Jan 2011 Tuangou- Group Buying in China

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Agenda

•  Chinese Group Buying ‘Fast Facts’ •  Group Buying Concept

•  Group Buying Issues

•  Fast Facts- SinoTech Group

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The Landscape

How does the Group Buying sector look in China?

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Chinese Group Buying Fast Facts

Source: Chinese Academy of Social Sciences

500 billion yuan (75.4 billion U.S. dollars) was made in group buying sector in China 2010

Group buying sites grew dramatically from 4 at the beginning of 2009 to nearly 1,700 by Dec 2010

China International Electronic Commerce Center (CIECC) passed regulations on Oct. 29, 2010 stating that group shopping sites should obtain licenses to participate in the business

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Group Buying Adoption Expands in China

iiResearch Consulting Group

10 million Chinese used Groupon-like sites in October 2010, up from 5 million in July

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What’s dominating the Offers?

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Looking Good for Make-up

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The Chinese Group Buying Sites (Main ones)

and……Groupon/Tencent JV is rumored to be announcing soon

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Lets ‘deep dive’

How Does Group Buying Work?

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Group Buying Concept

Each deal is only available for a limited amount of time (1-3 days normally)

Users can check the group buying websites or subscribe to SMS or email notifications.

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Typical Group Buying Rules

Typical structure 1.  Unless a minimum number of deals are purchased,

nobody gets it! 2.  Once the target set by the merchant is met, the

deal is triggered

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It’s About the Group

Spread the Word The whole idea is to provide great discounts for bulk/group purchases. Social Media has become a key to this model.

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Final Thoughts on

The Challenges for Group Buying Sites

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The Challenges for Group Buying Sites

-  Consumer Retention is Difficult…

-  You get deal driven consumers not long term customers, you don’t own the email and customer retention is low

-  Limited network effect because the deals are one-off

-  Clones don’t require exclusivity on deals

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The number of players means commission levels are being eroded far from the 40-50% that offers sites want to achieve down to 0% just to get the deal. This will continue until a clear leader emerges. Some large Chinese Search & Portals eyeing this sector and can make significant inroads in a short time by leveraging their netizen and advertising base.

The Challenges for Group Buying Sites

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Humble Suggestions

This is a highly competitive sector with a low barrier to entry. It’s all about the ‘offer’ – focus on securing the best valued products and venues Without the offer you having nothing but a trafficked sites (or not) that is not making sales Suggestion: Build the distribution list first, then use that as leverage to get and offer the best products/venues

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About SinoTech Group

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SinoTech Group - Fast Facts

•  Consists of two brands: Digital Jungle (Digital Agency) & SinoTech SIP (Social Media Tech/Consulting)

•  Heritage in software development

•  95 employees (combined)

•  Global reach

•  Independent

•  Offices in Beijing, Shanghai & Hong Kong

•  Founded in April, 2007

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Thank you - 谢谢 Dr Mathew McDougall | @sinotechian

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