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Rumor: Groupon's China JV Gaopeng Lays Off 400 Employees

Beijing Morning Post, 8/23/11

Gaopeng.com, Groupon and Tencent's (0700.HK) group buy joint venture, has laid off more than 400 employees, according to attorney Zhao Zhanling. Zhao represents a number of Gaopeng employees in the Tianjin region, on whose behalf he is preparing to file a labor arbitration brief.

Zhao claims that Gaopeng's latest round of layoffs is too wide-ranging, with Gaopeng branches in at least 13 cities (including Qinhuangdao, Yantai, and Nanning) being shut down entirely, and partial layoffs in an additional 18 cities, including Shanghai, Hangzhou, Wuhan, and Fuzhou.

The "Tianjin region," Zhao explained, includes the municipality of Tianjin and the cities of Tangshan, Qinhuangdao, and Taiyuan, where employees were told they would receive a half-month's salary as severance pay. In Shanghai, where 50 former employees staged a sit-in protest, employees have negotiated severance pay of two months' salary.

Hu Chen, co-founder of rival group buy site Tuan800.com, said Gaopeng had managed total sales of only RMB 37.6 mln in July. "The reason you're seeing layoffs at Gaopeng now is that they cast their net far too wide at the outset. There's nothing wrong with scaling back a bit - sites like Meituan and Kaixin001 have done the same in scaling back group buy operations in third- and fourth-tier cities."

A spokesperson for Gaopeng confirmed yesterday that the company was "making necessary optimizations" with steps to reallocate resources to more mature group buy markets, adding that the company "is very grateful for the contributions of our outgoing employees, and will provide greater compensation than is legally required."

Editor's Note: For more information on this topic, please see "Rumor: Gaopeng Shanghai Office Cuts Staff 30%," MD 8/22/11 issue.

Keywords: law litigation Hu Chen Internet Tencent 0700.HK Groupon Gaopeng Zhao Zhanling e-commerce HR group buying JV

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