China’s Group Buying Market is Settling Down, Top Four Locking Down Position

Last year was a tumultuous year for the group buying industry. But as suspected, closure, downsizing and consolidation has cleaned up the market and now the top ten sites are solidifying their positions. Daily deal aggregator and researcher, Dataotuan.com has release their latest 2012, Q1 Report to give some insight into what has been happening.

The Chinese Daily Deal Market in 2012 Q1

In Q1 2012, the total revenue of the daily deal market is around a whopping 4.5 billion RMB.  But ferocious competition and those who lack the stamina to keep fighting has resulted in the top 10 sites accounting for 78.6% market share.

Dataotuan has segmented the market into five grouping levels. The first level consists of Meituan, 55Tuan, Dianping and Lashou. The characteristics of this group show that they have over 200 Million in monthly revenue, have a total market share of 45-48%. The second level consists of 58Tuan, FTuan, Manzuo, Nuomi and Juhuasuan. The characteristics of this group show that they have monthly revenues of 80-100 Million in monthly revenue, account for 27-29% market share. Who really cares about the other players? Although Dataotuan rightly points out that smaller players in the 3^rd level have the potential to be acquired by 1^st level players who want more dominance or 2^nd level players who want to get into the 1^st level. As of March, Gaopeng, Groupon’s China arm sits at the 11^th position and has never been in the top five.

Interestingly Dataotuan has identified the pricing strategies of different companies. The number one player, Meituan has a strategy is to use a small discount and sell mainly low priced items. This strategy makes sense because most daily deal buyers are already price sensitive and may find it hard to get already cheap things at a bigger discount. This is likely to keep merchants happy, not to gauge them too much on margins.

When I interviewed Michael Jiang, VP of Product and Operations of Dianping last year, I realized that Dianping had a huge opportunity to crush many other players in the group buying space. Dianping’s core advantage is that they were already the go-to source for information about local venues, plus they were shifting more emphasis into mobile. All they had to do was switch on a daily deals feature and it all fits together. Now according to Dataotuan, Dianping’s monthly revenue has been growing at 30% per month since the beginning of 2012, and is likely to take the 3^rd position after Meituan and 55Tuan.