Alibaba opens the doors to its group-buying platform

Company will allow competitors to use its website to sell their products

HANGZHOU / BEIJING - The Chinese e-commerce giant Alibaba Group Holding Ltd announced on Wednesday that its group-buying site will serve as an open platform for other sites to sell their goods.

Analysts said the move, which will begin next year, will accelerate an ongoing reshuffle in the group-buying industry.

The site Juhuasuan.com, which means "group bargains", will extend olive branches to leading group-purchasing companies to open online stores on the platform, said Shao Xiaofeng, secretary-general of Alibaba, at a news briefing in Hangzhou, the capital city of East China's Zhejiang province.

Potential partners include Meituan.com, Manzuo.com and Gaopeng.com, said Yan Limin, general manager of Alibaba's group-buying business.

Alibaba will also work with several venture-capital funds to provide loans to small vendors that sell their products through the platform. The amount is set to total 1.2 billion yuan ($189.7 million), Yan added.

Some vendors, such as Gaopeng, have already wrapped up negotiations with Alibaba, said Ouyang Yun, Gaopeng's chief operating officer.

"I don't think the cooperation will erode the number of our existing clients. On the contrary, it will help to expand the pot," said Ouyang.

However, Wang Xing, founder and chief executive officer of Meituan, said that while he appreciated the idea of an "open platform", his company will give priority to Meituan's own distribution channel for the time being.

Since being spun off as a separate company in October, Juhuasuan has recorded nearly 5 billion yuan in sales. The figure is expected to reach 2.19 billion yuan in December alone, a monthly record high, according to Alibaba.

Statistics from the data provider iResearch show that Juhuasuan, first launched in March 2010, accounted for 52.8 percent of China's group-buying industry, which was worth 19.6 billion yuan in 2011.

The open platform is not the first to be launched by Alibaba. In September, Taobao Mall, a business-to-consumer website under the group, said it had been inviting other online retailers to open virtual stores on its site, promising to share the Taobao user base with smaller rivals.

Analysts said Alibaba is applying this practice to the group-buying sector to form a platform on which others conduct business, rather than one that sells goods on its own.

The feature of the Juhuasuan platform, namely the addition of localized services tailored to user locations, will help the group-buying service become a significant part of Taobao's overall transaction volume.

"Localized services, from restaurant coupons to movie tickets, will be a huge market and may account for transactions worth billions of yuan in the coming few years," Yan said.

He said Juhuasuan is also striving to set a standard for the group-buying industry. It plans to introduce measures, such as protection of customer rights, price monitoring and third-party quality supervision.

The burgeoning industry should "come to rationality", said Su Huiyan, a senior analyst with iResearch.

"Juhuasuan's open platform will help integrate useful resources and squeeze out market bubbles."

The site, which lately inaugurated a new domain, Juhuasuan.com, opened in March 2010 and leveraged on the already huge Taobao user base to get a head-start on the huge number of group-buying concerns that have gone online since March last year.

By the end of November, 1,813 group-buying sites had closed down because of fierce competition in the sector, according to the group-buying navigation site Lingtuan.com.

China Daily

(China Daily 12/29/2011 page16)