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Groupon China Begins Mass Layoffs

Groupon Cuts: Mass firings empty branch offices of the China operations of a group-buying giant.

Groupon China, known locally as Gaopeng, is laying off about a quarter of its employees and shuttering at least 13 branch offices, according to reports in various China tech business websites.

Gaopeng had been launched in January with just 10 employees sent from Groupon’s German operations. Within the first week the group had added 50 local employees, with plans to add 1,000 more by March, according to blog entries posted by one of is original staffers.

But suddenly Gaopeng is on a staff cutting binge, having fired about 200 from its Shanghai, Wenzhou, Jinghua and Taizhou branches on Friday. The firm was rumored to have cut somewhere between 400 and 1,000 employees during the past week alone, according to various reports in Sina Tech and Global Times. Many of those cut had been working at the 13 branches reported to have been closed down. The firings are said to have begun in July.

“People have been leaving the company almost every week recently,” a mid-level employee is quoted as telling the 21st Century Business Herald.

A former employee of the Beijing branch posted bitter complaints about the layoffs under the alias “Gaopengbuxingle” (Gaopeng will fail) on Sina’s microblog, revealing that the company announced nationwide job cuts Friday afternoon and told employees not to disclose details to the media.

On Monday a poster urged Gaopeng’s Shanghai staffers to dress in black to protest the sudden job cuts. He claimed that up to 30 percent of all employees will be cut. Most are said to be contract employees terminated after a six-month probationary period. They were given two months severance pay, according to a Gaopeng staffer, but only after a number of them had massed at the office demanding it.

Prior to the recent closures Gaopeng had branches in about 40 cities. Most of those closed are in third-tier cities.

The company is just “experiencing a reshuffling of personnel and only dismissed (employees) for poor performance,” said Ouyang Yun, Gaopeng’s chief operating officer.

Analysts have remarked that Groupon is so well capitalized that the closures and layoffs are more likely to reflect a revision in business strategy than a shortage of cash. But the company’s China efforts had been roundly jeered from the outset for having too many foreigners packing the executive suite. It was also blasted for its infamous Superbowl commercial which is said to have offended both Chinese nationalists and Tibet sympathizers the week of its China launch. Its China sales director left in a huff after only a few weeks on the job, then shared his criticisms of the company on his Weibo page.

Gaopeng was formed through a partnership between Groupon and China’s Internet conglomerate Tencent Holdings Ltd in February. Investors include Yunfeng Capital, a Chinese private equity fund co-founded by Internet business guru Jack Ma, the chairman of domestic online commerce giant Alibaba.com.

Gaopeng.com gets 1.71 million clicks a day while its main competitor Lashou.com, ranked eighth in China, gets 6 million, according to data from Internet research firm Analysys International.

Gaopeng has been suffering quality control problems, according to online complaints. Many of its customers have been complaining about long delays in receiving products or about inferior quality products or services.

Groupon’s rapid growth globally — the fastest of any of the major e-commer platforms — has inspired many copycats to crowd the niche in China. One of the more successful is Dianping.com, China’s largest dining and review site which shifted from offering reviews to providing group-purchasing of meals.

The sudden layoffs by a Gaopeng, which had been expected to dominate the China market for group-buying, is expected to have a domino effect on other such firms that have failed to quickly establish reputations for reliable service.