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Group-buying websites struggle through 'cold winter'

2011-11-25 14:57    Ecns.cn     Web Editor: Su Jie
Since the first mainland launch last year, altogether 5,700 group buying sites had sprouted.

Since the first mainland launch last year, altogether 5,700 group buying sites had sprouted.

(Ecns.cn)--About 456 mainland group buying websites closed in October, bringing the total number of closures as of last month to 1,483, revealed a survey by lingtuan.com, a Chinese group buying navigation site.

According to data from etao.com, since the first mainland launch last year, altogether 5,700 group buying sites had sprouted, but 20 percent had stopped updating or had changed their businesses. The total volume of transactions in October also dropped by 11 percent compared to September.

To quote Reuters, "The group buying market is entering a cold winter, and it's just the beginning." The Hong Kong-based South China Morning Post concluded that a lack of investment, keen competition and poor management were causes of the closures, citing an analyst.

Tuan800.com, another group buying navigation website, reported that September and October had seen large scale layoffs by several well-known sites, including 55tuan.com, tuanbao.com and gaopeng.com, a joint venture between Chicago-based Groupon and Shenzhen-based Tencent.

Struggle to survive

"We were informed that the parent company decided to shut down its branch here at the end of October and compensate each of us half of one month's basic salary," said Li Qian, an employee who makes 1,400 yuan as base pay at the Fushun branch of 24quan.com, located in Liaoning Province.

"The company had warned us that if we don't sign the resignation agreement, we wouldn't get paid the October salary. But we will battle against the unfair terms," Li added.

Wang, Li Qian's colleague, told China Youth Daily that although the Fushun branch's business had been growing, it had suffered constant losses since its launch in June.

The Fushun branch was reportedly just the tip of the iceberg. The company's Huaian branch in Jiangsu Province also disappeared suddenly one day, leaving millions of yuan in unpaid debts. Now, 24tuan.com has reportedly reduced its staff from the 6,000 in September to 5,000.

Gaopeng.com also laid off nearly 150 employees from its Shanghai branch and nearly half of its editors only six months after its high-profile launch in March this year. Even tuanbao.com and 55tuan.com have reportedly sent away more than 50 percent and 70 percent of their employees, respectively, reported the People's Daily.

Feng Xiaohai, CEO of manzuo.com, explained that "large group buying websites prefer to raise capital through private placement. However, less and less investors are interested in their offerings now. Thus, once there are financial problems, they have to effect a radical reduction in the number of persons."