Groupon heads to China

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Corporate America’s future customers, at least that’s the hope (Kim Kyung-Hoon/REUTERS)

“There are hundreds of Groupon clones there (in China),” Groupon CEO Andrew Mason told me a couple of months ago,  “It’s tricky to figure out how an American business can participate.” Looks like he did. Groupon, the molten hot social shopping company, is setting up shop in China as (powered by Groupon) with service initially in Shanghai and Beijing. Groupon’s China venture is a partnership with Tencent, a major portal, and Yunfeng Capital, whose investors include Jack Ma, the power behind China’s online retail giant Alibaba. GaoPeng can be translated as “friend in high places” and in Yunfeng Capital’s Ma, Mason certainly has one.  The same for Tencent, whose “in-depth knowledge of Chinese online communities,” said the company, can get Groupon to the most important segments of China’s 457 million internet users. By partnering with Ma and Tencent, Groupon is trying to avoid a long build out phase in China. The country, with its billion citizens starting to knock on the door of the middle class, has lots of profit potential for any consumer company. The question facing Groupon, and indeed the entire US economy, is how hard is it to tap into that potential.

Groupon stopped messing around in China and allied itself with the big guns because it was being nibbled to death by those hundreds of clones. Startup mode is cool, but it was no longer operable in China. That’s not what Mason had in mind, since the company been able to quickly get control of the business in other Asian markets. In places like Vietnam, competing services would start before Groupon arrived, but the company could acquire some of those startups and seed Groupon with those very same entrepreneurs. “We’ve gone in there and met these people and found the right team DNA that we’ve learned will lead to success and then acquired them usually when they are a month old and just getting started.” said Mason.

But China’s energetic entrepreneurs were all over the concept, even to the point that Groupon doesn’t own the name domain name, which is an exact duplicate the American company, right down to the logo. “To copy what we’re doing exactly, that’s both depressing and ineffective; if there are 500 Groupon clones, 499 of them are completely irrelevant: if all you are doing is, if your plan of attack to simply copy what somebody else is doing you are not likely to be very successful.” But they are, nevertheless, something Groupon had to deal with, and Mason decided to deal from strength.