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eBeijing

Cyber Life
Cyber Life
UPDATED: October 9, 2010 NO. 41 OCTOBER 14, 2010
New Shopping Spree
Websites are helping many strike good bargains
By DING WENLEI
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(CFP)

Online group buying is an example of precise marketing for local businesses, particularly because online social networking tools or websites help them reach their target customers through word-of-month.

Zuo Qincheng, an editor of TopCapital, a magazine on private equity investments in Beijing, said two thirds of her group purchases were based at Web pages her friends forwarded to her.

At some sites, buyers are invited to submit notes about what they want to buy and the website will consider it if similar applications reach a certain number. That's how Zuo got her digital camera after waiting for two months.

"It's cool. I want to buy a new digital camera for my trip to Switzerland this winter, but I never expected such cheap prices! " Zuo said.

While gaining popularity, online group buying marks the beginning of customer-to-business (C2B) e-commerce in China, said Wang Qiheng, CEO of Goutuan.net, the first directory site for group buying in China.

"Customers will have a larger say in deciding which to buy and what prices to buy at. That's the power of group purchasing," he said.

By July this year, 94 major Chinese group buying websites had reported 134 million yuan ($19.7 million) worth of sales from 2.72 million purchasers, said a recent report on the country's emerging online group buying business compiled by the China e-commerce research center (TOOCLE) under the Ministry of Commerce.

Cutthroat competition

Chuan Thor, Managing Director of venture capital firm Highland Capital Partners, expressed worry about the quick proliferation of online group buying websites, however.

"So many websites compete with each other for similar services and products, and that's why we decided to give up investing on the business model after examining 10 cases," Thor said.

"Most of them lack impressive services and are unable to forge their advantages or barriers over competitors, making it difficult for these websites to build customer loyalty, have a larger say in negotiations with potential clients or accumulate a repertoire of reputed clients," Thor said.

The cutthroat homogeneous competition led to price-and-sale oriented tussle among these websites.

Domestic websites earn a 10 percent commission on average for each sale and sometimes offer free promotions to court big clients, while Groupon charges 30 to 50 percent commissions on sales. Since June one group buying website shut down almost every two days, said Wang of Goutuan.net, "but despite that four or five new websites were launched every day."

From January when China's first group buying website Manzuo.com was opened till the end of August, a total of 1,215 Chinese counterparts of Groupon had been launched in operation. This excludes 256 already shut-down or yet to be launched, and some striving to offer deals at a regular base, said the TOOCLE report.

The game became even fiercer when Web portals entered the playground to take advantage of large numbers of their users and clients. News portal Sina.com, e-commerce giant Taobao.com, lifestyle directory site Dianping.com and China's most profitable Internet conglomerate Tencent.com all launched their group buying services recently.

Websites with offline marketing expertise, tactics of balancing client and customer interests, and a discerning eye about client credit and product or service quality will survive, along with group buying branches of Internet giants such as Tencent and Dianping, Lee said in a post on T-sina, a Chinese version of Twitter at Sina.com.

It's easy for Dianping, a platform for consumers to make comments and share information on local restaurants and other service businesses, to turn resources with its branches in six cities into real advantages for group buying business.

"But Tencent, with a large number of users and a powerful instant messaging tool QQ, is a real rival to us," said Shen Boyang, CEO of the group buying website Nuomi.com, a dark horse on the group buying landscape.

Launched on June 23 by Oak Pacific Interactive, the website now ranks third in terms of market share. Depending on the two social networking websites under its parent company, Renren.com and Mop.com, the website disseminates daily deal information online very quickly.

"Websites appearing in the first batch will be marginalized unless they can innovate in the business model or forge a brand for themselves, creating certain barriers for competitors," Lee said.

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