Groupon’s Chinese Joint Venture GaoPeng is shutting down Offices in China

by Swati on August 24th, 2011

Groupon’s joint venture in China that operates the group buying website GaoPeng.com has closed offices and sacked hundreds of employees in several cities across China, according to Wall Street Journal’s recent reports.

The former and current employees of GaoPeng say that more than 10 offices around China have been closed. “They’ve been firing people for at least three months,” said James Liu, an employee at GaoPeng. A Chinese lawyer representing some of the furious former employees of GaoPeng estimates that about 400 people have been fired so far, but the number can’t be confirmed.

Groupon and GaoPeng stated that the office closures are part of a change in strategy and don’t diminish Groupon’s operations in China. “The company plans to focus more on the middle to large-sized cities in China where the market is more developed. It is fully committed to the Chinese market for the long term,” a spokesman for GaoPeng said.

“Groupon’s approach to international expansion is to aggressively create a large presence upfront and refine our strategy as we gain deeper insight into the local market. We view any adjustments to the business as very typical in order to build a long-term foundation for success. Our JV in China is just one example of many new markets where we have fine-tuned our strategy as we go, ” said Groupon spokeswoman Heather Dickinson.

Groupon has invested $8.6 million for a 40% stake in the GaoPeng joint venture, since January. The venture is also funded by Chinese Internet giant Tencent Holdings Ltd. and private-equity firm Yunfeng Capital. However, Groupon’s entry into China was shaky from the start.The company has struggled to gain market share, as its local Chinese competitors continue to expand. Groupon is the dominant daily-deals website in the U.S, but GaoPeng was ranked No. 8 among daily deals websites in China, with 15 million unique visitors a month—less than 30% the number for the top website Lashou.com in the category.

“Groupon had 80 offices around the country, and total headcount of more than 3,000 people. The company came to China and tried to expand too aggressively. That strategy just doesn’t work in China,” said a GaoPeng manager.

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