Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假中国团购业料将加速整合

By newsdoug on January 31, 2012

Group buying cleanup continues at Groupon.cn While recently listed Groupon (Nasdaq: GRPN) struggles with a tough group buying market in its US home base, one of its Chinese copycats, Groupon.cn, may be facing an even grimmer future as a much-needed cleanup of the ultra-competitive China market continues. Chinese media are reporting that Groupon.cn, which has no relationship with the US Groupon, has told most or all of its staff to stay on extended vacation following the end of the weeklong Chinese Lunar New Year holiday that ended on Sunday. (Chinese article) It also says a group of Groupon.cn’s partners are preparing to sue the company, presumably because it failed to pay them for their products that it offered for sale on its group buying site. Groupon.cn has denied the reports through a Weibo microblog posting, saying all of its activities have returned to normal since the end of the Lunar New Year holiday. Of course it’s possible the Chinese media reports are exaggerated, but I’m inclined to believe there’s at least an element of truth to them considering the disarray and rampant competition in the China’s group buying space. Gaopeng, the group buying joint venture between the real Groupon and Chinese Internet giant Tencent (HKEx: 700), struggled during most of its first year of business last year, laying off hundreds of employees in the process. (previous post) Meantime, LaShou, China’s largest group buying site, is in the midst of trying to make a New York IPO that is showing few if any signs of moving forward after the securities regulator asked for more information, reportedly over concerns about some of its accounting. (previous post) Other signs of turmoil also emerged in the second half of last year, including layoffs at another top player 55tuan, giving this latest report about problems at Groupon.cn even more credibility. I would look for more headlines on this company once the situation becomes clearer, as it won’t be able to hide massive layoffs for too long if they really are happening. Perhaps the company will even sell itself to a rival, though such deals are relatively rare in China due to the big egos of bosses who hate to give up control of their businesses. Meantime, this development looks like the latest sign of distress for an overheated industry that is set for a major clean-up in 2012.

Bottom line: Reports of woes at Groupon.cn mark the latest phase in a cleanup for China’s overheated group buying space, which will see a major acceleration this year.

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