The group buying company Groupon from Chicago has set its eyes on China, after successes in 29 countries, including Europe and Japan. Groupon might actually have a chance to win, says CIC founder Sam Flemming in CNBC, although IT companies from the US have mostly failed in China and group buying was actually invented in China as tuangou.
Tuangou flourished in China partly because haggling is part of Chinese culture, and partly because of scale: there were 420 million Chinese online as of June, 2010, up by 36 million from the end of 2009, according to the China Internet Network Information Center. Chinese netizens also spend a lot of time on internet forums, chatting with others who are interested in the same issues or products. There are, for example, 700,000 people talking about cars in online car-related communities; they post 13 million comments about cars each month, according to CIC Data, an Internet consulting firm that tracks China’s blogs, online bulletin board sites and social media for companies. In North America, you just don’t have the same size or scale of pre-existing online communities, says CIC founder, Sam Flemming.
“In China, this grew out of something customers were already doing. Chinese Netizens had already organized themselves online around brands, products and services – then they recognized they have the collective power to do different things: complain a brand not offering good service, or get 55 people together and get a discount,” says Flemming.
What American companies do better than Chinese is making money on the internet, says Flemming in CNBC.
Still, there appears to be a huge demand for Americanized version of tuangou; at least 50 Groupon clones have popped up in the last few months. Shtuango.com may be making money, but it’s nowhere as successful as Groupon.
“We’ve seen this both with tuangou and with online social games, like Happy Farm; both were developed in China, but made a lot more money in the U.S., because American companies figured out how to monetize it effectively,” says Flemming.