Groupon Gearing Up For China Operations

http://blogs.wsj.com/digits/2011/02/21/groupon-gearing-up-for-china-operations/

by chr15 • 15 years ago

4 2 15 years ago

blogs.wsj.com

arthurdent• 15 years ago

Groupon China will be a huge failure.

Groupon doesn't care a ton since they have boatloads of money, and they'll feel like they HAVE to take a shot since "China's a huge and growing market, blah blah blah" but it'll really be chalked up as a fat expense with not much benefit if any to the company.

Here's why China's different:

China, by and large, doesn't live for rampant consumerism. Walk the streets of Beijing or Shanghai (the 2 cities where this is most likely to matter in China) and you'll see that most shops are convenience stores and dingy eateries trying to eke out a living selling 2RMB ice cream pops and water, NOT "skydiving lessons! pottery classes! cosmetic dental procedures! maybe if i can drive some loss leader business in and call it an advertising cost, it'll be a good long run investment!"

Beijing and China are big cities, but most of the citizenry inhabit a tiny subset of the city. People go YEARS without venturing beyond a 1 mile radius of where they live. They rarely travel to other parts of the city to "try a new restaurant" or "hey, let's do pilates". For most people in China, everything they need is already there, so a groupon for something across town isn't appealing (most stuff on groupon isn't in close proximity to my house).

That said, even though most people are like this, even if some small %age of the population cares, (small %age) * (shit ton of people) == possibly profitable for Groupon.

China does have a lot of money and growing consumerism, but the gini coefficient is absurd. The median monthly income in Beijing is < 600 RMB (<USD$1000). People who have money can buy whatever they want and are relatively price insensitive.

Gift certificate and coupons aren't widely used in China. They exist, but they haven't been a fixture in the consumer landscape the way they have been in the US. Prices in China are a suggestion, and aren't even always written. The price for a widget is a function of how much the vendor likes you, the time of day, if the shop has to pay rent soon, and only sometimes, the actual cost to produce it.

I'm not going to speculate on counterfeit coupons as a problem, but I can't imagine that will help the cause.

This will fail because the intersection of businesses who want to use groupon + consumers who care about groupon is smaller than you'd guess for a huge population, buying and travel habits aren't conducive to the groupon model, there will be distrust of the brand and discount mechanism.

sunchild• 15 years ago

I'm no expert in this area, but the conventional wisdom is that China is saturated with group buy sites that pre-date Groupon launch stateside.

Groupon Gearing Up For China Operations

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