This article provides a systematic analysis of community group buying, offering 11 key insights and proposing product concepts for reference. -01- Summary of Community Group Buying Business 1. Model Perspective
Group buying + next-day delivery + self-pickup achieves consolidated order fulfillment, eliminating the last-mile delivery, reducing fulfillment costs and product prices.
Concentrating categories/traffic creates a group buying effect, achieving supply chain scale advantages, reducing costs and product prices.
High-frequency drives low-frequency, essential needs drive weak needs; fresh produce attracts and retains customers, while standard products boost gross margin and GMV.
Pre-sale ensures production based on orders, reducing inventory and waste.
Group leaders handle traffic, operations, and after-sales, reducing customer acquisition, operational, and after-sales costs. In summary, community group buying is a model of large-scale procurement, low-cost fulfillment, and operations, using fresh produce to attract and retain customers, and standard products to enhance gross margin and GMV. In simpler terms, community group buying is a new retail format based on local/city warehouse distribution and supply chain, with an improved business model. It is an optimization and competition across the entire chain. 2. User Perspective From the user's perspective, low price is the core of community group buying; it satisfies part of users' daily shopping needs by offering both fresh produce and daily necessities; next-day delivery meets users' usage habits to some extent. -02- How Does Community Group Buying Achieve Low Prices? Through institutional improvements such as pre-sale, cash settlement, and centralized procurement, community group buying reduces procurement costs by 25% compared to other formats. Pre-sale: Production based on orders ensures zero inventory; typically, fresh produce inventory/end-of-life waste is about 5%-15%.
Cash settlement, no credit period: Because pre-sale generates cash flow, suppliers can be paid in cash, and they are willing to offer a 5%-10% price discount for this.
Concentrating categories reduces procurement costs: Xingsheng Youxuan's categories are within 1,000 SKUs, while other platforms are around 2,000, rotating on a schedule. Typical convenience stores have over 2,000 SKUs, and supermarkets over 10,000. Community group buying has more outlets and higher sales volume, securing lower procurement prices. Without data, this article estimates a 10% reduction. Through consolidated order fulfillment and group leader operations, community group buying is significantly more efficient than food delivery and front-warehouse models. Consolidated order fulfillment: Each order's delivery cost is about 1 yuan, with a distribution ratio of about 7%; a food delivery order costs about 6 yuan, with a ratio of about 24%; front-warehouse delivery costs about 8 yuan, with a ratio of about 10%.
Customer acquisition, operations, and after-sales costs: Group leaders attract customers, guide repeat purchases, provide after-sales and even door-to-door delivery, accounting for 10% of sales revenue, about 1.5 yuan per order. For front-warehouse, this cost is about 8 yuan, accounting for 10% of order revenue. Note: To conduct community group buying, one must start from the points mentioned in the first and second sections, asking whether these have been achieved, to what extent, and what remains to be done. It is not community group buying just to recruit a bunch of group leaders. -03- Is Community Group Buying Internet or Retail? Is It About Traffic or the Backend? Some compare community group buying to Pinduoduo, saying Pinduoduo is about acquaintances forming groups in pairs, while community group buying is about group leaders pulling people to form groups. This is a shallow fantasy of internet people and outsiders. From the summary above, community group buying is a victory of the model, a victory across the entire chain from traffic, operations, after-sales, delivery, to supply chain, with warehouse distribution, supply chain, and product operations being the top priorities, while traffic and group leaders are just the tip of the iceberg. Not to mention that community group buying is not a victory of traffic; Pinduoduo is also not a victory of traffic but a victory of the entire chain driven by supply chain. Huang Zheng said that if users have more planned purchasing, the supply chain becomes more efficient, costs and prices drop, which in turn stimulates purchases. This indicates that Pinduoduo's design integrates traffic around the supply chain, with group buying and WeChat channels serving supply chain efficiency. Community group buying is even more so. -04- Competition in Community Group Buying Community group buying is currently the only business model that can scale fresh produce across all categories and is superior in cost and efficiency models to similar formats. On this basis, community group buying can gradually expand categories. Supermarkets, farmers' markets, mom-and-pop stores, fresh produce e-commerce B2C, front-warehouse, store-warehouse integration, and e-commerce are all within the sphere of influence of community group buying. 1. Supermarkets The decline of the supermarket format is evident. Community group buying eliminating supermarkets' fresh produce business would be equivalent to declaring the death of supermarkets. It is expected that within the next 2-3 years, supermarkets will significantly decrease, gradually evolving toward high-end, dining-experience-oriented supermarket formats. 2. Farmers' Markets & Mom-and-Pop Stores Farmers' markets and mom-and-pop stores are the main battlegrounds for fresh produce, relying on their labor and hard work to reduce costs and prices. Community group buying matches them in cost, price, and quality. As this hardworking generation ages, labor costs rise, and capital supports community group buying, this format will gradually decline. 3. Other Online Fresh Produce Formats Fresh produce e-commerce, front-warehouse, and store-warehouse integration have limited scale, and even if they scale up, they won't affect the overall picture of community group buying. These formats will move toward mid-to-high-end, but in the long run, once community group buying stabilizes its base, it will gradually encroach on the mid-to-high-end market. 4. E-commerce Due to traffic shifts, some standard products from e-commerce will also be diverted to community group buying platforms, so e-commerce is also within the sphere of influence. Community group buying can go deep in a few categories, capture traffic, and gradually expand categories to compete with e-commerce. -05- Areas to Explore in Community Group Buying 1. Warehouse Distribution – Regional Scale Benefits The essence of community group buying with consolidated order fulfillment is that when regional and community order density is insufficient, warehousing and delivery costs remain high, and it ceases to be community group buying. Solving regional scale issues and focusing on order density is paramount; otherwise, the essence of consolidated order fulfillment and cost reduction is lost. Order density also helps increase the scale of centralized procurement. In product design, one can refer to the red envelope bike idea from shared bikes, using red envelopes to guide users to ride bikes from remote areas to suitable regions, thereby reducing operational costs. Leveraging regional scale benefits in warehouse distribution can also create regional network effects in products, further optimizing the model. Specific product solutions can be devised by readers. 2. Warehouse Distribution – In-Warehouse Operations, Timeliness, Waste, Cost, SKU Not elaborated. 3. Supply Chain Scale and Efficiency – Group Buying, Centralized Procurement By concentrating categories, a group buying effect is created, expanding single-item procurement scale, improving supply chain efficiency, and reducing costs and prices. This is one of the core reasons for low cost and low price in community group buying. What guides users' purchasing decisions? The most effective factor is price, and the most effective factor for price is scale. Scale and Price So how to increase scale? Aim for supply chain efficiency, design supporting product mechanisms/sales plans, let traffic serve the supply chain, and in turn serve traffic. Take Xiaomi's "focus, word-of-mouth, extreme, fast" mantra: focus means concentrating SKUs to increase procurement scale and reduce procurement costs. Extreme means pursuing lower-cost manufacturing solutions, processes, and suppliers. Word-of-mouth means designing communication methods suitable for the current product form at the sales end. Additionally, Xiaomi initially used a pre-sale system!!! That is, Xiaomi worked on both front and back ends to ultimately create a business model that is cost-effective for users and efficient for the supply chain. I heard a story about a Pinduoduo merchant. They initially had low sales, leading to high shipping costs, high procurement costs, and high selling prices, which prevented sales growth. They entered Pinduoduo with a low-priced bestseller, shipping volume exceeded 100,000, reducing shipping costs by 2 yuan. The 2 yuan saved was equivalent to their entire original profit. Moreover, not only did the shipping cost for that item drop, but all items' shipping costs decreased because of this bestseller, creating an extra profit margin and driving down prices for other products. The bestseller also drove down procurement costs; suppliers of other categories saw the bestseller case and lowered prices to help the merchant boost sales. This shows that what drives e-commerce is not traffic but the backend, including the supply chain; traffic is just a lever. In all businesses involving supply and demand, including community group buying, e-commerce, and offline stores, products and prices are the traffic drivers; buying traffic is putting the cart before the horse. You think Pinduoduo made low-priced goods successful; I believe low-priced goods made Pinduoduo successful. Low-priced goods bring traffic to Pinduoduo, not the other way around. What Pinduoduo does is improve traffic efficiency, such as group buying, WeChat channels, and invite-to-bargain. Supply chain scale and price are twins, influencing each other. Which comes first, the chicken or the egg? How to break this spiral? Common methods include: Channel reduction driven, e.g., initial community group buying players used their wholesale business to directly do retail.
Product differentiation driven, e.g., white-label products, clearance goods.
Activity driven, e.g., promotions by platforms, brands, or distributors.
Subsidy driven, e.g., current practices by Didi and Pinduoduo.
Distributor cross-region sales, exploiting brand owners' different channel policies and distributor demands to find price space.
Pre-sale.
Group buying.
Others. Additionally, to get scale and price moving together, specific product mechanisms are needed to control risks, facilitate transactions, and steer them in the intended direction, such as Pinduoduo's early invite-group mechanism, Meituan's early group buying approach, and Xiaomi's pre-sale system. Community group buying's group buying and group leader system also ensures the dual start of scale and price. In summary, the core of improving supply chain efficiency is to move upstream as much as possible, use mechanisms to replace the information gathering and risk buffering functions of intermediaries, achieve upstream scale production benefits, and feed back to consumers, making them part of the chain. Another Extreme of Supply Chain – Upstream Pulling Downstream Suppose a product has extremely low marginal production costs at scale and strong user demand. Would the most extreme supply chain efficiency and traffic generation be to produce based on production rather than sales? For example, if the marginal production cost is 2 yuan and the normal selling price is about 5-10 yuan, with large potential demand, could we ignore sales volume, produce without restraint, and sell at 2 yuan? Users would naturally be attracted by such discounts. As more such products appear on the platform, users would be significantly drawn in. Of course, such products must meet certain conditions, such as large potential demand, price sensitivity, and significant room for improvement. Fresh produce is a category that broadly fits. Since products themselves are a means of traffic generation, extreme supply chain efficiency is extreme traffic generation efficiency. Huang Zheng said that if consumers have more planned purchasing, supply chain efficiency improves, benefiting both production and consumption. Often, it's not starting from the user side but from the product and supply side, from studying product patterns and supply chain efficiency, initiated by platforms and merchants, using product mechanisms and traffic to connect supply and demand, forming a positive cycle of price and scale. Simply put, upstream pulls downstream, production drives consumption. The limitation of upstream pulling downstream is that production far exceeds consumption, so it can only be implemented on a limited number of SKUs. As long as extreme supply chain efficiency is achieved in key categories or products, consumers will return frequently and develop an impression of the platform as offering good quality at low prices. 4. Supply Chain Predictability – Production Based on Orders The current community group buying model has users ordering one day in advance, with orders cut off at 10 PM. Suppliers deliver goods to the platform's central warehouse, then through various levels of warehouses to pickup points. In this model, the platform achieves production based on orders, but distributors do not, because from order cutoff to delivery to pickup points, goods need to be sent to the platform warehouse for sorting; these 12 hours are used for sorting and delivery. (Actual sorting and delivery times are earlier; procurement is done 1-3 days in advance.) So the platform achieves production based on orders, reducing stockpiling, but suppliers do not, so overall efficiency has not improved. Even if the platform adopts direct sourcing from bases in some categories, it cannot achieve production based on orders. Is there a way to maximize production based on orders across the entire chain, thereby improving efficiency and reducing costs and prices? Supply Side: If the consumption side remains unchanged, solutions can only come from information and logistics. Due to physical space constraints, it's difficult to organize production based on orders across the entire chain within a day. From an information perspective, data and algorithm predictions can guide procurement, but this requires time and data accumulation, which cannot be done in a few years. Consumption Side: The consumption side can be addressed through operations and guiding consumption habits. For example, limited daily traffic-driving products can achieve production based on orders across the entire chain. Generally, traffic-driving products can be sold out, so quantities can be procured N days in advance. In terms of consumption habits, consumers can be guided to develop planned purchasing habits. If consumers can plan purchases 3 days in advance, the backend can further deepen production based on orders and stabilize the supply chain. You might ask how to achieve this? For fixed consumer goods, such as daily chemicals, personal care, and kitchen condiments, users can be encouraged to plan long-cycle purchases. For example, launch a family half-year daily chemical consumption plan, where participating users receive very low prices. Recipes, nutrition plans, and price guidance can help consumers develop planned purchasing habits. Housewives often have difficulty deciding what to cook daily, and their nutritional requirements are increasing. If price discounts are also offered, it can stimulate users to some extent. Of course, this is more suitable for products with large procurement volumes; small-volume products are of little significance. 5. Product Operations Product quality and categories are also significant for users and the business model. Fresh produce is key to attracting and retaining customers in stores and supermarkets, and it is the foundation for driving standard product consumption. This is no exception in community group buying. In terms of categories, the current standard configuration for community group buying is fresh produce + standard products. To capture traffic, fresh produce is needed, and it must be done deeply on a certain number of SKUs. This is the first stage. Later, categories need to be expanded, not emphasizing extreme supply chain efficiency and price advantages, but extreme expansion speed and category breadth, using categories to retain users. In terms of products, data-driven recommendation consumption is one method. Scenario-based product selection planning, product display, and activities are also solutions, such as recipes that pair beef with potatoes. Pinduoduo has already tried product recommendation features, which are necessary in large-scale transactions. In terms of operations, factors such as quality, specifications, origin, and taste of fresh produce significantly affect price, and user awareness is unclear, leaving room for pricing strategies and operations. 6. Group Leader Operations The best way to manage group leaders is to let them make money. As long as group leaders can earn money, they are willing to invest money and labor. The relationship between group leaders and group members is not solid, and there are limited ways to know members. Therefore, certain methods are needed to empower group leaders, help them find more members, and improve conversion and repurchase rates. Possible methods include organizing activities (self-funded or platform-funded), providing additional services (delivery or other services), sending red envelopes, and chatting. If group leaders are not managed, they will not act spontaneously. Product-level support can be provided, such as a collection of group leader cases, new member activities, lucky draws, and even scripts and topics for communication. -06- Three Bottlenecks in Community Group Buying Many people see rapid volume growth as the way to break through in community group buying. Their understanding is simple: order scale determines procurement scale, procurement scale determines price, and price determines order scale. So rapid city expansion and volume growth are core. I can only say this is an outsider's view. They ignore three bottlenecks: Regionality of consumption and supply: Order volume in Hunan Province has little effect on order volume in Sichuan Province. Therefore, focus on regional order volume rather than overall order volume. Local product structure and supply chain also have regional characteristics.
Local warehouse distribution capacity and its impact on user retention: If you rely on subsidies and group leader expansion for rapid volume growth, even if you can sell, can you deliver? If you can't deliver, will subsidized users stay? I believe Meituan and Baidu Waimai have deep experience with this.
Ignoring the impact of fresh produce non-standardization and warehouse operations: Not elaborated here due to confidentiality. First, in community group buying, an order actually means items; each order with 5 items is 5 orders. So even giants' orders are still in the millions. Second, when orders surge, the backend will severely lag; those deeper in the backend understand this better. Finally, no matter the current order volume, the market is still small and just starting. See point 8 for details. -07- The Endgame of Community Group Buying The current bottlenecks determine that community group buying is inevitably a long-term, regionally fragmented project, and I also believe that community group buying will have multiple formats coexisting. The core reason is the complexity of user needs; the complexity of business, products, and participants is secondary. In terms of user needs, users care about price, quality, SKU, and delivery experience. China has a large population with clear user segmentation: most people care about price, some about quality, and a few about delivery experience. To say something uncomfortable, many people think fruits sold at 1-2 yuan per jin on platforms are not edible; being too cheap actually deters these high-quality customers. In terms of user types, official data reveals that China has 500 million middle-class people and 600 million people with monthly income below 1,000 yuan, showing the vast scale and clear segmentation of our user base. Currently, giants will inevitably focus on price to capture the largest user group. This also provides a strategic window for other platforms to compete with differentiation, focusing on quality and delivery experience. In the trillion-yuan e-commerce track, Taobao focuses on SKU, Tmall on quality, JD.com on delivery experience and quality, and Pinduoduo on low price. In the trillion-yuan community group buying track, multiple formats will also emerge. -08- Progress of Community Group Buying Community group buying is still in its early stages, with a significant development period ahead. 1. Market Penetration Market penetration is still very low. The best and longest-running player, Xingsheng Youxuan, has only 2% fresh produce penetration in Changsha, with other platforms even lower. Calculation: Assume Xingsheng Youxuan's annual GMV is 40 billion yuan, fresh produce accounts for 30%, and Changsha's fresh produce accounts for 5% of the national total. Changsha has 8.4 million people, with an average daily fresh produce consumption of 10 yuan per person. 2. Geographic Penetration Nationwide, there are an estimated 34 provincial-level administrative regions, 333 prefecture-level divisions, 2,851 county-level divisions, and 39,945 township-level divisions. Didi, the most aggressive expander, has entered 14 provinces and about dozens of prefecture-level cities, roughly 1/20 of the entire market, and most orders are small. 3. SKU Expansion Current mainstream platforms have fewer than 1,000 SKUs, far from the millions on e-commerce platforms. To reach a trillion-yuan scale, SKUs may need to reach hundreds of thousands to millions. -09- Timeline for Community Group Buying Take food delivery as an example. Food delivery started with Ele.me's entrepreneurship in 2008, experienced 5 years of slow development, and by the end of 2013, Meituan entered, sparking the food delivery war. Half a year later, Baidu Waimai entered, and after 3 years of fierce competition, by mid-2017, Baidu Waimai was sold to Ele.me. Within less than a year, Ele.me was acquired by Alibaba. After another 2 years of Alibaba-Meituan competition, by the end of 2019, Meituan gained market dominance. It took 12 years in total to reach the current situation. Community group buying is more complex, heavier, and slower than food delivery. If we extrapolate from the food delivery path, 2016 to 2020 is just the pioneering period for community group buying, and the market landscape will only be established in the next 5 years. -10- Ecosystem Opportunities in Community Group Buying 1. Suppliers A trillion-yuan consumption channel will give rise to numerous brands and suppliers; fresh produce suppliers will undergo significant changes, with many transitioning from wholesalers to distributors; (fresh produce) suppliers will have more opportunities to reach end consumers. 2. Warehouse and Distribution Providers Shared warehouses and grid warehouses supporting platforms will emerge in large numbers; delivery infrastructure, such as cold chain, vehicles, and drivers, will see significant development. 3. Platform Operators Becoming a store or seller on a platform may be more profitable than being a platform. Don't all think about making money by being a platform; being part of a platform and making money is the key. -11- Ecosystem Building in Community Group Buying 1. The Pervasive Idea of Giants Monopolizing Benefits Current community group buying platforms only focus on themselves and users (focusing on users is also for themselves), ignoring or even sacrificing ecosystem builders such as group leaders, distributors, and brand owners. For example, they put all order stocking pressure on suppliers without any control over orders, maximizing platform interests. If suppliers are ruined, who will play with you? This is a very unhealthy mindset and practice. 2. Giants Cannot Do Without Ecosystem Builders In terms of strength, Meituan, Pinduoduo, and Didi are called giants in the internet world, but in the offline system, in the fresh produce field, and in the brand and distributor ecosystem, they are still participants. They are far from being able to sacrifice others for their own benefit. If they try, they will ultimately harm themselves. Without suppliers, warehouse providers, group leaders, and other ecosystem builders, giants cannot stand alone. 3. Building a Good Ecosystem Is Essential When Mr. Ma started his business, he knew to take care of and rely on sellers, with the slogan "Make it easy to do business anywhere." Even now, with his high profile and some employees' arrogance, he still uses "Make it easy to do business anywhere" as his foundation. Some platforms today start overturning the table before they grow, thinking only of themselves, with ill intentions. Do you really think you can accomplish this relying on yourself and capital? I hope all parties learn from early Alibaba, even if it means supporting one group to defeat another, you must support a group rather than let partners sacrifice for your own success. 4. Building a Good Ecosystem Enhances Competitiveness Platforms that focus on ecosystem builders and help them can improve overall industry efficiency, which in turn enhances their own competitiveness. For example, if supplier stocking and inventory pressure are solved or controlled, suppliers with profits will have more motivation to participate, invest resources in supply chain and warehouse operations, help platforms solve price and quality issues, and enhance platform competitiveness. In summary, for community group buying to grow into a trillion-yuan platform, it must develop a good ecosystem where all parties have their place, share benefits, and develop together, rather than allowing the platform to profit alone and use others as stepping stones. This is not only tyranny but also a root cause of self-destruction. As the ancients said, "If you want to achieve success, help others achieve success; if you want to stand, help others stand." That is the way. Source: Product No Return (ID: yiguojiren) Tips: 400-2000 yuan will be paid for any tip adopted.