Group buying in China has exploded with over a thousand sites trying to get their piece of the pie. Low barriers to entry mean that many start but don’t intend to stay in it for the long term, but instead aim to get acquired by a bigger player like Lashou or Meituan. This strategy was highly suspected with the Groupon.cn acquisition by Groupon.com not too long ago.

It is reasonable to have localized group buying deal sites but it is not rational to have hundreds in the same city unless they are vertical like Jumei.com for women’s products. Death and consolidation will eventually happen to many of them.

Also with so many group buying sites, in the long term it may hurt merchants. If the coffee shop next to you is offering a deal, you may feel pressured to have a bigger and better deal. This cycle of “1-upping” could lead to an ongoing price war and squeezed profit margins, which may eventually put them out of business. Group buying may also cultivate behaviour of only buying from a merchant if there is a deal on; therefore weakening customer loyalty based on true value.

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Jason Lim

Jason is an Australian born Chinese living in Beijing, specializing in entrepreneurship, start-ups and the investment eco-system in China, especially in the tech and social area.