[UPDATED] Gaopeng.com Lays Off Hundreds of Groupon China Staff, Rumors of No Cash Flow

[UPDATE on July 30th – We’ve been contacted by Groupon head of PR in the UK who confirms an unspecified amount of staff being cut, but clarifies: “We’re not laying anyone off in China, but terminating some employees for underperformance.”]

Groupon’s Chinese site is having a phenomenally tough time of late – reportedly today Gaopeng.com is laying off 25 percent of its staff, and we’re hearing rumors of it being unable to pay its Google and Baidu ads bills.

The job losses are reported across the Chinese tech media, saying that 25 percent of staff are being axed at Gaopeng’s offices in smaller “tier three” cites and medium-sized “tier two” cities. Its operations in China’s largest cities seem unaffected, indicating that Gaopeng might need to focus on business in the country’s wealthiest cities, and that it might have over-reached itself initially. Upon launch, Gaopeng’s group buy network extended to 127 cities, and it soon took on some 3,000 employees.

According to Chinese site Techweb, a typical Gaopeng office in a tier two city would’ve had about 50 people, while in smaller cities there would’ve been 20 to 30 staff members.

The cash flow problems remain a rumor. According to Marbridge Consulting Gaopeng is spending 15 million RMB per month on ads, between Google and Baidu, and is unable to sustain such ad spending. That figure could well represent nearly half of Gaopeng’s monthly sales revenue.

If all these issues are confirmed, it’s not clear why Groupon/Gaopeng’s joint-venture partner, Tencent, isn’t stepping up.

Two days ago I looked at stats which showed updated revenue and pricing stats for China’s major group buy sites. In it we saw how Gaopeng was offering a lot of deals last month, but wasn’t able to follow that through in terms of number of deals sold, or monthly revenue.

Gaopeng wasn’t listed in the top ten of group buy sites in China, where Meituan and Tencent’s Tuan.QQ seem to be gaining a stronghold in this highly fragmented market.

For Groupon’s Gaopeng.com venture in China, it’s going to be a tough summer, as we see the average price of deals go down as people opt for cheaper packages. That’ll make it even tougher to bring revenue up. Perhaps such a slim-down and refocusing on China’s tier one cities is the best – or the only? – move it can make right now.

Groupon has also had some setbacks in India too, with its Sosasta.com subsidiary.

[Source: Techweb – article in Chinese]