In this 8/24/11 WSJ article, “Groupon Stumbles in China, Closes Some Offices,” reporter Loretta Chao sums it all up in the first paragraph: “Groupon Inc.’s joint venture in China has closed offices in some cities and laid off hundreds of employees, according to people familiar with the situation, raising questions about the online coupon company’s strategy in a big market ahead of its planned initial public offering of stock.”
Though the disclosure is made that “foreign Internet companies have long struggled in China, which has more Internet users than any other country,” subsequent paragraphs are devoted to explaining where Groupon might have gone wrong.
Here’s three major pitfalls Groupon should have known to avoid:
1) Groupon might have be an innovative agent of change, thought leader, and market disruptor back in the U.S., but in China they are one in hundreds in the online buying business.
2) It wouldn’t be so bad if those aforementioned competitors lacked serious advantage over Groupon, but one of them had already registered Groupon.cn, which has logged more traffic than Groupon’s China venture, Gaopeng.com!
3) Americans might have forgotten that culturally/politically insensitive Super Bowl ad that Groupon offended China with, but the Chinese didn’t–and everyone knows that to do business in China, good relations with the government is essential.
Market penetration abroad isn’t something to take lightly. Most ecommerce merchants would do anything for the marketing dollars Groupon is spending to launch their China brand–but as we’ve seen with Disney, Best Buy, and others, giant chests of investment dollars don’t always equal success. Oftentimes international business victory is in the details, like smoothing the way with diplomatic handshakes and solid market research. In setting all best “market penetration” practices aside, it seems Groupon is as cheeky in its offline negotiating behavior as it is with it’s shameless ads. They haven’t crumpled and tossed their China campaign in the fail-can yet, but if they want to pull through, it’s time to learn to say “ni hao,” or it will be “zai jian Groupon!”
