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People's Daily Online>>China Business

Facing hard times, group buy sites get rational

By Chen Jing (The Economic Daily)

15:33, December 02, 2011

Edited and Translated by People's Daily Online

The group buying website Lashou.com was recently frustrated in its initial public offering on an American stock exchange and suspended its IPO road show. Almost simultaneously, the global group buying leader Groupon suffered a plunge in share price last week, almost falling below the issue price.

Group buying websites are struggling to find a sustainable profit model and solutions to other problems, leading some to ask: Can the group buying model survive?

Why capital market gives cold shoulder

Data from Tuan800.com shows that the number of group buying websites with monthly sales of more than 100 million yuan has declined from seven in August to five in October, including Meituan.com, 55tuan.com, Lashou.com, Nuomi.com and t.dianping.com. At the same time, Most of the frontline group buying websites have taken defensive measures or shrunk sub-stations and shifted their focus to first-tier and second-tier cities.

The direct reason for the shrinkage of group buying websites is that they are not favored by the capital market any more.

"After June 2011, except for strategic investors, professional investment institutions stopped investing in the group purchase area," said Feng Po, an analyst with China Venture.

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