Group-buying websites in China face funding crisis

August 13, 2013 Leave a comment

Group-buying websites in China face funding crisis

Staff Reporter

2013-08-13

Group-buying websites emerged in China in March 2010 and immediately entered into cutthroat competition for market share. At the peak of the craze, 5,058 such websites were in the market, but there are only 943 left, chiefly due to a lack of funding, reports news portal Xkb.com.cn Last year, a total of 1,514 group-buying websites closed down or withdrew from the market, an average of four shutdowns per day, according to statistics from the China Electronic Commerce Research Center.In the second half of this year, domestic internet giants may also begin to re-evaluate the value of their group-buying websites, and companies may look to merge or consolidate taking into account the new consumer trend of purchasing on mobile phone apps, said Hu Chen, co-founder of group-buying website Tuan800.com

In late July, reports emerged on China’s Twitter-like Sina Weibo that Juqi.com, one of the country’s top 10 group-buying websites, was close to bankruptcy with several of its suppliers reportedly demanding to be paid and beginning to remove computers from the company’s headquarters after their requests were ignored.

On Aug. 2, Juqi denied the speculation on its website, saying the company is still in operation. However, it is believed that the company has already suspended its operations due to lack of funding.

Juqi, which opened for business in June 2010 and established websites in 15 cities offering restaurant, entertainment and hotel group-buying deals. It ranked among the top 10 group-buying sites last year, the report said.

Wang Qiheng, CEO of Lingtuan.com, attributed the failure of Juqi to its problems in setting the direction of its development and cost control, thus resulting in a funding shortage and complaints from customers.

According to figures compiled by Tuan800.com, in the first half of the year the top five group-buying websites, including Dianping.com and Meituan.com, accounted for 90.09% of the total domestic market. Meanwhile, there are now only 943 group-buying websites left in the market — a survival rate of just 18.6%.

In contrast to the shrinking number of the websites, the group-buying business continues to grow, reaching 14.1 billion yuan (US$2.3 billion) in the first half of the year, marking its best first-half year to date. Whole-year transactions in the industry may reach as high as 30 billion yuan (US$4.9 billion), with a compound growth rate of about 20%, the report said.

The size of a group-buying website is vital to its survival, with larger companies placing pressure on smaller and medium-sized competitors, the report said.

Filed under Macro Trends, TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment