As group-buying is such a hot topic and recently Groupon has come to China, I visited several group-buying sites to see what they offer.

Many of the offering are heavy discounts on restaurants and hotels.  For people who plan to have dinner with friends or spend a night in another city, these could be helpful.  And then, there are a few spa, a few ski restores, some stuff animal, cosmetic, health food and so on.  Anyway, nothing I will call daily necessity.  But, if it is cheap enough, probably some people will give it a try.

Many of them also offer special promotion to boost usage.  For example, both Groupon China and Lashou are giving out “Red Pockets” to their users.  I got RMB2 from Lashou and RMB6 from Groupon.  Lashou also promise to count me in its next lucky draw – the winner can take home a Mercedes Benz.  No, you have not heard me wrong.  A real luxury car worth RMB 300,000.  (Click here if you want to register: http://www.lashou.com/?inviter=ic2hlcm1hbnNv) Last time, Lashou gave away a flat in Shanghai!!  A girl from Shenzhen won it.

But, I just wonder how many of the users attracted by such promotional gimmicks will stay on and become regular group-buyers.  (Just wonder how many times the Shenzhen girl who won the Shanghai flat has used Lashou.)  Overall, I don’t think the offerings are particularly attractive. I think most people will give group-buying a try, just because it’s hot.  But if the offerings stay the same, I wonder how many will stay on and use it regularly.   Once people have satisfied their curiosity, will the group buying sites have sustainable business??

I heard there are over 2600 group-buying sites in China by the end of last year.  (From http://www.goutuan.net/)  But, some experts said 700 have closed their businesses.  (See http://www.pedaily.cn/Item/205106.aspx) The low entry barrier and seemingly clear business model made many people  start group-buying sites.  But without clear positions to distinguish their services and under limited resourced, many have closed down.   Consolidation will be even more intense this year, as most of the leading sites raised tens of millions of investment and Groupon started operating in China.

To me, as a user, I sincerely hope, apart from graping headlines and spending on promotion,  they will find more attractive items to offer. After all, how many spa and ski resorts you can go to.    How about pet food and dry cleaning services ??  Both have demand on a regular base.

Sherman So

Author of Red Wired: China's Internet Revolution, the first book to completely survey the nature of China's internet. (http://redwiredrevolution.com/) She previously was the lead China technology reporter...

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4 Comments

  1. I agree about the promotions not having any lasting effect.

    But with pet food, dry-cleaning services etc., surely it is precisely they have regular demand that those kind of products will not guarantee regular use? I.e., don’t people have regular ways of buying them?

    Sigh… I have never understood the lasting appeal of group-buying…

  2. The biggest problem with targeting group deal users is that they’re often just looking for the cheapest price and don’t really have any site-loyalty.

    So unless a group buying site can consistently get good deals, the users would simply jump from one site to another.

  3. In my opinion, group buying is an effective way to get a SMB’s name on the map, whose services or products might not otherwise be given a chance given maybe a lack of marketing resources and gives them a competing chance. Here in the U.S. I think these SMB’s know loyalty is not guaranteed and it’s definitely a fad at the moment. Also taken into consideration is the country in which group buying is involved. In a recession, customers don’t care about whether the services are a regular demand (such as dry cleaning), they will consistently look for the best deal (movies, food, enterntainment…) Every penny counts to these group buyers with shrinking disposable income.

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