The Struggling Group Buying Model in China – Gaopeng the Biggest Victim

According to Dataotuan, a Chinese daily deal aggregator and analytics company, the trend shows that deal quantity is increasing but deal quality is decreasing. Simply put, daily deal effectiveness is deteriorating.

Dataotuan has tracked the number of deals launched and sold since May and it reveals that although more deals are being created, the average number sold and average revenue per deal is sliding.

To illustrate the precarious nature of the group buying model in China, Dataotuan looked at the number of ‘failed’ deals, or deals that sold less than five times. May recorded 4.9%, June 7.8% and July 8.7% and nearly half of these failed deals have no sales. Out of the top 10 players by revenue, QQ had the highest proportion of failed deals at 16.7% and Dianping, the lowest with only 0.5%. However QQ still dominates the market in terms of market share by revenue at 11.9%, indicating a kind of spray and pray approach to deal creation. Of the failed deals, online shopping accounts for 32% and life services accounts for 31%.

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