Groupon China downsizing operations, retrenching employees

Groupon China downsizing operations, retrenching employees

Summary: Group-buying site reportedly laying off 400 workers and closing offices in smaller cities, which other industry players note as nothing new as the market has been undergoing "irrational expansion".

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TOPICS: CXO, E-Commerce
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Groupon's joint venture in China has laid off hundreds of employees and closed offices in at least 13 cities, according to reports, signaling an end to the aggressive growth of group-purchasing sites in the middle kingdom.

The Chinese coupon-selling Web site, Gaopeng.com, was also reported to have closed offices in smaller cities such as Qinghuangdao, Nanning and Yantai, while those in Beijing, Shanghai and Wuhan carried out partial layoffs.

A lawyer representing the joint venture estimated about 400 people had been retrenched, but the numbers could not be confirmed, according to a report by Wall Street Journal.

A spokesperson for GaoPeng said the company was planning "to focus more on the middle- to large-sized cities" in China where the market was "more developed", and added that it remained "fully committed to the Chinese market for the long term".

"Groupon's approach to international expansion is to aggressively create a large presence upfront and refine our strategy as we gain deeper insight into the local market," said Groupon spokesperson Heather Dickinson, who added that the adjustments to its businesses were "typical" to build a long-term foundation for success.

The joint venture, backed by China's Tencent Holdings and private equity fund, Yunfeng Capital, had suffered "poor sales" and ranked eighth in the sea of group-buying portals, clocking just 1.7 million clicks per month. In comparison, its immediate rival Lashou.com averaged 6 million clicks a month, according to statistics from Internet research company, Analyses International.

In a report on Sohu.com's news site, Hu Chen, co-founder of rival group-buying site Tuan800.com, said Gaopeng had "cast their net far too wide at the outset". He added that "there's nothing wrong with scaling back" as competitors such as Meituan and Kaixin001 had done the same in China's third- and fourth-tier cities.

This was confirmed by Feng Xiaohai, CEO of another competing group-buying site Manzuo.com, who noted that there had been "many bubbles and irrational expansion in the group-buying market", with other sites laying off staff as well.

Feng said Gaopeng was getting more publicity simply because it "laid off more people than others".

Reports also emerged that staff were unhappy about the circumstances under which there were fired. Sohu.com reported that a lawyer in Beijing was working with Gaopeng employees who were retrenched to negotiate for a two months' severance pay package.

Topics: CXO, E-Commerce

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