It’s no secret that Gaopeng, Groupon’s joint venture with Tencent in China, is a train wreck. The troubled company saw multiple rounds of job cuts in 2011, closed thirteen braches and was rumoured to have cash flow problems.
The only comfort for Groupon may be that many of its competitors in China are having troubles of their own. TuanBao, the clone that was provocatively named Groupon.cn at one point, has fired over 70% of its staff. Pinju has entered into liquidation after a row with Shanda over promised investments failed to materialize.
Lashou, one of the more popular clones that unleashed a fierce advertising bombardment on major Chinese cities last summer, cancelled its planned $100 million IPO on Nasdaq last November citing “corporate developments.” IFRAsia reports that the sudden cancellation was due to accounting issues raised by the U.S. Securities and Exchange Commission.
A reshuffling of the industry is clearly underfoot. @蒋平脚板印 tweets”All the success cases are from platforms with a large number of users: like Taobao, Baidu, Dianping and 360Buy. In other words, group buy is another sales channel for platforms.” @林林林涛 offers the same insight: “The group buy sites with user platforms will dominate sooner or later. It would be good if even two of the professional [Groupon-clones] survive.” @ks胡俊 agrees: “The group buy sites that rely on group buy will disappear in large numbers in 2012.”
What do the consumers think? Xinhua Net compiled a list of eight common consumer complaints about Chinese group buying sites. A Tea Leaf Nation investigation confirms that netizens strongly agree:
1. Irresponsible Spending– Like their Western counterparts, Chinese consumers find themselves falling victim to the “irrational spending exuberance” prompted by the ticking time limit on sale items and the ease of impulse buying. The result: Hard cash turned into a pile of coupons that may or may not be used before they expire.
@精明消费 complains, “I know the original purpose behind group buying is to save money, but now it has partly become irrational spending. Doesn’t matter if it’s something I should buy or shouldn’t buy: I want to buy everything. Doesn’t matter if it’s something I should eat or shouldn’t eat: I want to eat it all.” As @王嘉的微博客 observes, “This is the voodoo of group buying. Or one could call it irrational consumption. Following the crowd is a type of fashion, so naturally consuming with the crowd has also become fashionable…”
2. Deficit of Trust– With over 5,000 group buying sites in China at last count, many consumers are falling victim to fraudulent sites that imitate legitimate ones, sometimes even purporting to offer the same items. One estimate puts the loss to consumers at over $20 billion RMB (over $3 billion U.S. dollars).
No wonder @芥子缘 exclaims, “Now group buying has become a battle of wits and courage: one has to avoid buying fake products on the one hand and take precautions against group buying sites ‘running away’ [with our cash] on the other hand. Group buying has become a form of torture!”
3. Faking Buyer Numbers– Irresponsible sites are increasingly “puffing” buyer numbers to attract buyers and business clients. One site offered a discounted group tour which it claimed had been bought 294 times and was attracting over a hundred more buyers every day. Yet a check of the same site three days later showed — presto! The number of buys for the item somehow remained unchanged at 294.
4. Pricing Shenanigans– Many consumers have complained that prices are often higher than in-store prices for the same item. Some sites also play games with the discount percentage, with one showing a 99% discount for an item that was in fact only 20% cheaper than full price.
@嘉兴公安局 complained, “For lunch today colleagues and I went group buying and discovered an issue: The prices on the group buying site and the restaurant menu were very different. Noodles that cost 18rmb were priced at 40rmb on the website, chicken wings were raised from 16rmb to 25rmb, pacific saury [a type of fish] prices also went from 16rmb up to 25rmb, a 12rmb fruit salad was marked up to 20rmb. All dishes had their prices raised to lure consumers [with an apparent discount].”
5. Quality Discount– A reduced price sometimes means reduced product and service quality as well. One example was a coupon for a Western meal set that turned out to include a tiny steak less than half the size of the restaurant’s normal offering.
@警号170501 griped, “Listening to colleagues discussing their frustrations with group buying; why is it that group buy customers are made to feel inferior? Why do we get attitude from shop owners and servers? It’s not like we are taking advantage or coming to steal or rob [the store]. We also spent real money…[group buying] is a case of there being both willing sellers and willing consumers. So why is it that with group buying service and quality get discounted along with the price?”
6. Prepayment Issues – Consumers often face difficulties obtaining refunds should they run into problems with a prepaid coupon. Sites often use the excuse of troubles with cyber attacks or problems with ZhiFuBao, a Chinese version of Paypal, to delay or avoid repaying consumers.
7. Misleading Advertising– Items advertised sometimes differ from the actual items received. For example, deeply discounted cosmetics items often turn out to be tiny samples rather than the main event. Some items also hide additional conditions or “creative” pricing techniques that result in confused and dissatisfied consumers. Requests for refunds in such cases often go unanswered.
@弥生thrui月 complained, “Have to be careful about group buying going forward, too much false advertising. One time I group bought a hotpot meal…a five minute walk from the subway station turned out to be at least five minutes by car…and a group buy for a bar said it was by a bridge but actually it was half a kilometer away. I wish all the people putting up this false advertising will run out of toilet paper when they are in the loo.”
8. Lack of Sales Proof– Sites often claim that receipts cannot be issued due to the large discounts on offer, with some even refusing to provide electronic or SMS sales verification. Since in these cases the website controls all the transaction information, consumers often have a hard time protecting their interests should any disputes arise.
Bonus – Epic Poem Rewritten in Honour of Group Buying Closures
Inspired by the slew of fallen group buying heroes, CYZone, a magazine for start-ups in China rewrote part of an epic poem on the famous Three Kingdoms era: [Chinese version]
The great river rushes East, and when it ebbs,
many are caught without their undies.
Nasdaq, alas, the Waterloo of Lashou.
FTuan, 24Quan… reaching such heights, yet amounting to nothing,
The VCs can’t stop their streaming tearsOh back in the golden days,
The groupon model was newly imported,
Oodles of American dollars in VC investments were at hand,
The original Groupon led the way,
Thus began the warring states of a thousand Groupon clones in China.Now, 55Tuan is hibernating,
Gaopeng cannot fill its seats,
And an investment in Pinju was abandoned by Chen Tianqiao [of Shanda fame].
Naked in the freezing winter,
Why did we clone Groupon in the first place?
Follow Tea Leaf Nation!