Groupon China Off a Bad Start

The e-commerce giant groupon was frustrated soon after it took first step in china.

Groupon, one of the largest deal-of-the-day websites in the world, failed to see the success of its expansion plan in China soon after it was implemented.

At 0:00 on February 16, the home page of www.省略, a deal-of-the-day website built by Groupon and China’s portal website Tecent, was on longer available, just one day after its silent and sudden appearance.

The website only lasted less than 24 hours.

A reliable source said that Oliver Samwer, who runs Groupon’s international business in Berlin, arrived in Beijing on February 17 to talk with Ouyang Yun, CEO of the joint venture appointed by Tecent, hoping to find a solution to the problem.

“The current situation, if not changed, will lead to the collapse of the cooperation between Groupon and Tecent,” said a source close to Groupon.

Die within 24 Hours

The only-24-hour-old home of Gaopeng showed that users can only register their accounts with emails and its business only covered Beijing.

After inputting all the required information for registration, the users will be told that “you have already subscribed to the e-paper of Gaopeng. We will be officially online next week and provide great discounts to our first customers. Please note our message, which includes the daily discount information in the city you live”.

A source close to Groupon Germany said on February 16 that the sudden appearance of this website was made by Groupon. Tecent, without knowing it before, shut down its server in China very soon.

The deal-of-the-day website Gaopeng was built and run by Groupon Germany and Tecent. It is said that both parties contributed 50 million US dollars and halved the joint venture’s stakes.

Groupon reportedly got the approval certificate for running website in China not long before opening the homepage to the public. However, the joint venture has not got the business license from the industrial and commercial department.

My City Deal, a German deal-of-the-day website, was acquired by Groupon in March 2009 and then shouldered the mission of helping Groupon expand in the international market.

According to the estimation of SharesPost, which is a stock exchange for non-listed companies, Groupon’ s market value is about 6 billion yuan. SharesPost forecasts that Groupon’s revenue will increase from 85 million US dollars to 1.9 billion US dollars in 2015. Its revenues in 2010 and 2011 are respectively estimated at 600 million US dollars and 920 million US dollars. Its Chinese partner Tecent, which went public in Hong Kong, has the market value of 350 billion HK dollars (USD 44.94 billion).

Dispute Caused by Fast Expansion

The discordant actions of Groupon and Tecent showed the great disagreement between the two parties in deploying and developing business in China.

At the beginning of January, Groupon was reported to be working on cooperating with Tecent to accelerate its expansion in China.

Groupon’s first destinations in China were Beijing and Shanghai. Before the Spring Festival, the office of Groupon in Shanghai was still haunted by chaotic layout. People walking in the 100-square-meter room, with documents laid aside disorderly. No security system was used. Everybody can get into and out of the office without any trouble.

An HR executive is stationed there for daily management. Her job is to recruit more talents to help the development. Now, she is working together with the senior executives from Germany and experienced staff from the other deal-of-the-day websites, trying to keep the rhythm of the operation and expansion.

She said: “Groupon is expanding very fast in Beijing and Shanghai. Every day I have to interview dozens or even hundreds of people for different positions.”

The two offices of Groupon in China allegedly accommodate over 300 employees. According to the plan, about 500 employees in total will be recruited. The number is reduced by a half compared with the former plan of recruiting one thousand workers in China, as Groupon’s global vice president Mads Faurholt said.

In order to attract more talents, Groupon provides high salaries for their employees. A sales manager who is appreciated by German executives, are paid at least 20,000 to 30,000 yuan (USD 3,038 to 4,557) one month. The basic salary for ordinary sales staff is about 3,000 yuan (USD 455.7).

“The executives in China have the rights to decide which one to employ. The decentralization of rights puts the HR management under a chaotic condition,” said the aforementioned HR manager.

Oliver Samwer hopes that Groupon can get into and develop in China “as quickly as possible”, said a source close to him.

Oliver Samwer’s anxiety to achieve success is closely related with Groupon’s plan to go public. The deal-of-the-day giant Groupon was reported to work on IPO with the value of 15 billion US dollars.

Obviously, Tecent was dissatisfied with Groupon’s fast expansion. “Tecent hopes that the launch of the website could be delayed and Groupon’s recruiting pace could be eased,” said a source.

Tecent Lost Dominance

Apart from the disagreement in expansion strategy, Groupon and Tecent also have contradictions in client screening and content module of the website.

Groupon hopes to borrow its experience of expanding in the international market and makes strict screening of the clients. Meanwhile, it hopes to keep in line with its style to use concise product introduction and page design. However, Tecent wants to stick to the traditional deal-of-the-day in China with its own experience.

Before cooperating with Groupon, Tecent has its own deal-of-the-day business QQ Tuan, which literally means QQ-based deal of the day. Now QQ Tuan is not related with Gaopeng.

In comparison, Tecent matters a lot for Groupon’s development in China. It provides Groupon with legal convenience in getting into China. In addition, its 100-million users will be the first targets of Groupon in China.

Notable is Groupon’s ownership of operating right of Geopeng despite the halved stock ownership.

An insider says that Ouyang Yun, CEO of Gaopeng appointed by Tecent, is responsible for the whole’s strategic affairs. But in truth, the operation and management rights of the company held by Germans. Mads Faurholt takes control of its Beijing branch and Raphael Strauch for Shanghai.

Presently, most of the senior executives of the joint venture are foreigners or overseas Chinese. They don’t understand China’s deal-of-the-day market and can not even “talk with Chinese very well”.

Brief Introduction to Groupon

Groupon is a deal-of-the-day website that is localized to major geographic markets in the United States, Canada, Brazil, Germany, Greece, France, Holland, Belgium, the United Kingdom, Israel, Italy, Portugal, Spain, Japan, Poland, Turkey, Mexico, Peru, Chile, Colombia, Sweden, Argentina and Romania. Launched in November 2008, the first market for Groupon was Chicago, followed soon thereafter by Boston, New York City, and Toronto. As of October 2010[update], Groupon serves more than 150 markets in North America and 100 markets in Europe, Asia and South America and has amassed 35 million registered users.