Rumors are circulating on China’s Internet that Groupon China is going
to be acquired by Ftuan.com, a native Chinese daily-deal website. After
entering the China market last year, Groupon has not been able to put itself on
the top10 list in this industry in China. The profit deficit was 46 million
dollars in 2011. For many internet experts, it’s only a matter of time before
Groupon China went out of business. It’s not the first time a multi-national
Internet company suffered a waterloo failure. No foreign internet or e-commerce
company has ever succeeded in China including Ebay, Yahoo and Amazon. As China
has become the fastest growing and the most important marketplace in the world,
these Internet giants can’t afford to pass up the opportunity and screw up in
China. But how can they succeed?
Let’s take a closer look at Groupon China. The daily deal business in
China is fiercely competitive. Over 5000 daily-deal websites have emerged since
March 2010. However the brutal competition should not be an excuse for Groupon’s
failure. There are many reasons why it’s not going to succeed in China. First
and foremost, Groupon failed to fit the Chinese culture and develop the right
consumer insight. China is a country that distinctly different from any country
in the world. Any foreign company which simply copies the foreign model in
China will fail hard. For example, the direct marketing model, which is very
efficient and effective in America market, hardly gets any material result in
the China market.Chinese customers are not very loyal
to any brand. All the customers care about is the price of products. Even
though Groupon poured tons of money to market its brand, customers don’t
necessarily believe its brand is better. They didn’t know the customers and the
culture at all before they moved their business to China. The management team
is another big failure. Almost all the senior level executives are foreigners
or American-born Chinese. They have great work experience and knowledge. However,
they don’t understand the China market. What’s more, they can’t even
communicate very well with their staff because of the language barrier. So the
localization strategy is not there at all. How can you be successful in another
country if you don’t do business the local way?
Here are a few takeaways that Multi-national Internet giants can learn
from Groupon whether they are expanding business in China or planning to enter
the China market.
1.
Do
your homework before you knock the door
The Internet Giants need to do the research and understand what works
and what doesn’t in China. Don’t simply copy your so-called successful model to China
and hope it will work automatically.
2.
Know
your customers
The Internet
industry is quite different from the traditional industry. All internet
companies need to tap into consumers’ mind deeper. You’ve got to understand
their behavior and preference.
3.
Make
your positioning clear
If you come to China now, chances are that there are already a number of companies who are doing the same thing as you do there. So figure out a way
to make yourself stand out. The Chinese consumers no longer buy it just because
your company is from United States or elsewhere. It's very difficult for you to compete with hundreds and thousands local Chinese companies if you don't have a clear positioning.
4.
Doing
business the local way
For these internet companies, doing business the local way is extremely
important. A localized management team is a great advantage in almost every
aspect. China’s higher education is producing more and more qualified
candidates who can also speak fluent English. You've got to hire the right
people. You've got to have a local team knowing how to do business the local way.
Yuhui Zhang is a
graduate student in the Northwestern Medill IMC marketing program and is
specializing in digital marketing and marketing analyticas. Yuhui will be
graduating in December 2012. He can be reached on twitter using the handle @Yuhui_Zhang.
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