Some new figures are showing just how dramatically China’s group buying sector has contracted over the past year, with word that another major player Wanzhong has folded due to lack of funds. Wangzhong’s closure comes as the number of group buying casualties finally starts to slow, simply because so many have now left the space. I do expect we’ll see at least one or two more major closures or mergers this year, and previously predicted that former high-flyer LaShou could be one of those. But that said, the year could also see 2 or 3 major players finally emerge that have the potential to make IPOs and post strong long-term growth, similar to what we’ve seen recently from global sector leader Groupon (Nasdaq: GRPN). Read Full Post…
The long awaited clean-up of China’s cluttered group buying sector appears to be accelerating, with new reports that a potential cash-rich consolidator has emerged in the form of GroupNet, which is itself the product of the merger earlier this year between former mid-sized players FTuan and Gaopeng. The new reports say that GroupNet has raised $40 million in new funds, which it will use to acquire other companies in the money-losing space where many players are now on life-support after burning through hundreds of millions of dollars in investor dollars over the last 2 years. (
New signs of consolidation are appearing in the overheated in e-commerce and group buying spaces, with Suning.com (Shenzhen: 002024) again emerging as a potential major consolidator in e-commerce as a mid-sized group buying site named 24Quan closes up shop. The e-commerce news is easily the more interesting of these 2 bits, as China’s group buying sector has largely run out of cash by now and most players are tottering on the brink of insolvency. By comparison, the e-commerce field is backed by a big number of cash-rich companies like Suning, Alibaba and Amazon (Nasdaq: AMZN), which have indicated they are prepared to lose big money for a long time to defend and build their positions in a country likely to become the world’s biggest e-commerce market in the next 5-10 years.
It’s Monday morning and the news flow from the weekend is rather slow due to the summer holidays, so I’m going to be a bit whimsical and comment on the potential for new M&A following a new $60 million funding round for Dianping, an interesting and profitable company which started as a restaurant ratings company but which has also expanded into the problem-plagued group buying space. I’ll start by saying I have absolutely no reason to think Dianping has plans for any major M&A, but then will quickly add that its recent receipt of the $60 million in new venture funding looks suspiciously like it might be intended for such a purchase.
The shakeup in China’s online auction space continues, with global pioneer Groupon (Nasdaq: GRPN) effectively retreating from the market just a year and a half after it entered while up-and-comer Dianping passes an important milestone in the mobile space. The shake-up has been going on since the beginning of the year, fueled by rampant competition that has caused many Chinese consumers to rapidly lose interest in group buying deals from companies that look increasingly shaky as many run out of cash and are forced to close or make massive cutbacks. Of course the big really news from this space has yet to come, but could be just a month or 2 away when I predict that cash-challenged giant LaShou will either be forced to shut down or get purchased by one of the industry’s stronger players. But more about that in a moment.
Layoffs and resignations are the main story at Tencent (HKEx: 700) these days, with the head of the company’s group buying joint venture reportedly resigning as China’s Internet leader also makes large job cuts at its Soso search engine. Both of these developments should come as a surprise to no one, and reflect an ongoing consolidation gripping the overheated group buying space in the former case, and a rapidly slowing advertising market in the latter. Let’s look at the group buying situation first, which has reportedly seen the CEO resign at Gaopeng, the 1-year-old group buying joint venture between Tencent and global sector pioneer Groupon (Nasdaq: GRPN). (
New developments are happening rapidly at group buying leader LaShou, which appears to be on the cusp of a meltdown as it runs out of money in the brutally competitive sector. As many of us prepare for the May 1 Labor Day holiday that marks the start of spring, many who follow this company may be wondering if LaShou will still be in business by summertime. In the latest development of this fast evolving story, domestic media are reporting a mass resignation of many top LaShou executives in recent days, including its top regional managers in Shanghai and Beijing, as well as a vice president. (
