Technology

Competition intensifies in online team-buying market

(Xinhua)
Updated: 2010-08-10 09:05
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BEIJING - With huge discounts, sometimes even below 10 percent of original prices, China's online team-buying websites, familiar as Groupon.com in the US, are drawing an increasingly large army of buyers.

The potentially lucrative business model of online team-buying websites are also taking in more revenues, as shown by the number of such websites which more than doubled to about 900 in July, according to figures from a Beijing-based Internet analysis firm, Analysys International.

Despite the large number of existing competitors, most of them small- and medium-sized firms in the market, three of China's four major portal websites launched their own online team-buying services in July.

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However, the three major portal websites, Sina.com, Sohu.com, and qq.com, are running their team-buying services by outsourcing the operation to smaller Internet companies, unlike the 900 professional websites whose only business is team-buying.

Industry insiders and observers interviewed by Xinhua said that this might cause a shake-up in the online team-buying market.

Chen Shousong, an IT analyst with the Analysys International, said the major portal websites' entrance into team-buying had significant implications for online team buying in China.

Zeng Fuhu, deputy manager of the website operating Sohu's team-buying service, said that portal websites enjoyed a strong competitive edge in the team-buying market.

"We already have a huge pool of users and hits. That would save us big costs in marketing and provide more affordable services to customers," he said.

But the "strong competitive edge" has not posed immediate threats to smaller professional team-buying websites like Nuomi.com, whose head, Shen Boyang, said their revenues had been growing after the entrance of portal websites.

Wen Zhenhua, a manager with another professional team-buying website, Meituan.com, described the competitive edge of professional team-buying websites as "devotion".

"We are devoted solely to online team buying, pooling all our resources into it so that we could provide excellent service," he said.

Most of the 900 professional team-buying websites like Wen's are operating using a business model called "Team buying 2.0", in contrast to the former 1.0 mode.

Under the former mode, friends or strangers would connect online and agree to approach vendors as a group in order to negotiate discounts.

However, the increasing popularity of team buying has opened a new market for professional service websites which save buyers from the haggling. They serve as intermediaries between customers and businesses, with all goods and services offered at discounts.

"Having the same business model is a problem, because it would make it difficult for small firms to receive investments, especially after the three portal websites entered the market," said IT analyst Chen.

Although July recorded more new team-buying websites starting up, compared to those closing down, the number of closed websites was huge, Chen said, though he did not give an exact number.

As to how the team-buying market would continue to develop, Chen said he was optimistic.

"Customers and businesses have recognized team-buying websites. As long as they specialize in team-buying and make full use of their distinct advantages, the market would not be dominated by a few heavy weights," he said.

Wen, with Meituan.com, seemed to be confident in his company's future, "In a marathon match, players are many, but only a few strong ones can finish in a short time."

Shen, the head of Nuomi.com, said the future market would see the coexistence of a few major websites and some smaller websites that specialize in certain cities or business fields.

Their optimism is well-grounded, for China's online shopping market has enjoyed rapid growth over the past several years.

One out of every three Chinese Internet users, or one out of 10 Chinese people, shops online, according to a report by the China Internet Network Information Center (CNNIC) released in June.