First group buying website begins strategic contraction

"TechWeb Special Report" May 26 news, the recent domestic unknown group buying site Litters Group High-profile announced the launch of the U.S. IPO process, the company has obtained from the Ding Hui, tian-you, Qing branch and other investment institutions of strategic investment, the first round of financing is expected to reach 200 million U.S. dollars.

It also means that the litters group is about to break two records in a very short period of time: China group buying, which has the highest single round of financing this year, and the first Chinese group buying company to officially enter the IPO track. A consumer is not familiar with the site, with the help of the capital of the hand, an overnight fame, is about to soar.

In fact, we found that the current purchase site on our significance is no longer a simple discount shopping zone, it brings us more and more speculation and confusion.

Although the topic of "Thousand-Regiment War" has not been so frequently talked about by people, but from the first half of this year's short months, group buying is still one of the most popular words in the domestic Internet. Cross-border involvement, huge financing, advertising, digging corner job-hopping ... The various news stories surrounding group buying sites are almost full of daily media pages. Group buying industry's lively degree is called "unprecedented".

Behind these noises, however, some diametrically opposed trends are emerging. To Happy Group, the United States Group Network for the first batch of online group buying website began shrinking scale, the implementation of substantial layoffs and even close the local branch station. Group buying site both internally and externally also slowly show two different states.

Capital constraints? The first group buying website starts strategic contraction

This April, there is a rumor that happy net April 21, 2011 from the sudden dismissal of group buying staff, downsizing may reach hundreds of people, and will be closed in Nanjing, Ningbo, Zhengzhou, Xiamen, Chengdu and other 12 cities of the substation.

Happy group purchase through downsizing and closing the station to complete the contraction strategy (TechWeb map)

Happy net at that time response said, will adjust the two or three line city group buying team size, focus on manpower and resources to do key cities. "Happy net The adjustment does not close the local branch station, but the resources and scale of various stations to deploy, to some city group buying team to adjust and properly placed." ”

One months in the past, happy net contraction strategy has been basically completed. So far, the group has been able to complete the job cuts, the number of Web site editors from the original 70 people to reduce to 20 people up and down, and sales of a greater reduction. "A happy group buying insider said.

Happy net last December formally entered the group buying, the initial positioning is for white-collar users to build a group buy navigation platform, until the end of February this year began to officially launch its own operation of the group purchase service. But only 3 months less than the time, let happy buy tasted the taste of ups and downs.

In fact, the start of the contraction strategy of the group buying network is not only happy to buy a family. Before that, the Wang created by the United States network shut down 4 city stations, on the grounds that these urban payment tools in the consumer group coverage of low, small number of businesses. "Group buying in key cities will be more confident, at least the current stage five cities are not suitable for group buying business development, aggressive will be very dangerous." Wang at that time gave such a footnote to the contraction strategy.

Industry insiders Hu Chen also believe that the development of mature group buying site is currently in the "contraction" and "winter" status. After the beginning of this year's advertising campaign, small and medium-sized group buying has begun to shrink front, based on the preservation of the strength of the base. and large group purchase site to the first-tier city as a model, and then mature experience to promote to the second-tier cities.

This is certainly true, but behind the two diametrically opposed phenomena of rapid expansion and contraction, the role of capital should be the most negligible.

Who is supporting the group buying site?

What is the reason for the group buying site to have a big turn? One argument seems to be more persuasive than the "maturity theory" mentioned above, which is the strength of capital support. More people tend to think that lack of funds is the ultimate source of "rapid downsizing" in group buying websites.

September 2008, Happy net access to the Northern Lights 4.005 billion dollar a round of financing, the beginning of 2009 officially launched the second financing, including the Arctic Light, the United States and other venture capital of three VCs together to inject about 20 million U.S. dollars. But after more than two years, happy net again did not raise the news to appear.

Industry speculation, a few years ago, 25 million U.S. dollars in SNS, group buying and other business expansion has been left, and happy to buy dozens of local stations and hundreds of staff costs also become the biggest burden of its struggling. At this time in addition to layoffs and close the station, happy net should not find a better way at present.

The experience of happy Net is almost applicable to all the group buying peers who implement the strategy of contraction. Then, we can not understand this: group buying site basically rely on financing, each step of the market strategy is almost all by the capital strength of the holding-"when the money is too much, spend a full meal can only hunger a meal."

Single from the advertising, the purchase of the website of the burning money situation is breathtaking. This year, there have been 4 group buying websites have invited star endorsement ads: February at the end of the group Treasure net heavily signed Una, Rundong, Qinlan 3 stars endorsement ads, and launched a full range of bombing-type sales, April 21 Cosmetics vertical Group Buy poly beauty products signed by the Girl Idol Geng, to assist its development of female market; Then 58 with the city's 58 group to join hands to invite the Red actor Yang, to create a "magical website" advertising, handle the net is to handle the actor GE, not low-carbon way to promote its "Low-carbon happiness proposition." From this point of view, we have enough reason to believe that there will be more Group buy star spokesman.

Handle NET heavily invited GE endorsement ads (techweb map)

In addition to the high-profile propaganda Bo eyeball, and even the office site of group buying also frequent replacement, according to the disclosure, the industry a group buying site in half a year to replace the office site is as high as 3 times. Needless to say, the expansion and expansion of the people is the main reason for frequent relocation, of course, it depends on the backing of capital.

In order to chase the support of the capital, there are still many internet companies among the group buying market. Recently, the domestic online recruitment website worry quietly launched group buying business 51Club website, group buy products covering food, beauty, shoes, clothing, and other aspects of life. From the online recruiting industry to the field of general merchandise buying, such cross-border involvement is indeed confusing. Perhaps "for the future split group buying business, financing listing" is the closest explanation to the truth.

Online recruitment website worry also followed the upsurge quietly launched group buying business (TechWeb map)

Anti-view site itself operating conditions are not very optimistic, in the existing thousands of group buying sites, most of them are still in a loss or barely maintain the situation, only a very few to achieve profitability. A group buying website practitioner said: "In fact normal, the profit of group purchase website is maintained at 10%-15%, but now even 5% are not, remove the promotion expense, manpower cost, almost can say certainly is not profitable." ”

From this view, the current support for group buying site operations almost all of the power from the financing, without financing support, the site and even the entire group buying industry chain will face the risk of breakage. These capital-feed sites, in fact, are equivalent to "a borrowed crutches" walk, once the cane is recovered or damaged, the group purchase site may collapse.

How long will capital strength stand?

Before being able to walk independently, financing is undoubtedly one of the most important things for the current group buying website, and the support force of the capital let group buy disguise into a glossy "concept myth". Not long ago, the company officially went to the U.S. IPO, its group buying business glutinous Rice Network has also won as much as 743 million U.S. dollars in market expansion funds. Indeed, the "Chinese version of Facebook" is a masterpiece of capital.

In addition, the burning of money after the financing has been interpreted by Chinese Internet companies as a unique business model, old-fashioned capital tactics: you have to pay attention, grab market share, and, more importantly, drag down competitors. After the completion of the financing, handle network, high-peer network, the public comments network, the United States and other major cities in China to expand actively, while advertising, personnel and product discounts on the cost of billions of dollars.

Capital for Chinese Internet companies, full of temptation but also hidden trouble (TechWeb map)

In the Chinese market, winners are not necessarily the most efficient and best service companies. Capital would not be so polite, and would not behave like that. Instead, they spend recklessly and worry about quality control later. And that doesn't mean today's losers will win tomorrow, but they want more to survive.

Forbes once commented on the status of China's group buying market, which believes that China group buying is rich in funds, with up to 3,000 competitors, low access threshold and thin margins, it is difficult to big. But once investors have invested more than 100 million dollars in a company, they will not give up so easily, as long as the company is able to gain market share and gain attention, they will continue to throw money inside, then is the IPO path. These sites are willing to accept every single less than 10% commission is not important, many sites can not get the purchase of money, the most important is to be the most, efficiency does not matter, and finally to fight for the IPO, after the mess to clean up.

And for the currently launched group buying site, the capital can support them to what time is not the most important issue, it is important how early to rely on their own strength to step on both legs walk. After the purchase site to explore a viable and effective profit model, even if discarded crutches, will not hinder the pace of the future forward.