Group-buying as a business model in China has begun to cool down, and evidence of this has now translated into massive layoffs from Groupon Inc.'s Chinese joint venture firm and several other group-buying internet companies.

Gaopeng.com, the joint venture between Groupon and Tencent Holdings Ltd, China's largest Internet Company in terms of sales, began to close its offices and reduce its workforce on August 18.

The mass layoffs take place just eight months after Groupon's first appearance in the Chinese market.

However, Groupon Inc. is not the sole player to have made a sudden so-called "reshuffle". Several online group-buying giants are reducing their local presence across the country.

Mike Bastin, an expert in marketing and management with Tsinghua University, attributed the dramatic U-turn by group-buying businesses to the relatively immature Chinese business environment.

"Unfortunately, it's another area where the Chinese business environment perhaps isn't quite mature as it needs to be. Complaints have risen exponentially, if you read the news, 1500 complaints three months this year, the same as the total for last year. Also, there's been an explosion in the number of group-buying providers, and many of them lack the credibility (shall we say) to deliver what they actually promise."

Hu Yanping, general manager of the Beijing-based research company Data Center of China Internet, said the employee cuts sounded an alarm to the industry and the group-buying websites must focus on the fundamentals of the business, instead of irrational expansion.

According to an earlier report in April carried by Tuan800, a leading group-buying service navigation site in China, the top cities in terms of group-buying volume are Beijing, Shanghai and Tianjin. The report reveals that several online deal giants are reducing their local presence, and closing down their offices in some 3rd and 4th-tier cities.

Mike Bastin predicts that these group-buying websites would give their utmost attention to their development in the first-tier cities in an effort to consolidate their business.��

"Perhaps they have to scale down and focus on first-tier cities where there is a more transparent more mature business environment and they can screen potential merchants, such as restaurants or home appliance producers in order to create a business model that works. So I think a period of consolidation and then gradual expansion."

Having said that, the Tsinghua University expert warns that Chinese consumers should be very vigilant, since there's not that much protection for them at this moment in time.

"Certainly you need to screen the providers and make contact to make sure there is some credibility there," said Mike Bastin. He also added that social media help expose complaints, "so there is pressure being brought to bear."