Popular group-buying site in China shutters

Summary:24Quan, one of China's top 5 group-buying service provider, has shut down its services "temporarily" due to dissension among its investors.

24Quan, which was one of the top five group-buying sites in China, shut down its services "temporarily" due to dissension among its investors.

The Web site was closed since Saturday, with only brief Chinese and English announcements stating the site will be taking a "long vacation" due to misalignment of interest and ideology differences between the company's previous shareholders and management team.

24Quan "will not be able to offer you services in the upcoming few weeks", and is expected to "resume service after resolving matters with the shareholders".

It also left a customer service phone number consumers can contact if they encounter any issues utilizing the merchant-issued coupons they had paid for.

A Phoenix News report Monday said the group-buying company closed the Web site as shareholders had withdraw their investments and some creditors had demanded mandatory claims in the court.

These investors also took US$2.4 million of investment funds they had promised to the company, without informing the management team.

In addition, they forbade the company to conduct further rounds of financial activities, making it difficult for the company to support its operations and triggered protests from the management team and employees, who decided to suspend the site services until the investors returned the funds, according to a Sohu report.

24Quan has been shutting down its branch offices across China due to shortage of money. The Beijing-based company closed a number of underperforming sites in less developed cities in China as it, like all of other Chinese group-buying Web sites , is still losing money.

In 2011, China's leading daily deals Web site Lashou.com delayed its initial public offering in the U.S. due to "accounting issues". The group at that time was reported to have filed with U.S. regulators to raise about US$100 million from the Nastaq listing.

According to various reports, all top 10 group-buying sites in China are losing money and are funded primarily by money from private ventures which expect to make profits from their listings.

Lashou.com, for example, lost 391 million yuan (US$62 million) during the first six months of 2011, which is 6.8 times the net income it earned during the period. Many daily deals sites have also been reported to have suffered a spate of fraud cases during their operation.

Topics: E-Commerce, China

About

Cyrus Lee, writing under a pen name, is a Hong Kong-based reporter in an English-language newspaper and a correspondent for a radio station.

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