“From the perspective of those who have experience with the brutally competitive Chinese market where virtually no non-Chinese companies have succeeded, Groupon’s management seemed to make all the wrong moves.” Paul Denlinger tells in the Business Insider why Groupon is on the wrong track in China.
Instead of hiring local Chinese who had rich experience in the local Chinese market, it instead went to Harvard recruiting MBA graduates. From what everyone had seen, Groupon was setting itself up for a fall in China.
But then, Groupon announced that it would partner with Tencent to develop the social buying market. Tencent, based in Shenzhen, has long been the instant messaging and virtual currency leader in China, with more than 600M registered users in China.
The not-yet closed deal is an effort to let Groupon look nice for a possible IPO, focuses on the US market, rather than on a good China strategy. Tencent is a huge company, but has a bad reputation on e-commerce.
Another unmentioned player is Alibaba/Taobao, led by Jack Ma, which is the undisputed leader in e-commerce in China. For many in China, Jack Ma is a marketing genius, regularly inviting former US presidents and business leaders to major marketing events in China at the company’s headquarters in Hangzhou. In addition, he has a close and cordial relationship with China’s premier Wen Jiabao. For the Chinese government, Taobao’s business platform has the advantage of being able to provide important leading information about the state of China’s exports, in a way which is even more accurate and reliable than the government’s own Bureau of Statistics. Without a doubt, Taobao/Alibaba would take a dim view of Groupon and Tencent’s attempt to elbow in on their e-commerce space. Jack Ma has a famously long memory, and while he may not seek to hit back at Tencent and Groupon immediately, he may well wait for the right opportunity.