24quan in Trouble? CEO Du Yinan Responds

24quan CEO Du Yinan, at right, during Disrupt Beijing's group buy session

Last week we wrote about some of the concerning reports circulating on the net about group buy site 24quan’s, ahem, “restructuring.” Amidst the sort of things we’ve come to expect from group buy sites — branch closings, location-based layoffs — there were also reports of vendors and employees going unpaid or being threatened with withheld wages if they didn’t sign a separation agreement when their branch was closed.

24quan CEO Du Yinan was nice enough to leave us a comment on that story. In essence, he confirmed the layoffs, although obviously not using that particular word:

24Quan is undergoing transformative changes which will help steer the company to sustainability and profitability. We made a difficult decision to close down many under-performing sales centers in third and fourth tier cities and in some of these closures, admittedly, we could have done a better job with communication.

He also disagreed with my assertion that the reports of not paying vendors or employees essentially amount to theft:

24Quan is an honorable business and we pay all of our merchants and employees. At 24Quan, we do more than 10,000,000 US dollars of business per month and therefore we can assure you that we are not incentivized nor motivated to “steal” 3,000 dollars from employees or 300,000 dollars from merchants. We can confirm that people have stolen money from the company during our down-sizing efforts and hence we are taking a measured approach to reimbursements and payments to third parties, painstakingly verifying obligations and payment details. We also acknowledge that some of our ex-employees are unhappy with our decision to close down certain cities and we understand their frustration.

But — of course — we were interested in learning more, so I got in touch with Mr. Du via email. The following interview is being reproduced verbatim, with only minor edits to correct grammar and spelling. That makes it one of our wordiest interviews, but in this case, we felt it was best to reproduce my questions and Du’s answers in their entirety so that people get a clear understanding of the conversation.

Interview

CC: Certainly, there is no motive for 24quan to steal (relatively) small amounts of money, but if the company owed a debt to merchants and then failed to pay that debt within the stipulated time limits — which I believe is what happened, in at least a couple cases, correct — isn’t that a kind of theft? Certainly, it impacts merchants’ businesses in an adverse way and it’s not something they have any control over…

There is no motivation for 24quan to “steal” money from its merchants. We value our long-term relationships with quality merchants which is paramount to what constitutes our good and everyday business practices. That said, we handle a vast amount of merchant payments on a daily basis. To give you a sense of the size of our business, we have in excess of $12,000,000 of cash turnover – every month. Naturally from this kind of deal volume, we see a small percentage of irregularities. Furthermore, we reserve the right to question and to evaluate merchant claims when we spot an irregularity, as we also take quality control very seriously.

The majority of our merchants provide the services they commit to, however, there are also cases where the merchant will not provide the service they committed to offer to our customers, or there is a serious default in the service given. For example, we reevaluate claims when we are led to believe that (i) the merchant may not have delivered its services per our stated offering, which results in massive customer complaints; (ii) when the contract entered into was fraudulent (a fake chop or altered contract); or (iii) when we believe the merchant has already been paid (we paid but they claim non-receipt of funds).