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Forbes: Helen H. Wang
When a bellman in a Shanghai hotel advised me to get a breakfast coupon from an online group-buying site for less than half the price, I knew that social commerce had gotten into the hearts and minds of Chinese consumers. It’s not surprising that thousands of group-buying websites sprung up in less than a year in China’s chaotic cyberspace. According to JP Morgan, the group buying market grew from zero to more than $150 million in 2010, and is expect to reach half a billion dollars in 2013.
Although crowded with thousands of players, China’s group buying market is dominated by the top 10 companies, with Lashou commanding a 14 percent market share. Other major players include QQ Tuan, Meituan, etc. Gaopeng, Groupon’s China arm, came in last out of 10 in terms of number of deals.
When Groupon first entered China early this year, I really thought it would have a chance to succeed. Group purchasing is a perfect fit for Chinese culture. Even before people in the West knew such a thing as group-buying, Chinese consumers had showed up at some car dealers in groups to demand deep discounts. China’s collective culture makes group purchasing behavior very natural. In addition, many Chinese are good bargainers. They would go out of their way to find a good deal.
The timing was perfect for Groupon, too. China’s Internet population is approaching half a billion and hundreds of millions of new consumers are entering the scene each year.
Yes, China’s Internet market is known as a hard nut to crack because of low barriers to entry and many copycats. Western companies such as eBay, Yahoo, and Google have suffered painful defeats in China. But I thought Groupon could make it if it got it right.
Alas, so far the situation doesn’t look so good for Gaopeng. It has made some of the same mistakes as other Western companies. For example, its early management team was composed mostly of foreigners who have no experience in China. Their insensitive ad during the Super Bowl reflects how poorly Groupon understands China. Its partnership with Tencent, China’s largest Internet portal, seemed to have a troubled start with internal conflicts. Now Tencent has its own group-buying site, QQ Tuan. Although Ouyang Yun, Gaopeng COO, said QQ Tuan and Gaopeng have complimentary business models, the two companies look more like competitors than partners.
Gaopeng also faces tough competition from Lashou.com and other group-buying sites. Lashou is founded by a seasoned Chinese entrepreneur and backed by U.S. venture capital firms SGR and Milestones – both are experienced in Chinese technology ventures. Its momentum is strong after raising $110 million in series C funding in April. So far, Lashou seems to have done everything right. It is expanding rapidly to 2nd and 3rd tier cities, setting up call centers and logistics, and enhancing customer services.
Gaopeng certainly has an uphill battle in China. Some analysts have already written it off to a fate similar to eBay, Yahoo, and Google (not in bad company, all world class organizations  ).
However, China’s Internet market is too significant to give up. In less than a decade, China’s Internet users could reach as many as 750 million and China’s consumer market could reach $16 trillion. A burgeoning middle class has fueled a consumption boom. Retail marketplaces are spreading in urban areas like wildfire. E-commerce has been growing 60 percent per year in recent years.
In order to succeed in China, Western Internet companies need to study the China market carefully and understand Chinese culture. Here is some basic advice for companies that want to succeed in China:
- Try to use local talent who understand the China market well. Ideally, the management team should be a combination of experienced Chinese and Western managers
- Be flexible with your business model and adapt your products and services to Chinese consumers. The most common mistake that Western companies make is that they transport their business exactly as-is to China. But the China market is very different from that of Western countries. What works in your home country may not work in China. If necessary, you need to re-brand and re-position your products and services. You also have opportunities to create brand new product lines in China.
- Focus on your competitive advantages and outperform competitors. In the Internet space, oftentimes the only competitive advantage Western companies have is stronger financial support. If you have more money to burn than Chinese competitors, spend it smartly and wisely. Sometimes, your strategy may be to secure a large customer base. Revenue will come later.
- Train your employees, sales teams, service and support teams. Many Chinese employees don’t have enough skills for the workplace. It’s important to go the extra mile in training. At the end of the day, all things being equal, customers are more likely to return to the website that has superior customer service.
- In the Internet space, another critical factor is speed of execution. The window of opportunity is only about one or two years. Whoever who can act fast and get there first will be the winner.
It is still not too late for Gaopeng to get back on track and succeed in China if they can implement the right strategies with focus and speed. Someone has to change the game. As Meg Whitman, eBay’s former CEO, said, whoever wins China wins the world.
– Helen Wang is a consultant and author. Her new book The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You is top rated #3 on Amazon. Follow her on Twitter @hhwang
 While Google is considered too powerful in the United States – with “an online package of news, entertainment, blogs, and services drawn from all the world’s up-to-the-minute knowledge,” it is not in China.
According to iResearch, Google’s market share in China was only under 15%, down from about 25% earlier last year. Baidu, the Chinese search engine, has more than 69% of market share in China’s search-engine market. No double Baidu has an upper hand against Google in China because it has a deep understanding of Chinese users and their complex languages.
Most multinational companies found the China market is hard to crack. It took long time for multinationals to learn how to do business in China. The worst defeat was eBay – it shut down its China site last December and took a back seat in Tom Online, a Beijing based Internet portal that provides wireless value-added services with no experience in online auction business. Yahoo! had been in China for seven years. It finally threw itself to Alibaba, a local e-commerce company.
However, Google is not giving up. Recently, Google is joining China Mobile to launch a mobile-search-engine business. With more than 400 million cell phone users, China is the world’s largest cellphone market. Many industry observers are betting on the fact that Google is being favored among the business professionals – “in terms of future business development, Google does have a good base in China to grow on.”
The mobile search is critical for a country that has more than 400 million mobile phone users. But I don’t see why Baidu is not doing the same. In addition, how Alibaba comes to play a role in the search engine race is not clear. Google is definitely facing an uphill battle in China.
In my previous post, I talked about the unofficial number of China’s Internet users estimated at 150 – 200 million. Yesterday’s Xinhua news revealed the new statistics from China Internet Network Information Centre (CNNIC): the number of Internet users in China has reached 123 million, representing a 19.4 per cent growth since June 2005.
This means, in a year or two, China will “officially” surpass the United States and become the number one country in term of Internet users.
While this sounds encouraging for people who want to tap into the Internet boom in China, a closer look at the numbers showed some signs of a problem: more than 80 percent of the Chinese netizens are below age 35, with 40 percent of them between age 18 – 24. The ratio of high school students is even higher, at 50 percent
As Lu Bowang, CNNIC senior consultant, said, “It may be a worrying phenomenon that the ratio of Internet users above 30 years old is dropping because the Internet economy is too much focused on entertainment and young users,”
I remember my friends in China complained about the silliness and mindlessness of the content on the Internet. Compared with the US, majority of people on the Internet in China are young people seeking entertainment and fun, versus professionals searching for information and knowledge.
I believe one of the reasons is because there is less outdoor space in China. After school, those kids, full of energy, don’t have many places to go. Sitting in front of computers and escaping into cyber space becomes a natural alternative.
 As for business people, they usually have their secretaries, typically young girls, to surf the Internet for them for any business related information. No wonder this resulted in a country of young netizens!
China, Internet users, netizens, emerging markets
 A new Internet video sharing site Yoqoo (??) was launched in Beijing last month. Similar to YouTube in the US, it allows users to generate short video clips and share online with their friends and families.
The founder is my friend – the former COO of Sohu Victor Koo! According to Victor, Yoqoo lets people to watch funny clips to relax themselves before they start their day at work or when they leave their offices in the evening. “That will be a new lifestyle,” Victor said.
Video sites that offer clip sharing are getting increasingly popular in the United States. For instance, YouTube has quickly become one of the most-viewed website, with users uploading 50,000 video clips per day. The video offerings of Google and Yahoo! have also generated a lot of traction.
What’s different about Yoqoo is it taps into the opportunity of the convergence of broadband Internet, 3G (third generation) mobile technology and traditional TV networks. With the country’s 400 million mobile phone users and 3G technology, Yoqoo will allow users to download video clips to their handsets.
As to business model, Yoqoo is targeting advertisements from TV companies and even film makers. It also expects some studios to post trailers at the site as part of their marketing strategy.
However, the question remains who would watch video clips and how to navigate the ocean of information overload. In my opinion, an aggregator site that can help users sort out useful and quality information will be critical.
It seems to me in the past when we talked about Internet, it was about text and pictures. Now it’s about audio and videos. User-generated content is the trend. As Yoqoo’s logo says: “?????” – the world is watching!
China, Internet, Internet video,business, convergence
 Chinese youth is an interesting, vibrant and cyber-savvy sector of Chinese demographics that is shaping the future of China.
Yesterday’s Seeking Alpha article says, eighty percent of Chinese youth in urban areas between the ages of 18 and 25 are active bloggers. That is approximately 50 million bloggers! They blog on a variety of topics, ranging from celebrities to sports to lifestyle. They discuss on topics such as what clothing to buy, what music to listen to, and what movies to watch.
These days, young people don’t care about political issues. They care about being cool and getting ahead. They are pragmatic, driven and extremely international-minded that set them apart from their parents.
Chinese youth also forms a major class of consumers. There are about 15 million undergraduate students in Chinese universities. They are increasingly keen on buying iPod music players, fashionable cosmetics and clothing, as well as other famous name-brand goods.
The number of Chinese college students is expected to grow to 30 million by 2010. These young adults are products of the controversial “one-child” policy. Chinese parents, wishing the best for their only child, are willing to foot every bill for their children during college years to ensure their success.
China, Chinese youth, emerging markets, bloggers, consumers
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