establish a 50 million yuan (US$7.9 million) fund for consumer protection.

“Localized services, from restaurant coupons to movie tickets, will be a huge market and may account for transactions worth billions of yuan in the coming few years,” said Yan Limin, general manager of Alibaba’s group-buying business.

Experts seem sold on the idea. “Juhuasuan’s open platform will help integrate useful resources and squeeze out market bubbles,” said Su Huiyan, a senior analyst with iResearch.

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image credit: leon lee

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