Birth of Lashou Mall
Just last week, we discussed the tipping point of the Chinese group buying market, and how firms have to diversify out of pure group buying models to survive.
News has it that Lashou, one of the top 10 group buying sites in China, will be launching ‘Lashou Mall’ this week. The birth of Lashou Mall seems to follow the footsteps of Taobao Mall. Taobao Mall was launched in 2008, with the bulk of web traffic derived from Taobao’s main channel, Taobao.com. It was only until late 2010 that Taobao Mall detracted itself from Taobao, to operate on an independent domain. Given Lashou’s forerunning status in the group buying scene (Lashou.com has more than 1 million monthly unique visitors), it is natural for them to follow suit.
Similar to Taobao Mall, Lashou Mall provides a platform for merchants to set up their stores and sell their goods, after paying fixed rental fees. Not forgetting its roots, deals offered by merchants on Lashou Mall will still retain the element of group buy; products will be sold collectively and at discounted rates.
The Need to Diversify
The pure group buying model is getting difficult to maintain. With intensified competition and increasing customer expectations, deal prices are decreasing. On the other hand, advertising costs for the firms are increasing, with aggregators and search engines such as Baidu and hao360 having the last laugh.
Also, many customers are one-time buyers, and revisit rates are relatively low due to the wide array of choices in the Chinese market. Not denying the fact that consumers do take brand names into consideration, the sheer number of firms providing almost similar services actually gives customers a very good reason to switch allegiance to substitutes that offer more competitive prices.
As reported previously, Lashou has been racking up massive losses, amounting to more than US$100 million since its inception. Declining coupon sales, increasing costs, coupled with its delayed IPO and retrenchment of staff in recent months, the need to diversify has never been so imperative.
Lashou Mall Not the First to Diversify
Lashou was not the first to move out of the pure group buying slate. Another big player in the Chinese group buying market, 55tuan, had launched 55.com, a ‘one-stop lifestyle site’ in mid-October 2011.
The interesting thing is, deals on 55.com are not retrieved directly from its affiliated website, 55tuan. In fact, similar to Taobao Mall and Lashou Mall, 55.com provides a platform for merchants to set up online stores. The stark difference here is that the merchants on 55.com provide local deals instead of product deals.
Chinese consumers seem to be diverting their attention to product over local deals. Other e-commerce websites that provide product deals, such as 360buy and Vancl are rapidly expanding. With larger group buying sites generally shifting focus towards product deals, I’m not very certain if 55.com will just work out.
But I must admit, the establishment of 55.com was one step away from pure group buy. It had integrated both business models of 55tuan and Taobao Mall. Costs will also drop significantly because less emphasis is now placed on sourcing for merchants and deals. Instead, the lifestyle website is now a provider of online space for merchants to place their local deals. Furthermore, 55.com is still fundamentally doing what its parent website is best at: group buy.
Lashou Mall Will Not be the Last
One by one, these giants are finding ways to stretch their reach into the untapped areas of e-commerce. Lashou Mall will not be the last in the industry to diversify. Recently, another group buying firm, 24quan, received Round C funding. The exact figure was not disclosed, but was believed to be more than US$10 million. The e-commerce market is definitely expanding; the question is: will the companies expand together with the industry? We are certainly in for more bouts, and the best is yet to be.