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Chinese Groupon-like sector collapsing due to economy (GRPN, BIDU)

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Chinese counterparts to Groupon ( GRPN , quote ), Amazon ( AMZN , quote ) and EBAY ( EBAY , quote ) that focus on daily deals and consumer-to-consumer sales are falling apart, due to intense competition in the sector and slackening economic growth in China itself.

In a recent article by Kathrin Hille in the Financial Times , "China's coupon websites struggle to pay the bills," it was reported that "Growing numbers of Chinese merchants are struggling to collect their money from daily deals websites as some of the smaller companies in the fiercely competitive sector are collapsing."

As detailed by Hille in her Financial Times piece, it has certainly not been for a lack of capital: this business group as "sucked up $700 million in venture capital funds since it took off last year."

Some of the larger coupon sites such as Lashou, Wotouan and Manzuo are spending heavily on advertising to maintain market share.

There have also been layoffs at many of these companies -- at least one initial public offering has already been postponed due to unfavorable economic conditions.

But, as the Financial Times points out, the sector was due for a shakeout. Names like Baidu ( BIDU , quote ) and Tencent ( TCEHY , quote ) stand to bear the brunt of any downturn in the "group buying" or coupon business.

Investors have not fared well with Groupon (GRPN), either. Groupon is presently trading at around $20, off by more than 50% from its post-IPO high of $31.14.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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