How Groupon Is Losing China

At this point, it’s no secret: Gaopeng (Groupon’s nascent effort in China) is a train wreck. By September of this year, the seven-month old endeavor had already accumulated $46.4 million in net losses with just $2.1 million in revenue. Meanwhile, a number of competitors in the region are predicting profitability within months.

In today’s “Attack Of The Clones” panel at Disrupt Beijing, a few of Groupon’s fiercest Chinese competitors took the opportunity to, well, attack. While obviously a bit subjective, their words do provide some insight on how a company so massive in the US could tank so dramatically on the other side of the world.

Panel guests Yinan Du (CEO of 24Quan) and Xing Wang (CEO of Meituan) agreed on at least two points: Groupon rushed their entry into China, and failed to embrace the culture (or hire people who could). According to Yinan Du, “Groupon didn’t have a chance from the beginning”.

“For any startup to be successful, there has to be a magic team behind it. They hired magic, but no one who understands both worlds. You have to be bi-cultural, you have to have someone who really understands how things work in America and how it differs in China.” Amongst the noted differences: margins. While Groupon happily pulls somewhere around 40% margins on deals in the US, no competitor in China is seeing anything above 14%.

Both panelists also harped on Groupon for their partnership with Tencent, calling it shortsighted and clearly not properly thought out. “They were focusing on PR rather than the business itself.”

Alas, Groupon was unable to send a representative as they’ve recently entered their quiet period in preparation for their impending IPO. Had they been on stage, however, there may not have been much they could have said to dampen the onslaught.