Groupon's China venture posts $46M loss
Revenues for Groupon's China business in the past nine months were $2.1 million
IDG News Service - Groupon's China venture posted a net loss of $46.4 million for the past nine months, generating only $2.1 million in revenue as it fights to gain dominance in the country's highly competitive group buying market.
The figures were reported in the company's latest securities filing on Friday. Groupon's China business, called GaoPeng, launched its first deals in March, competing against more than 3,000 other rival group-buying sites in the country. GaoPeng is a joint venture that includes Groupon and the Chinese Internet firm Tencent.
The fierce competition has meant high marketing costs and lower profit margins. Analysts and industry executives expect many companies in China's group-buying market will eventually run out of cash and fold.
"This is a market in which most companies have a gross margin of 5%," said Mark Natkin, managing director for Beijing-based Marbridge Consulting. "That's not a viable business. Being able to make a gross margin of 20% or 30% really only happens when you boil the market down to three or four top companies."
China's group-buying companies have yet to make a profit, Natkin added. At the same time, companies including GaoPeng have been forced to lay off employees in order to compensate for shrinking budgets, according to analysts.
Groupon could not be reached for comment. But the company's CEO Andrew Mason defended its China business in August in an email to employees, which was included in the securities filing.
"China is definitely a different market, but every month we inch closer to profitability," he said. "Our China growth strategy was to hire quickly and manage out the bottom performers. So far, that strategy has improved our competitive position in China from number 3,000 to number eight."
Groupon's global operations excluding GaoPeng recorded a net less of $214 million for the first nine months of the year, according to the securities filing. That happened despite its revenue reaching $1.1 billion, up from just $140 million in the same period a year ago.
Part of the reason is Groupon spent a lot more on marketing. For the first nine months of 2010, it spent $89 million, but for the same period this year, it spent $613 million.
- Five Steps to Achieve Success in your Application Security Program This white paper provides a general framework your organization can use to create or build upon an application security program. It includes guidelines...
- Unlock the Value of Enterprise Mobility Download this guide and learn how to manage the secure deployment of enterprise mobile apps and data, while still encouraging the levels of...
- Rebranded Quadmark revamps its IT solutions with Google Apps Switching to Google Apps halved Quadmark's IT admin costs while achieving 10% time savings per employee. The global consulting firm now spends 80%...
- Manufacturing Outlook: Improving time to market, operational effectiveness and innovation in a highly competitive environment An enterprise project portfolio management solution can help manufacturers position themselves in the new competitive landscape.
- Live Webcast
Transforming Finance, Procurement and Supply Chain Effectiveness with Cross-Functional Analytics
Date: May 6th, 2014
Time: 1 PM EDT
Attend this Webcast to find out how Oracle's packaged analytic applications enable line-of-business managers to examine all...
- Video Stream Quality Impacts Viewer Behavior This scientific white paper, using statistical data from Amakai's streaming network, analyzes how changes in video quality cause changes in viewer behavior.
- Service-Enabling CICS Applications: Best Practices This informative webcast provides an informed, thorough look into CICS service-enablement options and how they can affect your environment. You'll learn how to... All Applications White Papers | Webcasts