China is like a jungle when doing business. It is filled with hundreds if not thousands of fierce competitors, fighting in an unpredictable and shady environment where rules elsewhere simply don’t apply. Before Gaopeng (Groupon China) even came to China, experienced market observers wrote them off and tossed them into the ‘savagely beaten foreign company’ bucket, with the likes of Google, Yahoo and Ebay. Beijing Morning Post, reported that last week Gaopeng has just culled 400 employees around China; is Gaopeng the next victim?

Touted as the golden start-up of America in 2010, Groupon ignited the ‘group-buying’ phenomenon in China where more than 5,000 clones exist. According to Crunchbase, Groupon has raised monstrous funds totalling US$1.14 billion. A lot of that cash was used to expand internationally through acquisitions and establishing beach head presence in countries like China. Controversially a lot of money was spent on paying foreign managers, mostly ex-management consultants and investment bankers extremely high salaries, when they didn’t even have much knowledge of China of even the Chinese language. Obviously the strategy was not paying off in China, where Gaopeng was getting killed by Chinese clones like Lashou, Meituan and now Tencent. Only just a few months ago, Andrew Mason, Founder and CEO of Groupon, came to China to shake-up strategy and re-organize his troops. Perhaps these cuts were in the pipeline?

The large scale structural layoffs resulted in 13 tier 2 and 3 branch offices such as Qinhuangdao, Yantai, Nanning being completely shut down and 18 tier 1 and 2 branch offices such as Shanghai, Hangzhou and Wuhan were downsized.

Unfortunately for those cut in tier 2 and 3 cities, labour laws and protection are not in their favour, where Gaopeng only compensated 2 weeks’ salary, compared to 2 months salary in the tier 1 city of Shanghai.

Of course these significant cuts had rippling effects on the morale of staff throughout the organization, leading Gaopeng human resource executives to try and calm the nerves of its people by saying no more employees will be cut except for branch heads. However, many doubt such tactics and believe the end could be near for them too.

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.

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