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Groupon China Experiencing Failure to Launch

groupon china

In a post earlier this month, we reported that Groupon was getting set to launch in China. They actually opened their doors for business on February 15th but shut back down in less than 24 hours with local regulators stating that the site had yet to receive a valid license.

In January Groupon and China’s largest internet service, Tencent, set up a joint venture in what originally looked to be a promising business partnership but in reality has turned into a union plagued with problems. The Chinese press said that it was Tencent that pulled the site and that they did not agree with Groupon’s decision to put the site up so soon anyway, believing that Groupon should slow down.

Groupon has also been relying on Citydeal, a German company it purchased last year, to help set up shop in China. The German team is said to be noted for its aggressive tactics in poaching employees away from competitors by offering double the salaries and then turning around and firing those same people once they have established a stronghold within the industry. However a number of China’s top group buying sites including Lashou, Manzuo, Ftuan and almost twenty others got wind of the possible underhanded tactics and threatened to blacklist anyone that attempted to work for Groupon.

Lashou’s director of marketing, Zheng Bin, verified these reports, and he went on to further explain these new rules: Lashou will be resolute in firing any current Lashou employees found to be working part time for Groupon; and any potential applicants, who have previously worked either part time or full time for Groupon, will be rejected. Zheng Bin added, “We are taking these steps in response to Groupon aggressively poaching our staff.”

This was followed closely by the resignation of Groupon China’s marketing director, Ren Xin, who was with the company for just a couple of months before leaving, citing personal reasons as the cause for his departure.

Then there’s Groupon’s infamous Super Bowl ad featuring Timothy Hutton talking about the people of Tibet. It was apparently intended as joke by Groupon poking fun at itself, or at least that’s what Andrew Mason, CEO of the company said, but it was a major flop in this country, which doesn’t even begin to describe how many in China saw it.

The Chinese gained control of Tibet in 1951and the country has been an ongoing source of tensions related to religious, human and political freedoms ever since. So for Goupon, a company trying to make its way into a country that may have already held some misgivings, the Tibetan ad was ill conceived and thoughtless. Many in China wanted to know what Groupon was thinking, or asked if they were oblivious, while others said that because of the ad, Groupon was now doomed to failure in China.

As in Australia, Groupon also faces identity issues in China, since the Groupon.cn and Groupon.com.cn are owned and actively used by yet another Groupon clone. Groupon’s partner, Tencent, purchased the name gaopeng.com for the site for approximately $149,000. It means “cherished friends sitting around the table”.

It doesn’t appear that the cozy name has done much for Groupon’s image in China and the company hasn’t even gotten off the ground yet. Now there’s speculation that Tencent may decide that it doesn’t want to work with Groupon and that without the China- based company Groupon’s entrance into the market could face indefinite delays.

Groupon was said to have plans to dominate the Chinese group buying industry by May of this year. It’s sounding more and more like those plans may have been a bit overly ambitious and Groupon may need to do some serious tweaking on that take-over date.

Source: People’s Daily Online, Marbridge Consulting

Krissa Ashton

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