Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100

By newsdoug on March 9, 2012

Groupon.cn gets investor cold shoulder I’ll close out this first week of March with more thoughts from the battered e-commerce and group buying sectors, where an executive from Groupon.cn, which has slashed its workforce in recent months, has made some frank comments on the dangers of growing too quickly and the reliance of capital from fickle investors. Ren Chunlei, whose company is no relation to US-listed group buying leader Groupon (Nasdaq: GRPN), complained in an interview with Chinese media that investors were practically begging for sites like his to take their millions of dollars in cash in the first half of last year to quickly expand in the then-red hot group buying and e-commerce spaces. But when they complied with big expansions and needed more cash in the second half of the year as losses mounted amid intense competition, those same investors suddenly changed their minds and wouldn’t provide any more funds. (Chinese article) Ren didn’t give any figures in terms of layoffs, but the same article quoted unnamed sources saying Groupon.cn has cut its workforce from 2,300 at its peak last year to just over 100 people now. That story has been played out throughout the industry, where other sites have also had to slash their workforces in recent months, including at Gaopeng, the joint venture between the real Groupon and Chinese Internet leader Tencent (HKEx: 700). Group buying leaders LaShou and 55tuan are both pursuing IPOs as each looks desperately for new cash to stay afloat following the broader flight of private investors from their sector discussed by Ren. I’m not very bullish on the space in general, but considering the current bloodbath I would actually say that any group buying site that can manage to make an IPO in this climate might actually be a good investment, since there’s a good chance that competition will ease considerably by the end of this year as many names like Groupon.cn either get acquired or simply go out of business. Of course, I’d also warn investors to watch out for accounting problems at these companies, as such problems were reportedly behind the indefinite delays plaguing LaShou’s IPO, after it made its first public filing for a New York listing late last year. (previous post) The latest report on the bloodbath comes from the equally overheated e-commerce space, where an apparel seller named Yaodian100.com which is reportedly desperately looking for a buyer as it faces insolvency. (English article) This looks like a mid-sized player that competes with bigger names like Vancl, which also reportedly had to make layoffs last year as it delayed a planned New York IPO due to weak market sentiment. But the bottom line is that the entire e-commerce and group buying sectors will continue to feel pain this year, with investors unlikely to come to the rescue until a much needed consolidation takes place.

Bottom line: The clean-up of the e-commerce and group buying spaces will pick up pace this year, claiming its first major victim by September.

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