Latest Group Buying Turmoil Shows Up at 24quan, Meituan

By newsdoug on November 25, 2011

Users at 24quan sub-site locked out It’s Thanksgiving day in the US, but people in China’s turbulent group buying sector have little to be thankful for, as intense competition appears to have claimed a new victim in the form of a sub-site operated by 24quan. (Chinese article) According to Chinese media reports, the sub-site, called Zhongshan Zhan, has suddenly shut down and its merchants are refusing to honor its coupons. I checked 24quan’s main website (www.24quan.com), and it appears to be still functioning normally, so this report appears a bit unclear about what’s really happening at the parent company. But regardless of the specifics, this latest report, which cites a number of irate customers, reflects the current turmoil afflicting China’s group buying space, where consumer complaints are frequent and companies are bleeding cash. Industry leader LaShou’s pending New York IPO appears to be indefinitely suspended, as the US securities regulator looks into accounting issues (previous post), and there’s no sign that 55tuan, another major player, will be able to make its intended US IPO before the end of this year. (previous post) Another new media report reflecting the current chaos says that a site called Meituan has suddenly started offering all employees who have worked there for 6 months or more stock options. (English article; Chinese article) The company apparently denied the move was related to an upcoming IPO, which doesn’t surprise me. I suspect the move instead means something entirely different, namely that Meituan is worried about its own finances and is using these options as a way to retain employees who might be worried that their company might not survive long enough to make those options worth anything. The report says the options don’t vest until 4 years — which looks like an eternity in the current market. I would honestly be surprised if more than 10 percent of the current crop of group buying companies are still in business 4 years from now, and I’m guessing that Meituan won’t be among that small set that survives the upcoming industry clean-up which should begin in earnest in the next 6 months.

Bottom line: Reports of the shut-down of a unit of one popular group buying site and option awards at another are the latest signs of turmoil, which will result in an industry shake-up very soon.

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