△Add friend, please note community group buying registration Source: ChinaVenture (投中网) Multiple entrepreneurs claim that community group buying will become a trillion-yuan market, and in the future, this field will give birth to its own Meituan or JD.com.
In 2018, considered a year without a trend, an O2O war called "community group buying" is erupting. In April 2018, "VC Queen" Xu Xin of Capital Today led the investment in Xingsheng Youxuan. By August 2018, the community group buying model began to see frantic capital pursuit. In just three months, over 2 billion yuan in capital poured in, with participants including many top-tier VCs: GGV Capital, IDG, Sequoia China, Joy Capital, ZhenFund, etc. Data source: CVSource Besides the big names in capital, the gold diggers are also experienced, mainly three typical types:
Grassroots entrepreneurs from traditional fresh food and retail sectors, familiar with supply chains, local markets, and community relationships;
Internet entrepreneurs chasing the trend, well-versed in traffic operations;
Offline retailers such as convenience stores or supermarkets that fear disruption and actively seek transformation. Multiple entrepreneurs stated that community group buying will be a trillion-yuan market, and in the future, this field will give birth to its own Meituan or JD.com. Some investors also said they hope to find "the next Pinduoduo" in community group buying. Currently, although this market is still in its early stages, it is already showing signs of a melee. Under the fierce battle, a batch of companies have been eliminated. In November 2018, Chengdu community group buying company Xiannüguo announced the cessation of its community group buying business. According to industry insiders, some community group buying companies in Changsha have already seen serious declines in operating profits, with self-rescue measures such as selling off, negative asset transfers, and pivoting to supply chain services. The "Second World War" of Group Buying "If you want to eat apples, you have two choices: one is to go to the fruit store at the community entrance, buy at 6 yuan per jin, and get it immediately. The other is to use a community group buying mini-program, with similar quality, 9.9 yuan for 3 jin, delivered the next morning. Which would you choose?" asked Liu Kai, founder of community group buying company "Niwo Nin". Data proves that most people would choose the second option. Allowing users to eat apples and other fresh produce of the same quality but with higher cost-performance is one of the important scenarios for community group buying. This logic also applies to other categories such as dairy products, rice, flour, oil, grains, daily chemicals, personal care, and beauty products. The current mainstream model of community group buying is: taking the residential community as a unit, recruit community moms or community store owners as group leaders, and create owner WeChat groups; group leaders publish and promote group purchase products in the WeChat group, and consumers place orders through mini-programs; the next day, goods are delivered to the community group leader according to the order quantity, and consumers pick up goods at the group leader's pickup point. Group leaders usually receive a 10% to 15% sales commission. The platform provides support in branding, technology, sourcing, logistics, and after-sales service. In the view of industry insider Wei Mo, this consumer-demand-oriented, direct-from-farm model is logically similar to the common saying in second-hand car e-commerce ads: "Remove the middleman, sellers earn more, buyers spend less." The costs saved by removing the middleman mainly include procurement, logistics, and promotion costs. According to Liu Kai, fresh produce currently accounts for about 60% of "Niwo Nin"'s overall sales. But unlike community supermarkets that usually have dozens of fresh produce SKUs, its platform sells a limited number of categories daily, such as only apples and pears. Because of the large volume, they can purchase in bulk, haul goods directly from the base, with less loss and lower costs. At the same time, goods are delivered directly to the community entrance, and the last mile is picked up by users, greatly reducing logistics costs. "Taking Changsha as an example, we have divided delivery for 600 communities into 46 routes, with each truck serving about a dozen communities. We sort goods by community in the large warehouse, and outsourced logistics personnel deliver goods to the community group leaders. The last mile is picked up by users. In this way, the average logistics cost per order can be controlled within 0.5 yuan, which is difficult to achieve with traditional e-commerce logistics methods," Liu Kai said. Gao Zhengang, founder of Squirrel Neighbor, gave an example: "The cost of a data cable is 2 to 4 yuan, and the market price is 15 yuan. If the purchase volume in a single community exceeds 15 cables, the supply chain can provide free shipping, so the cost per cable will be less than 5 yuan. Then we can sell it for 9 yuan, and the gross margin can still exceed 30%." Under this model, in addition to logistics and procurement costs, promotion costs will also be greatly reduced. Gao Zhengang previously analyzed hundreds of thousands of WeChat groups and found that several types of WeChat groups, such as family and friends groups, company groups, and owner groups, have the ability to drive sales: the first two are not suitable for commercial operation due to strong relationships, but "in owner groups, people naturally share or recommend local specialties, and with high frequency." Therefore, the business model of recommending through owners is feasible. "Two moms living in the same high-end community in Changsha, in most cases, will not have vastly different income levels and spending power. This means that if A uses Gucci, B is unlikely to use Dabao. In this case, A's recommendation to B is often very persuasive." According to Liu Kai, currently over 70% of its users are women aged 30 to 49, with moms making up the vast majority. Through the spontaneous recommendations of moms, the company almost does not need promotion costs. According to him, after "removing the middleman," its fresh produce fulfillment cost has dropped to within 1 yuan, and prices are about one-third cheaper than at the convenience store at the entrance. Even products priced at 8 or 9 yuan can maintain a 30% gross margin. Multiple entrepreneurs told us that without further expansion, they have basically achieved profitability. Among them, several have monthly revenues exceeding 100 million yuan. According to Liu Kai, "Niwo Nin"'s monthly sales have exceeded 100 million yuan, with a compound growth rate of 30%. For each new city opened, it takes about six months to break even. "Community group buying is the first business model in fresh e-commerce that can achieve sustained profitability, and it is one of the few channels in the fresh food sector that has been proven successful, with explosiveness, sustainability, and stability," said Cai Jingzhong, investor in Kaola Select and partner at Galaxy Creation, in a recent interview. Xu Bingdong, managing partner at GGV Capital, believes that if the previous WeChat ecosystem dividend mainly optimized user acquisition and convenient maintenance, the emergence of community group buying has further greatly improved cost and efficiency in the transaction fulfillment stage, making it possible to optimize the single-order model in fresh food transactions. Pinduoduo in the Community? Changsha, a central city, is the most eye-catching "star" in the community group buying trend. Changsha is not only the birthplace of the community group buying model but also the main battlefield for many leading projects. According to industry insiders, there are nearly 100 community group buying companies in Changsha, and it is not uncommon for a single community to have 7 or 8 community group buying companies. Some entrepreneurs believe that this is partly due to the city's strong social entertainment nature, and partly due to its WeChat business (weishang) gene. "Changsha is the base camp of Chinese WeChat business. Those who joined WeChat business in 2016 and 2017 have learned how to sell goods on WeChat. With national regulation, the trend of WeChat business is weakening, but these people will not stop," said industry insider Wei Mo. "Community group buying is more like an upgrade of WeChat business." Gao Zhengang also revealed that Squirrel Neighbor's expansion model currently draws on the management and training system of WeChat business. But the difference is that "WeChat business product selection is particularly unreliable; they dare to sell anything. Community group buying is the opposite; everything sold must be carefully considered." Multiple community group buying entrepreneurs believe that community group buying is not Pinduoduo in the community. Although they also rose in "non-first-tier cities," unlike Pinduoduo, which is heavily criticized for low-end products, "quality control" is crucial to the community group buying model—a major premise for the model to work is the trust relationship among community owners, and the amplification effect of reputation collapse could be a fatal blow to the enterprise. "Some entrepreneurs are just 'wearing the skin of community group buying' to do WeChat business. They sell unknown cosmetics and daily necessities with 'mysterious' sources, purely to make a quick buck and leave; there are also merchants engaging in malicious competition through homogeneous products, engaging in price wars, hurting themselves as much as the enemy. Such a state 'could very likely' ruin the reputation of the community group buying model and industry," Wei Mo said. More startups say that product quality and reputation are crucial to the long-term development of community group buying companies. In Liu Kai's view, selling goods in community WeChat groups, once complaints occur, the chain effect is often very strong. To ensure stable operation and avoid large-scale complaints and group departures, in addition to product quality, a strong operation and after-sales service system is needed. "For example, as long as users say the food doesn't taste good, we will refund first." "Initially, when there were only a few hundred groups, we mainly relied on customer service to help manage the groups. Now our group count exceeds 5,000, so we need a combination of ground promotion, market and operations personnel, and technology upgrades for management. For example, we now set group rules at the initial stage of group creation, specifying what can be said and what cannot. At the same time, we use technology to capture keywords. When complaints appear, the screen will jump directly to the user, allowing customer service to follow up," Liu Kai said. Proactively caring for users and increasing user stickiness is also one of the group operation strategies of these companies. "For example, considering that middle-aged women account for a high proportion of users, their daily worry is what fruit to buy for their family and what to cook. Therefore, group leaders often recommend dishes and show cooking methods in the group," Liu Kai said. As for Squirrel Neighbor, in addition to platform administrators and group leaders, there are also auto-reply robots in the groups. For common questions from owners, such as the location of hair salons or property management phone numbers, the group leader pre-enters yellow page information, and the robot can automatically reply through the mini-program and WeChat group. In addition, its platform also has other life service functions such as second-hand trading and rental services. For example, "renting formaldehyde monitors, water quality monitors, hardware tools, tents, etc., these can empower group leaders." In Gao Zhengang's view, if its platform can bring convenience to community residents and make them feel trust, it will greatly help the long-term operation of its business model. Battle for Moms When free, Liu Kai likes to "lurk" in the company's community group buying groups. But because he only reads and doesn't buy, he has been kicked out of the group many times without realizing it. Managing WeChat groups and clearing out "ineffective users" who only read and don't buy is one of the tasks that "Niwo Nin" group leaders need to complete. In addition, group leaders often hold multiple roles: they are promoters—responsible for "attracting new users," building a 499-person group within a specified time, and conducting regular product promotions; they are the community's courier transfer station; they may also handle after-sales, etc. Among these group leaders, moms account for about 70%, and the remaining 30% are community store owners such as convenience stores and pharmacies. In the community group buying trend, moms and other "surplus labor" have gained new vitality. Liu Kai revealed that the natural advantage of moms is that they are also users, with usage endorsement, making them more credible. "Our current sales rankings in each city, the TOP30 are basically moms, but their income differentiation is relatively high, not as stable as community store owners. The latter's advantage is faster group formation speed, and sales revenue can basically reach above the median." For community group buying startups, "mom defection" may be one of the risks that need to be avoided most. "Moms usually have weaker workplace capabilities. How to train them, manage their turnover, and turn them into company resources rather than costs is very important," Liu Kai said. "In Changsha, there have been many cases of moms running away with WeChat groups," an industry insider told ChinaVenture. Multiple entrepreneurs emphasized that to avoid excessive turnover of group leaders, companies must have their own management and training mechanisms. For example, "Niwo Nin"'s group leader management and training mechanism involves multiple aspects: "In selecting group leaders, we use recommendations from group leaders or members; in the early stage, we teach group leaders to use the system, telling them how to attract new users, increase sales, manage WeChat groups, etc." To retain capable moms and users with purchasing power, when group leaders' monthly sales exceed 30,000, 50,000, and 100,000 yuan, they will enter advanced training stages. "For example, when a mom's sales exceed 30,000 yuan, we will teach them to use data analysis for refined operations. Conversely, moms with long-term sales below 30,000 yuan will be eliminated," Liu Kai said. Under this management mechanism, group leaders who have worked at "Niwo Nin" for more than 3 months have an average sales revenue of over 40,000 yuan, meaning their monthly income is around 4,000 yuan (10% commission). "Some moms do well and sell over 100,000 yuan a month," Liu Kai said. In Liu Kai's view, "Moms' loyalty is higher than imagined. As long as they are given sufficient income, they will not leave. For example, if they earn 4,000 to 5,000 yuan a month, that's more than working." Squirrel Neighbor, located in Shenzhen where competition is not as fierce as in Changsha, increases group leader stickiness through "franchise fee + high commission." "Our group leaders need to pay a franchise fee and bear group management, but they can share 70% of the community transaction profits," Gao Zhengang revealed. Endgame: Separatist Warlords or Unification? "We initially just wanted to expand quietly. But starting from August 2018, this track suddenly became hot. Recently, basically 3 to 5 capital firms contact us every day," Gao Zhengang told reporters. From August to November 2018, multiple community group buying companies announced financing of tens of millions of yuan or more. At the same time, Tencent, Pinduoduo, Hema Fresh under Taobao, Miss Fresh, Meicai.com, and a batch of other internet industry giants also entered the field one after another. Competition in this field is further intensifying. Xu Bingdong, managing partner at GGV Capital, believes that competition in this field is still in its early stages, and many investors are mainly betting on the team. When asked "Community group buying currently shows strong regional operation characteristics. In the long run, will it form a pattern of provincial separatism or a unified large platform?" Ji Bingdong said that the ultimate form is hard to say, and future development depends on new breakthroughs brought by comprehensive competition among all parties. Wang Shiyu, managing partner of Xianfeng Qiyun Capital, an investor in Shixianghui, believes that from the history of China's internet development, this field will definitely not remain in chaos forever. In the future, one company will get enough funding, run data significantly better than others, and then most money will flow into this leading company, whose advantages will become increasingly obvious. Liu Kai, on the other hand, believes that the endgame of community group buying should be one or two platforms dominating, similar to Taobao and JD.com in the e-commerce field. In his view, the fresh produce that currently dominates community group buying has a very long upstream chain, involving many links such as procurement, sorting, logistics and transportation, market promotion, operations, technology, and warehouse management. To achieve rapid expansion and long-term development, companies must achieve full-process order control and provide various demand information databases with price as the core, including ordering, purchase and inventory management, intelligent sorting and weighing, and automatic logistics planning. Facing competition from giants, he believes that the biggest competitiveness of startups currently lies in first-mover advantages: the pitfalls encountered and the series of standardization established in procurement, same-material same-configuration, group leader management standardization, logistics and distribution, etc. Gao Zhengang believes that to survive long on this track, the three elements of "people, goods, and venues" cannot have shortcomings. "If there are shortcomings, they may be eliminated in the first stage. In the next stage, with the help of capital, companies that can effectively connect these three factors may stand out." Tenth B-end E-commerce Inspection - Community Group Buying Changsha Special Session Event time: December 12-13 Event location: Changsha · New Gaoqiao Event flow: Morning of December 12: Community group buying exchange salon
Afternoon of December 12: Kaola Select Hero League Launch Conference
Night of December 12 to early morning of December 13: On-site inspection of Kaola Select logistics center——This time period is the peak sorting period in the warehouse, allowing direct observation and learning of the back-end operation process of community group buying e-commerce Distinguished guests Zhao Bo, founder of New Distribution Tang Guangliang, CEO of New Gaoqiao Liu Chunxiong, famous marketing expert Wang Jun, new retail industry expert Ren Xiaodong, CEO of Mofang Yunxiao Song Fang, partner of New Gaoqiao Cai Jingzhong, partner of Galaxy Creation Chang Ke, co-founder of Kaola Select Welcome distributor friends interested in community group buying to join us to understand and inspect on-site: Organization form 1. Expert exchange salon************2. Company visit
- On-site explanation
- One-on-one communication************5. Actual market case visit Participating distributor friends only need to pay a registration fee of 199 yuan Other expenses are self-paid Long press this QR code or click Read Original to register with one click! Add friend, please note the purpose -END-