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IDG News Service - Under pressure from entrenched local competition, Groupon, a late comer, is lagging in the Chinese group buying market. A focus on hiring local managers, and possible acquisitions, could however see its fortunes pick up, analysts said.
The company's Chinese site, GaoPeng.com, had as yet to enter the list of top ten group buying sites in the country by sales revenue in May, according to research from Tuan800.com, a group buying aggregator that offers an online portal to group buying sites.
"Some of it just gets down to marketing and exposure," said Mark Natkin, managing director of Marbridge Consulting in Beijing. "An amount of time is needed for early users to have a chance to use the product and tell their friends about it." GaoPeng has been offering discounts for only the past three months.
Groupon has risen to become a leader in group buying in the U.S., but the company still has a long way to go in China, where competition continues to be fierce. The country now has about 4,500 group buying sites, Tuan800.com said.
Another report released this month by Dataotuan, also a Chinese group buying aggregator, also showed that GaoPeng was not in the top ten group buying sites by revenue in May.
GaoPeng generated about US$693,000 in sales revenue in May, a three-fold increase from the $200,000 in the previous month, Tuan800.com said. But GaoPeng's sales revenue pales in comparison to the $11.6 million generated in May by Meituan.com, one of the country's most popular group buying sites.
GaoPeng ranked 15 in China by monthly sales revenue, said Hu Chen, co-founder of Tuan800.com. "In the Chinese market, GaoPeng is steadily improving, but if it wants to be competitive with mainstream customers, GaoPeng will have to redouble its efforts," he added.
Tuan800.com based its analysis on sales data that is publicly available. Both Groupon and GaoPeng did not respond to requests for comment on the growth of its business in China.
Groupon, a company that started in the U.S. in 2008, has helped popularize group buying, a new kind of e-commerce that revolves around offering discounts. Group buying sites operate by offering daily deals on restaurant meals and spa services, to even discounts on products like wine or comic books. Once enough consumers buy into the deal, the discount is given to all who participated.
Groupon's Chinese site is, however, positioned to grow, analysts said.
The site is already doing better than when it first came into the market, Natkin said. "From the outset, they were still finding their feet and they were a little heavy on having so many foreign managers," he said. But now GaoPeng appears to have cut down on the number of foreign executives, in an effort to bring in more local managers who understand the Chinese market.
"Many foreign companies new to the China market are still overly focused on duplicating their overseas schemes," he added. "They assume it will be the right fit for China."
Su Huiyan, an analyst with China-based iResearch, said GaoPeng's position in the market is gaining. "We see that user visits to their site are steadily going up," she said.