CRI听力:Hard Survival of Group-buying Websites

There are now more than 5,000 group buying websites in China, and amid the cutthroat competition, profits are increasingly harder to come by. Analysts believe many of these group-buying firms will close, and even those that remain will have to change their approach.

Some industrial insider says the novel business model of group buying and the quick spread in business volume drew investors' interest. But the bubble has become too big.

The biggest cost for a small scaled group-buying website lies in its operation, sales and labor costs. In order to attract more consumers, many group-buying websites have been squandering away money on advertising campaigns.

Su Shaohuan, CEO of group-buying website Weikee.com talks about their dilemma.

"An order at 200 yuan costs about 400 yuan to advertise. This is basically burning money. Ultimately, group buying websites attract consumers and settle orders by burning money."

In order to get more clicks and views from consumers, many group buying websites end up paying out of their own pocket to satisfy consumers, instead of making as much profit as possible, Niu Liben, chairman of a group buying website fclub.cn says.

"Take buffet coupons sold on group buying sites as an example. The group buying website gets a coupon that's worth 300 yuan at 200 yuan, but it sells the coupon to consumers at 180 yuan."

According to the China e-Business Research Center, the leading group buying sites - including lashou.com, nuomi.com and meituan.com - have received several rounds of investment funding from venture capital firms. But within the entire industry, only two firms have started to make a profit so far.

There has also been a tide of layoffs recently. Since April this year, meituan.com and 55tuan.com have announced staff redundancies. Elsewhere, the China branch of Groupon fired more than 500 people in August, according to Zhao Zhanling, attorney for the laid-off Groupon employees.

Statistics reveal that 1500 group buying websites closed up by the end of October this year.

Experts say group buying is definitely useful for both consumers and companies. But the sites rely too much on investment. To compound problems, many group buying websites operate in a similar manner and offer the same services.

Some group buying sites are aware of their problems and are making adjustments. They are trying to focus more on providing local services to customers, rather than just selling cheap goods. In other words, they are becoming purer O2O or online-to-offline service providers.
 
For CRI, I am Zhang Wan.