China’s group-buying websites offer great deals on a host of products and services while stimulating business. So why have so many of these platforms disappeared recently?
According to data from group-buying navigation site Tuan800.com, 120 million people in mainland China group-bought a product or service in August, a 109 percent year-on-year increase. The value of these consumers’ transactions for the month reached 7.7 billion yuan, up 108 percent year-on-year.
Group-buying websites provide easy and efficient opportunities for discounts. Between September 23 and October 21, popular group-buying platform Nuomi.com sold movie tickets and refreshments to a total of 17,085 people for 31 yuan ($5) each, about 60 yuan cheaper than the original price for a single movie ticket for the cinema on Fuxing Road in Beijing’s Haidan district.
Group-buying offers can also benefit luxury brands affected by the Chinese government’s recent austerity push, as South Beauty’s example shows. Over the past few months, the high-end restaurant chain has offered dinners for four people for 298 yuan on the Dianping.com’s group-buying sub-site. The original price for one of these meals was 1,234 yuan. According to China Daily, 12,165 of them were sold between April and October.
These platforms allow consumers to save money and also allow business “to capitalize on their unused capacity, promote their brand, or expand their service area.” But if group-buying websites have such healthy prospects in the Chinese market, why are so many of them getting swallowed up by large corporations or vanishing from the Internet entirely? Or is it just the industry maturing, going through a consolidation phase?
In the past two years, the following are some of the corporate activities related to China’s group-buying websites:
Gaopeng.com was a Chinese joint venture headed by the Chicago-based company Groupon. In August 2012, the platform merged with Ftuan, a Chinese group-buying website, and formed a new company, GroupNet. A few months letter, on December 12, Ftuan was renamed GaoPeng and eventually changed its domain name back to gaopeng.com.
Ruomi.com was a group-buying website that originally went online in June 2010. In August 2013, Baidu announced plans to invest $160 million into the website and gain a 59 percent stake. At the end of the same year, Ruomi.com’s CEO, Shen Boyang, resigned, and in March, the website was rebranded Baidu Ruomi. The website has performed well since then; in the first eight months of 2014, group-buying deals accounted for 727.6 million yuan, a 7.55 percent year-on-year increase.
Last January, Shenzhen-listed Suning Commerce Group Co Ltd. announced that it had fully acquired China’s first group-buying website, Manzuo.com. Deals worth 70.8 million yuan were made on the platform during the first eight months of this year, a 3.74 percent year-on-year increase.
On October 19, Sunpower Group announced that it had acquired one of China’s first group-buying websites, Lashou.com. According to Sunpower’s spokesman Zou Yan, the acquisition was an effort to help improve the corporations online-to-offline (O2O) platform. Group-buying deals made over 300 million yuan for Lashou.com during the first eight months of 2014, a 1.77 percent year-on-year decrease.
image credit: gaopeng.com