Attack of the Clones: Group Buy Session at TechCrunch Disrupt Beijing

This is a part of our TechCrunch Disrupt 2011 event coverage.

#10:28: Aaaand we’re back. After some connection issues, we’re not back in the liveblogging game, coming in a few minutes into a discussion of group buying in China moderated by Bill Bishop (of Digicha) and featuring Xing Wang (Meituan) and Yinan Du (24quan).

Yinan Du is talking about how 24quan wants to bring long term value to vendors by providing them with long term customers. They want people to enjoy the service so they keep coming back.

But how do you measure the value of that? 24quan created a special service to measure and incentivize repeated use by users to ensure vendors get long term customers from the service.

#10:29: Bill Bishop asks, are the profit margins in China group buy so low because of competition, and how do you raise it over time? Xing Wang says Meituan has a single digit margin now, but they expect to see it rise as competitors die off. Yinan Du says their margin is around 12% but the better sales have even higher margins, so they’re focused on making better sales.

Yinan Du: “We actually foresee the margin is going to come back up very quickly.”

#10:30: “How does the industry become more collaborative?” Yinan Du: We actually communicate a lot between companies, and aside from a few bad eggs, most companies are trying to promote a healthy market. But neither he or Wang Xing will name who the companies “disturbing” the sector are.

#10:32: ‘How will the consolidation of the market happen?’ Wang Xing says we won’t see any new entries, and smaller companies will just fade away, but doesn’t expect to see many acquisitions. He also adds, back to the point about profit margins, Wang says it will go up but will never hit 40% like in the US.

Yinan Du is talking about how it’s “winter” for group buy, ecommerce, etc. in terms of capital, so companies need to focus on profit and be able to self sustain. Companies that plan to rely on capital are going to be eliminated in this “winter”.

#10:35: “We strongly believe that if you want to survive in this market, you have to be profitable.” Says Yinan Du. 24quan expects to be profitable next month (i.e. December). Just in time for winter!

#10:36: How can you market going forward, as ad rates rise?’ Wang Xing says Meituan distinguished itself in this area by using mostly word-of-mouth marketing. Says 70% of Meituan users heard about the site from their friends. They have more traffic than other daily deal sites and pay less for that traffic because they don’t do ads.

#10:37: Now on to Groupon/Gaopeng: why are they doing so badly? Wang Xing: “They did so many things wrong I don’t even know where to begin!”

#10:38: Yinan Du: The structure itself got them off on the wrong foot, 50-50 JVs rarely successful in China. He says from the start, the team was too mixed, and driven by profit rather than passion. Du says the real key to success in China is to “find a team that can be bicultural.”