Groupon’s coming to China – will they succeed?
Groupon announced that they will be investing in Mainland China – serious investment – with the goal to become #1 by May. Groupon’s Berlin team, which has been leading much of its international expansion is in charge, and they are hiring 1,000 people (woah!) within a few months.
The word on the street is that Groupon has $950 million USD to invest in their China operation, so capital and resources won’t be the issue. That’s good news because to grow fast and have a real chance at becoming #1 (or even #2) they are going to have to invest in people to ensure the site has the same level of functionality that other sites have and to broker exciting deals that keep customers coming back.
While it’s true that Groupon in the USA is the “original”, the Chinese have taken group buy (团购 Tuángòu) to a new level. One example is the extremely popular LetYo aggregator. LetYo really takes aggregation to the next level by letting users search by location and type of deal, presenting the deal highlights right within the map, and then acting as an affiliate to the deal sites.
So what are Groupon’s largest challenges in China? In my opinion they are:
1. Talent – although they have money, so does everyone else. Most Chinese that truly know the market would probably prefer to be working for their own venture.
2. Functionality – Chinese sites are extremely plugged in, social, location aware, and have mobile apps with rich functionality. Groupon China will need to be able to compete.
3. Control of Sensitive Information – As we’ve seen in the Google case, Groupon will probably be attracting employees that are essentially working for other companies or agencies. Groupon will need to ensure that as they are innovating (and they better be!) they can control the information so that they maintain a lead position. If sensitive information is leaked to competitors it will be very difficult to get ahead.
4. Operations Management - They may have a site and they may sell deals, but when the customers come to redeem their tickets issues will always arise. Chinese are used to 24 hour support via all forms of communication – phone, email, QQ and in person and Groupon will need to have the infrastructure and systems in place to ensure both the merchants and the customers see Groupon as a class act.
5. Traffic! – A large majority of traffic comes through aggregators and just as it’s a risk to be dependent on Google for traffic it’s also a risk to be dependent on aggregators. Groupon needs to build their brand so that people come to their site directly, have their mobile app on their phones, receive their deals via QQ, email, social networking etc.
Go Groupon! We’re rooting for ya!