Groupon’s Chinese business set to cease?

The world’s largest daily deal website Groupon stumbled again in China as its Chinese joint venture Gaopeng.com is set to merger with another local website FTuan by the end of this month, Beijing Morning Post reported, which ascribed the deal to Gaopeng’s continuous losses in the market.

Gaopeng denied the report immediately, claiming the rumor “came from a malicious post on the Internet.” However, Beijing Business Daily reported on April 21 that the rumored counter-party FTuan admitted the two deals websites are in talks for “deep cooperation”, citing FTuan’s CEO Lin Ning. Lin, nevertheless, said the ongoing discussion is yet available to the public at the moment.

The report also cited an industry insider Zhang Ying, who believes the merger to Gaopeng is a “both the trend, and a forced choice”.

“If Gaopeng hands over operation to FTuan, it means Groupon is not likely to invest in the new venture in the future, which also ceased Groupon’s China penetration,” said Zhang.

In early 2011, Groupon teamed up with China’s biggest Internet-based service provider Tencent with 0 million ( million from each) to set up Gaopeng.com, with the operation remaining controlled by Groupon.

FTuan, on the other hand, is a rival Chinese group-buying website that Groupon’s local partner Tencent invested in.

Wu Xuefei, an analyst from China eBusiness Research Centre, estimated in an interview that the merger, if eventually realized, will become a sales transaction between the two websites, which means that Gaopeng is likely to be sold entirely to FTuan.

Wu’s forecast also pointed to the end of Groupon’s Chinese business, which, in fact, was ridden with troubles over the past year.

Despite Groupon innovating the daily deals business model, copycats in China started the similar business way earlier before Gaopeng entered the market. According to data from China eBusiness Research Centre, the Chinese market was filled with nearly 4,000 group-buying websites; however, the ten largest daily deals websites seized over 91 percent of the whole market in 2011.

Gaopeng failed to snap a position in the top ten even though it invest a huge amount of money in advertising and hiring. The website, at its peak, owned offices in over 100 Chinese cities by August, 2011, while the number slumped to only 39 in the early 2012 as sales were far behind its expansion momentum.

At the same time, the company was involved in a series of scandals during the year, including selling fake watches, and fabricated the winners for its own staff in a lottery draw on its Weibo.