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China’s state media blasts troubled community group buying companies for ‘burning cash’
- A number of start-ups have either filed for bankruptcy or reduced operations amid the ‘subsidy wars’ in the community group buying market
- No player in this market is expected to turn a profit in the short term
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Why you can trust SCMP
China’s state media has denounced the group buying industry’s cash burn strategy as a number of start-ups have either filed for bankruptcy or reduced operations amid the financial hardship caused by their “subsidy wars” to seize market share.
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“Burning cash has not only failed to create a prosperous market, but has resulted in a series of chaos,” said a commentary published on Wednesday by the Economic Daily, a newspaper directly under the Central Committee of the Chinese Communist Party.
The commentary blamed some community group buying operators for abusing their platforms’ power to disrupt the market, including dumping low-priced goods, as well as illegally collecting and using consumers’ personal information.
It also indicated that group buying operators’ subsidy wars only provided a sense of “false prosperity”, a lesson that should have been learned from what has happened before in the country’s bike-sharing and ride-hailing industries.
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The Economic Daily’s commentary followed news that community group buying provider Nice Tuan, which is backed by e-commerce giant Alibaba Group Holding, has ceased operations in multiple cities in August. Alibaba owns the South China Morning Post.
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