By now, everyone has seen the monumentally stupid Super Bowl commercial where GroupOn succeeded in pissing off everyone:

Well, GroupOn has finally gone and made their entry into China and opened up their official website.  No, it’s not www.groupon.cn as you might guess, that’s another company that is rather well established.  It is “gaopeng”, well as long as you don’t mistake that for www.高朋团购.com I guess you’ll find them ok.

As you may have guessed, GroupOn has a serious branding issue here in China from the start.  They are also kind of late to the game.  Meituan opened up 1 year ago and they are one of the major players in the group buy vertical.  As are many others who were in it from the start.  The original idea was to make a grab for GroupOn’s attention and cash in on a buy-out deal early on.  This would have been the smart move, but it was a move that was not made and now we have hundreds of group buy sites competing with each other with a new battle kicking off every single day and regardless of how much capital GroupOn has behind it, it is simply “just another one” out there.

This market entry however, has not gone unnoticed by the major players and they are already making adjustments.  New refund policies and full cash refunds for expired offers, not just credits but a transfer straight back to your bank account.  Given GroupOn’s recent legal problems this is a no-brainer for the myriad of Chinese companies that will have to deal with GroupOn now.  If you are familiar with this industry, they make their money in 2 ways.  The first method is by contracting with a business for a limited time offer and eating up a very large percent of the proceeds.  Consumers pay the group buy site and when the promotion is expired, money is sent to the local business based on how many sales there were.  The second method is off of consumers who fail to use their voucher before expiration.  The group buy site basically gets to pocket that.  GroupOn’s response to this situation was essentially turning it into gift certificates or “credits” if the merchant refused to accept it (why would they accept it? 40% of that $20 is still gonna go into GroupOn’s pocket).  In China, it’s been essentially an unspoken rule that “you’re fucked” if you fail to use the voucher on time.  This is fortunately changing to a policy which is vastly superior to GroupOn’s.

Branding and strategy aside, GroupOn is making some epically stupid blunders on just about every other front.  They have partnered with Tencent to enter the market.  Well, Tencent is the company that brings us QQ, and guess what QQ has (besides billions of gifs being spammed at you every second of the day)?  Yep, you guessed right!  Not only that, but GroupOn is making the same mistake that Google made not too long ago.  They are “sharing” the ICP license with Tencent, which is basically stupidly illegal.  Furthermore, the website is being hosted outside the country if you bother to trace it.

And just to top it off, the database servers are being hosted in Germany.  This is more or less showing that while GroupOn would absolutely love to do business in China, they are very unwilling to make a real commitment to doing business in China, nor is it willing to follow some of the real no-brainer laws and regulations on the books.  Manzuo is also another major player here and is already in a dispute over infringement issues.  The simple fact of the matter is that 高朋满座 is a 成语 here, and by naming themselves 高朋, they are infringing on 满座.  So, the stupid name they picked is an issue from the start and Manzuo will probably win it, not exactly a brilliant way to come into a market.  Well, what about that groupon.cn site?  At the time GroupOn was not registered in China in any way, expressed no clear intent and was up for grabs… so GroupOn might not like it, but there is nothing short of a buy-out that they can do about it.  Manzuo is also swinging hard to make this whole endeavor a very costly one on the part of GroupOn.  If you were here when group buy sites exploded, they did so with no help of traditional advertising, it was very viral and stupidly successful.  Lashou was essentially the first site to start airing some infrequent ads for additional exposure… they came a little late into the game compared to others.  Manzuo is responding to the ad-buying strategy of GroupOn by spending stupid amounts on ads and jacking up the rates.

So, let’s ignore all that for a moment and cut down to the core.  A successful group buy site will network with the collator sites, offer multiple deals per day across the major verticals, gain insight from their customers as to what types of deals to focus on and generally not step on the toes of other sites with price wars.  A site that is long established with a history of great deals and great customer feedback and service will be a winning site, and so far many of them are doing that precisely.  When a new site stumbles across a good idea, everyone else rushes to copy it and  tweak it slightly.  As a result of this, the “one day one deal” sites are rare now, but the original credit goes to liantuan who pioneered the format here.  The other key aspect is high levels of communication, during spring festival, the players went all out in this effort giving away free travel, entire sets of Apple products, cold hard cash and even bars of gold.  No purchase necessary, priced at 0元 and tons of free credit for every friend you got to participate.  What’s GroupOn… or 高朋, rather, have to offer on it’s initial marketing promotion?

And to participate is it simple and easy?

They want your ID number and full name.  For a stupid iPhone and they are making their announcements on the qq microblog rather than on their own site.  I don’t know about you, but I sure as hell wouldn’t want to be throwing my ID #s around, linking it to my name and email and dumping all of that on a foreign database.  Well, for Gold or a big pile of money? Maybe.  But not for some shitty iPhone that has a real value of about $10.

Will GroupOn succeed with their backwards US model, horrible branding, legal issues, a pissed off Chinese Government and the over-saturated group buy market? It might happen, but I wouldn’t hold your breath.