China’s appetite for e-retail and O2O has made them insatiable group buyers, as the market sees steep growth for another year. In just one month this June, 17% of Chinese people used a group buying site including top player Meituan, Nuomi and Dianping, a sharp increase on last year in the same period.
According to 88Tuan, a group-buying aggregator that publishes market analysis, the gross merchandise volume for the first half of 2015 totaled 77 billion RMB (about $12 billion USD), exceeding the entire volume for 2014.
In June alone, China spent 16.7 billion RMB ($2.7 billion USD) on group deals, up 1.4 billion RMB ($230 million USD) from last year. 250 million people used group buying services over the same 30 days, an astounding 17% of the entire population.
The boost in sales can be attributed to growth of substations in third tier cities and increased product quality, according to Tuan800.
Food and beverage group-buying and delivery accounted for 60% of the total market, bringing in 48.3 billion RMB ($7.76 billion USD) a 31.6 billion RMB ($5.07 billion USD) increased from last year.
Group buyers sites have also embarked on a mission to differentiate themselves in an increasingly competitive market of giants attempting to edge each other out of the market. Meituan vigorously expanded to movie and food takeout services, while Chinese ratings and review service Dianping launched new payment platform Shanhui to offer real-time discounts to shoppers. Baidu is now expanding on Nuomi’s O2O platform under the ‘Membership Plus’ strategy. The membership system of Nuomi will be integrated into the point-of-sale systems of the merchants, which allow users to pay products using prepaid cards linked to the app.
Shanghai was the biggest shopper over the June period, spending 1.5 billion RMB, while Beijing totaled 1.11 billion RMB ($ 179 million USD). Each of the 26 third tier cities made a 100 million RMB ($16.07 million USD) break through over the same time frame. Third tier markets accounted for almost 30% this six months, and are the focus of most company’s next expansion.
According to industry reports released last year, Meituan currently has more than 50% of China’s group buying market share in terms of gross merchandise volume (GMV). They are backed by internet giant Alibaba, and raised a $700 million USD in funding from Sequioa Capital China, at a $7 billion USD valuation earlier this year.
Baidu bought 59% of Renren’s group-buying service Nuomi in 2013, then acquired the remaining stake the following year. The search giant committed a 20 billion RMB ($3.21 billion USD) investment to O2O expansion which will focus almost exclusively on Nuomi, as they try to win out against Meituan. Tencent took a 20% stake in Dianping one month after Baidu’s initial investment in Nuomi, integrating its group buying service into WeChat.
Tuan800 estimates that sales will continue to rise across group buying platforms in the next six months as Chinese shoppers are expected to observe “Red July”, a period of increased sales.
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