Another Multi-National Company Failure? Groupon in China

Another Multi-national company failure?

Groupon in China

Executive Summary

After 2 successful years in online retail business focusing on deal-of-the-day services Groupon’s CEO Andrew Mason decided that the time has come for Groupon to enter and succeed in China market. (Exhibit4) The big day was set for February 28th, 2011. Worldwide market shares were strong and CEO thought they had all the potential to become leaders in China market as well. The competition was proven to be severe but by collaborating with China’s biggest Internet Company Tencent, Groupon had all the chances for success.

Nevertheless, there was already one obstacle on Groupon’s way to get accepted on the market which was Super Bowl offensive commercial referring to Tibet’s political situation which aroused Chinese Internet users’ indignation. Andrew Mason tried to correct Groupon’s mistake by making a public apology but company’s image in China was already ruined.

Since the launch date was already announced Groupon had no other choice but to enter the market and try to fix its image in China. The only big question at that time was what to do in order to improve that image.

Group Shopping in China

China has more than 450 million Internet users which is more than any other country and Group buying has grown exponentially in China since 2010. According to the monitoring data of iResearch, the number of group shoppers has reached to 140 million Yuan and netizen penetration rate is 30.2%. The transaction value on group buying websites reached 1.45 billion yuan in 2010. It is expected that the sales of group buying websites will reach 4.35 billion yuan by the end of 2011 (Exhibit 1).1 China become the largest group buying market in the world.

According to iResearch, the number of group buying websites in China reached nearly 2,000 as of end-2010. (See Exhibit 2), but many of which are loss-making. Indeed, according to iResearch, from January to July 2011, 76% of group buying shoppers...