{"id":13442,"date":"2011-08-24T15:32:12","date_gmt":"2011-08-24T19:32:12","guid":{"rendered":"http:\/\/www.asianinny.com\/?p=13442"},"modified":"2011-08-25T01:38:59","modified_gmt":"2011-08-25T05:38:59","slug":"groupon%e2%80%99s-china-venture-facing-cash-crunch","status":"publish","type":"post","link":"http:\/\/www.asianinny.com\/?p=13442","title":{"rendered":"Groupon\u2019s China Venture Facing Cash Crunch"},"content":{"rendered":"

Source from: FT.com<\/a>
\nBy Kathrin Hille<\/p>\n

Groupon\u2019s joint venture in China is facing a cash crunch just months after its inception, due to breakneck expansion and management infighting triggering an acute cash crunch, managers at the company said.<\/p>\n

The dramatic problems could raise doubts over the stability of Groupon\u2019s overall international expansion just weeks ahead of its planned IPO.<\/p>\n

E-Commerce King Ltd, the company that operates Gaopeng.com, the group\u2019s coupon site in China, is laying off up to one-third of its staff and closing between half and four-fifths of its offices in China, people familiar with the situation said.<\/p>\n

According to current and former managers, the company was forced into the drastic downsizing after Tencent, China\u2019s largest internet company by revenues and Groupon\u2019s joint venture partner, was slow to provide fresh funds.<\/p>\n

Other American internet companies such as Ebay, Yahoo and Google have also seen their China ventures go sour. However, unlike those examples, Gaopeng staff say the root of their company\u2019s problems is not a dispute between the joint venture partners or lack of understanding of the local market.<\/p>\n

\u201cWe were pushed to create mind-boggling growth rates, but nobody ever asked about profit,\u201d said one manager. \u201cThe company [has] severe operational problems,\u201d he said.<\/p>\n

In June, Ouyang Yun, chief operating officer of Gaopeng, told the FT the company had hired 3,000 employees and expanded to 50 cities. But last week, managers were told the headcount had to come down to 2,000, and between 20 and 41 offices would be closed because there was not enough cash.<\/p>\n

People close to Gaopeng said Oliver Samwer, the German entrepreneur who heads up Groupon\u2019s international operations, had pushed for the rapid expansion.<\/p>\n

Mr Samwer works for Groupon International based on a consulting contract which was signed after Groupon bought CityDeal, the European Groupon clone founded by him, in May 2010, but which runs out in October. Mr Samwer could not be reached for comment.<\/p>\n

Mr Ouyang, a former Tencent executive, runs the company together with four other managing directors hired by Mr Samwer. As part of their pay, the managing directors received bonuses based on how many staff they hired, people familiar with the situation said.<\/p>\n

\u201cOur average commission is 12 per cent, as compared with 50 per cent in the US,\u201d said one Gaopeng executive.<\/p>\n

Three of the managing directors, Mads Faurholt-Jorgensen, Raphael Strauch and Frederico Pericini, were put in charge of Gaopeng\u2019s regional offices in Beijing, Shanghai and South China respectively, but the regional sales forces subsequently started competing with each other for large corporate accounts, driving down already slim margins.<\/p>\n

Christian Macht, another managing director, is executing the drastic cost-cutting measures. Mr Faurholt-Jorgensen and Mr Pericini have now left, as has David Tang, the company\u2019s chief marketing officer.<\/p>\n

Mr Ouyang played down the company\u2019s problems, saying \u201cnot a lot of employees were laid off\u201d. He added: \u201cGaopeng is also undergoing some reorganisation of some departments, for example increasing centralisation of sales operations.\u201d<\/p>\n

Gaopeng said the decision to make the drastic cuts was driven by considerations of performance. \u201cGaopeng is optimising its business to meet the growing demands of the Chinese market. We are aligning our operations to focus more on middle- to large-sized cities where group-buying markets are more developed. Additionally, as a part of good business management, we are streamlining underperforming employees,\u201d it said, adding that it was still hiring and that it was committed to the Chinese market for the long term.\u00a0 Tencent declined to comment.<\/p>\n

For more info: please visit FT.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Source from: FT.com By Kathrin Hille<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-13442","post","type-post","status-publish","format-standard","hentry","category-up-to-date-news-on-everything-asian"],"_links":{"self":[{"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/posts\/13442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13442"}],"version-history":[{"count":4,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/posts\/13442\/revisions"}],"predecessor-version":[{"id":13479,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=\/wp\/v2\/posts\/13442\/revisions\/13479"}],"wp:attachment":[{"href":"http:\/\/www.asianinny.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13442"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.asianinny.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}