Survival of the fittest
Despite the downturn, analysts say group-buying still has great potential as a new form of e-commerce.
The money-burning phase will eventually pass and there will only be a few left after the cooling-off period, said Tang Xin, an analyst at the research firm Zhengluejun Management.
Tang's line was backed by Wang Huiwen, who said some websites are expected to go bankrupt by the end of this year. Just like online search engines, Wang said only three to five companies will eventually survive as the business gets on the right track.
Meanwhile, improving service quality should be the concern for the websites, rather than expanding and investing blindly, analysts say.
Data from Analysys International show that Gaopeng.com gets 1.71 million clicks a day. Its major competitor, Lashou.com, gets 6 million, ranking only eighth.
Competition among Chinese group-buying websites is not about the products they offer, but the services they provide, according to He Xiao, an analyst with CCID Consulting Co Ltd.
Running Gaopeng requires a very high level of resource integration. It must build up a credible business in record time, screening out unqualified merchants for its clients, the analyst said.
Yi Ming, who lives in Shanghai, bought a box of peaches on Gaopeng.com but wasn't satisfied with her transaction. She complained that the vendor Gaopeng recommended had failed to meet her delivery needs and forced her to wait for two weeks in vain.
"Backed by Groupon, Tencent and other sources of venture capital, Gaopeng should not be running low on cash. So its shrinking profitability indicates it needs more innovative ways to lure clients," said Chen Shousong, from Analysys International.
An example is the recent rise of Dianping.com, China's largest dining and review site, which has gradually shifted from its review-based model to offer group-purchasing services.
"The website can draw on its solid user base and wide-ranging connections with merchants of qualified services," Chen said.
