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People's Daily Online>>China Business

Group-buying firms look to Taobao (2)

By He Wei (China Daily)

13:55, December 26, 2011

The rationale of such cooperation is self-explanatory, he said, as it "enables us to get more public exposure, infuses new impetus to taobao.com and provides value-added services to brick-and-mortar stores".

The move also palpably educates the market, Feng added. In third-tier cities and towns where group buying is far from prevalent, online buyers can approach this concept via the traditional e-commerce model he or she is used to.

The group-purchase phenomenon saw the shutdown of more than 1,000 small sites within a year. The Chinese group-buying search engine tuan800.com claimed 14 percent of such sites in Guangzhou had failed to post new deals in two months.

Nationwide, revenue generated by all group-buying sites in October slumped 11 percent month-on-month, a major fall since the beginning of 2011, online search engine etao.com reported.

Yan Yan, a managing partner with SAIF Partners, a venture capital fund and investor in Vancl.com, told the first Financiers Forum in Shanghai that the key to e-commerce businesses is brand creation and recognition in a short timeframe.

"Group-buying sites usually lose money on their major businesses but they are eyeing venture capital and private equity to compensate for the losses. They need to overhaul their business models and turn them into more sustainable ones or they will fail," Yan said.

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