---
title: "After a Year of High Fever, Community Group Buying Cools Down Dramatically"
description: "The community group buying landscape has changed dramatically in just one year, with Tongcheng Life declaring bankruptcy and other players like Shihuituan and Chenxin Youxuan contracting to survive. A once red-hot sector has rapidly cooled, exposing numerous underlying problems."
author: "陈杨园"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2021-10-12"
language: "en"
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# After a Year of High Fever, Community Group Buying Cools Down Dramatically

> The community group buying landscape has changed dramatically in just one year, with Tongcheng Life declaring bankruptcy and other players like Shihuituan and Chenxin Youxuan contracting to survive. A once red-hot sector has rapidly cooled, exposing numerous underlying problems.

Source: Baobian (ID: baobiannews) Author: Chen Yangyuan Editor: Xing Yun

**The community group buying landscape has changed. In just one year, community group buying has fallen from its peak, Tongcheng Life declared bankruptcy, leaving a mess behind, while Shihuituan and Chenxin Youxuan continue to shrink and cut losses. Before that, many small and medium-sized enterprises had quietly collapsed. After a wild sprint, community group buying has rapidly cooled, and many problems have surfaced.**

When competition in community group buying was at its most intense, Liu Hua called himself and his team the "daredevils." Even in the cold winter night wind, they would ride out on motorcycles, rushing to various stations, racing against time.

Liu Hua was a ground promoter for Chenxin Youxuan in Chongqing. Looking back, it feels like a long time ago, but it was actually less than a year. Back then, the community group buying track was crowded with players. From mid-2020 to the end of the year, the atmosphere was thick with the smell of gunpowder, as everyone was building momentum for the key node of the Spring Festival.

The "old three groups"—Xingsheng Youxuan, Tongcheng Life, and Shihuituan—which had experienced industry ups and downs in 2019, validated the vitality of community group buying during the pandemic in early 2020, and also stirred the ambitions of internet giants for community group buying.

Starting in June 2020, Chenxin Youxuan, Meituan Youxuan, and Duoduo Maicai, backed by Didi, Meituan, and Pinduoduo respectively, refreshed the depth of the lineup month by month, exchanging subsidies for users and conquering territory.

The "old three groups"—Xingsheng Youxuan, Shihuituan, and Tongcheng Life—also received unprecedented attention, with other capital placing bets.

In July 2021, Tongcheng Life declared bankruptcy, becoming the first star company to apply for bankruptcy in the 2020 community group buying war.

Subsequently, Shixianghui saw multiple senior executives leave, and the founder turned to convenience store business; Shihuituan, one of the "old three groups," experienced layoffs and closed business in 21 cities.

At the same time, Chenxin Youxuan also entered a retreat phase, **and the wave of community group buying raised by internet capital began to recede.**

The Sichuan-Chongqing region has always been Chenxin Youxuan's most important base and source of pride.

Liu Hua told Baobian that in this region, business is not as good as when it was burning money at the start. "Recently, some group leaders have reported that our quality is not good. **This was originally our pride, but now it's a bit of a slap in the face.**"

To outsiders, the bankruptcy of Tongcheng Life is a landmark event in the evolution of the industry landscape, with mid-tier players reshuffling.

Many practitioners left the industry after experiencing business cooling, city withdrawals, and other upheavals. The foundation of the future imagination of the community group buying market has not been completely destroyed, but in their view, **winter has come, and leaves are beginning to fall.**

**The Great Retreat Begins**

"Newly opened groups have no buyers, and the goods purchased are of poor quality."

The photo of a sweet potato with sprouts sent by a group leader made Liu Hua feel uneasy.

The news of Chenxin Youxuan closing cities in his phone was not as vivid as this photo. Liu Hua was still trying to maintain his daily work as a ground promoter, giving confidence to group leaders and promoting their activity and order volume, but he himself found it hard to shake off the frustration behind this photo. He said: "**Our most proud advantage in the quality of fruits and vegetables is gone.**"

In the second half of 2021, community group buying changed dramatically, with players like Tongcheng Life, Shihuituan, and Shixianghui beginning a great retreat.

Chenxin Youxuan, which had previously carved out a path with platform traffic, capital advantages, and quality reputation, also entered a contraction period. Multiple media reports said that Chenxin Youxuan's previous 9 major regions and 31 provinces were merged into 3 major regions and 9 provinces.

City closures and warehouse withdrawals are underway. Since early September, Chenxin Youxuan first closed third- and fourth-tier cities, then provincial capitals.

A check of the Chenxin Youxuan app by Baobian showed that as of September 25, pickup points in Anhui, Guangdong, Guangxi, Hainan, Heilongjiang, Hubei, Jiangsu, Jiangxi, Jilin, Liaoning, Shandong, Shanghai, Tianjin, Tibet, and other places could no longer be searched. Many grid warehouses, shelves, and delivery vehicles left idle after Chenxin closures were put on second-hand trading platforms.

Currently, there are still many active pickup points in Sichuan, Chongqing, Hunan, Gansu, Inner Mongolia, Ningxia, Qinghai, Shanxi, Shaanxi, Xinjiang, Yunnan, Guizhou, Zhejiang, and Fujian.

**In Beijing, the newly relocated headquarters of Chenxin Youxuan, although a small number of pickup points can still be searched, all products are shown as out of stock.**

The community group buying war is similar to the thousand-group war, food delivery war, ride-hailing war, and bike-sharing war in the history of internet company development.

Huachuang Securities summarized in its research report: **From the player perspective, several wars have gone through the stages of "heroes rising together," "market clearing," and then "two or three oligarchs."**

**Market clearing: companies that neither have the ability to generate cash nor can continue to receive transfusions began leaving the table from early 2021.**

Kaola Maicai announced in February that it would suspend its Nanjing business; Yipin Daojia announced in March that it would suspend its Nanjing business; Shixianghui announced in April that its Jiangsu business would be merged into Shihuituan, with loss-making cities entering the station closure stage. The industry's elimination rate accelerated sharply.

In July, before summer had ended, the old head of community group buying, Tongcheng Life, announced that the company's capital chain had broken and it decided to apply for bankruptcy, opening the "first bankruptcy liquidation case in community group buying."

According to LatePost reports, Tongcheng Life had tried to find financing and seek acquisition for self-rescue before bankruptcy, but contacts with multiple companies were unsuccessful.

More than a month later, Shihuituan, which had aggressively expanded in the "hundred-group war" of community group buying startups in 2018 and acquired "Niwo Nin," announced that some business areas with lower efficiency would undergo "bold reforms" and contraction.

Subsequently, Shihuituan closed business in 21 city clusters nationwide, retaining only the Central China territories of Hunan, Hubei, and Jiangxi.

Even Xingsheng Youxuan, with the most solid foundation, could not withstand the impact of Meituan Youxuan and Duoduo Maicai.

36Kr reported that in June this year, when Xingsheng Youxuan's monthly order volume was 8-9 million, Meituan Youxuan and Duoduo Maicai had already exceeded 24 million orders, falling behind the internet giants in terms of city opening speed and order growth.

**The shift from burning money on subsidies to pursuing profitability accelerated Chenxin Youxuan's instability.** After nationwide contraction, Chenxin Youxuan retained its Sichuan-Chongqing base, hoping to leverage local retention to unlock the future possibilities of community group buying.

The Sichuan-Chongqing region is Chenxin Youxuan's last core base. After officially launching its community group buying business in June 2020, Chenxin Youxuan first broke through in the Sichuan-Chongqing region, achieving the number one order volume.

A ground promoter in Chongqing told Baobian that Chenxin Youxuan's business in Chongqing is still progressing, but the daily order volume of the groups he opened in September is not optimistic. "Wave after wave of new user acquisition, but there is no user retention. Now group leaders are all taking advantage of Pinduoduo."

To maintain the assessment performance of ground promotion work, he and his colleagues need to spend a lot of energy finding people to help with fake orders.

Chenxin Youxuan's survival crisis continues. The above-mentioned ground promoter talked about internal discussions about how long Chenxin can survive in the Sichuan-Chongqing region: "We think this year should be fine, but next year is hard to say."

**When Giants Burn Money, Is It "Gold Everywhere"?**

2020 was the year when the community group buying track experienced a big wind.

The pandemic accelerated business expansion, capital poured in, and competition was fierce. That year, Shihuituan raised funds four times, with a cumulative amount of $1.215 billion. After Xingsheng Youxuan raised $800 million in July 2020, its valuation reached $4 billion.

After the internet giants entered, **they used their expertise in "fast beating slow," frantically burning money to exchange for scale, replacing the time accumulated by the industry.**

Tomatoes for 0.01 yuan, eggs for less than one yuan per box, and other items flooded major platforms. The amounts for rewarding group leaders and subsidizing new users kept rising, stimulating the nerves of every practitioner.

From C-end users and group leaders to grid warehouses, warehousing and distribution, and procurement, every link felt the madness of capital.

"There is a three-yuan reward for attracting a new user. A colleague of mine directly ran into a university, attracted hundreds of college students, and earned thousands of yuan in a day." Li Ya recalled to Baobian that at the end of 2020 in Kunming, community group buying was "gold everywhere."

Both the "new three groups" and the "old three groups" accelerated the pace of opening cities across the country. The first battles started in second-tier cities, with the Wuhan campaign, Changsha encirclement and counter-encirclement, and then the flames spread to surrounding cities, entering more down-market areas while waiting for the opportunity to attack first-tier cities.

On September 19, 2020, when Li Ya, as one of the first BDs for Chenxin Youxuan's Kunming city opening, started market promotion, Chenxin Youxuan was still the first group buying giant in Kunming. He easily persuaded a group of group leaders who were new to community group buying, opening 10 to 15 new groups every day.

But in less than a month, Duoduo Maicai and Meituan Youxuan quickly entered Kunming, starting the "group opening war."

The **standard group leader profile** learned in training, such as convenience stores and Cainiao stations, soon became insufficient. Li Ya and the leaders of various Kunming areas formed a "flying tiger team" of about ten people, going down to various districts and counties to find more new group leaders. **Even beauty salons and fortune-telling stalls were included in their standards for qualified group leaders.**

In every city, **capital that ignored costs was constantly rewriting the order of community group buying players.** In March 2021, when Shihuituan entered Kunming, Li Ya and many colleagues were poached from Chenxin Youxuan to Shihuituan. He estimated that "50% of the people at Shihuituan's city opening conference were originally from Chenxin."

The effect was significant. In the first week of Shihuituan's Kunming opening, a ground promoter who jumped from Chenxin opened 37 groups in one day, all of which were old group leaders from Chenxin.

In Wuhan, in July 2020, the commission for a Shihuituan ground promoter to secure a group leader was only about 80 yuan. Four months later, Meituan Youxuan and Chenxin Youxuan quickly raised this number to 120 yuan, 130 yuan, and 165 yuan.

Duoduo Maicai also used this method to impact the territory of the "old three groups."

36Kr reported that when Duoduo Maicai opened in Wuhan, it poached almost all the employees of Xingsheng Youxuan's Wuhan central warehouse (Warehouse 3) within a few weeks, with salaries 2-3 times higher. As a result, Xingsheng Youxuan's central warehouse was forced to close for half a month.

Wang Fei began operating a grid warehouse for Chenxin Youxuan in Chongqing in December 2020. The initial investment and deposit for a grid warehouse were about 200,000 yuan, and he and several friends jointly invested.

At that time, the community group buying craze was extending from grabbing group leaders and users to grabbing warehousing and distribution.

During "Double 11," some cities saw order surges, making new entrants realize that backend fulfillment could not keep up, which would only accelerate the consumption of consumer trust. **Community group buying platforms tried to make up for fulfillment shortcomings with denser grid warehouses.**

In the first month of Wang Fei's grid warehouse operation, it achieved an average daily order volume of 10,000 orders, and even the drivers needed for distribution were in short supply.

Duoduo Maicai and Meituan Youxuan were simultaneously competing for drivers. Wang Fei needed to hire 10-15 drivers every day, and when transporting goods to group leader stations, he even had to keep raising prices, with driver prices rising from 240 yuan per trip to 280-320 yuan per trip.

At the end of 2020, Shihuituan announced a $196 million financing, Xingsheng Youxuan accepted a $700 million investment from JD.com, Pinduoduo invested one billion yuan in subsidies, and Didi CEO Cheng Wei said "Chenxin Youxuan's investment has no upper limit." Large amounts of money were thrown into this hot war without blinking. **"Thick blood" became the key for giants to intimidate opponents.**

**The Spring Festival Battle: The Last Carnival**

No one expected that, looking back, the community group buying during the 2021 Spring Festival had a flavor of doomsday carnival.

Qin Fang was an operations and maintenance staff member for Chenxin Youxuan in Hengyang, Hunan. From the local opening of Chenxin Youxuan in November 2020 to the Chinese New Year, the group leaders he managed had a total daily order volume of several hundred, with strong momentum. The operations and maintenance team kept growing, and at its peak, he had more than 100 colleagues in this small prefecture-level city.

But he didn't expect that "suddenly after the New Year, it didn't work."

After the Spring Festival, the peak demand season for community group buying ended on one hand, and more importantly, **subsidies were reduced.**

Subsidies had to recede. On March 3, the State Administration for Market Regulation believed that Chenxin Youxuan, Duoduo Maicai, Meituan Youxuan, Shihuituan, and others "dumped at prices below cost to squeeze out competitors or monopolize the market," and imposed maximum fines of 1.5 million yuan on all of them.

**With stricter regulation, the giants' frantic money burning was forcibly cooled down.**

In fact, another reason for this maximum fine was that as early as December 2020, the State Administration for Market Regulation had proposed "nine prohibitions" on community group buying product prices, market monopoly, and competition restrictions, but more than two months later, regulators found that platforms had only reduced subsidies and had not fully rectified.

Li Ya experienced the wavering and struggle of community group buying in these two months regarding regulatory requirements.

After the regulatory requirements were issued, Chenxin Youxuan tried to reduce subsidies. The Yunnan senior management proposed an attempt to achieve positive gross margin by raising prices on many products.

**The decline in order volume immediately defeated Chenxin Youxuan's acceptance capacity.** Before December was over, the general manager of Chenxin Youxuan's Yunnan region received a temporary phone call while on a trip to Dali, asking him to return for a meeting.

The next day after the meeting, Li Ya learned that he had left his post in Yunnan, and a manager from another province was parachuted in to take over.

For community group buying that relies on burning money, **those who first give up subsidies to pursue profitability also encounter pressure earliest.**

The newly appointed manager proposed a goal of "doubling order volume within a month." The previous method of encouraging group leaders and customers to take advantage of subsidies was hard to make work. "We turned to a worse direction—salespeople started to fake orders themselves," Li Ya said. In this way, they completed the Yunnan region's set goals for that month.

After the "subsidy reduction" was punished with maximum fines, the ground promotion assessment system in Kunming in March **changed from sales order volume to sales unit price, and the daily GMV of ground promoters became an important indicator affecting wages.**

The ideal outcome of this strategy shift was to filter out orders that were just taking advantage of subsidies, allowing users with long-term needs for community group buying to grow.

But the turn was difficult. For Li Ya and his colleagues, **this was just another way of "faking orders."** When headquarters began pursuing GMV, **the platform first made a shift in categories.** Some low-priced snacks were taken off the shelves, and more high-priced items like rice and cooking oil were put on.

Rice and cooking oil, with high demand and long storage periods, became the first choice for ground promoters and group leaders who hoped to earn commissions by faking orders and reselling goods.

After losing the compliance of low-price subsidies, the way community group buying solved problems with "subsidies" did not change.

Qin Fang told Baobian that after the reduction in product price subsidies, Chenxin Youxuan's rewards for opening new groups were increased. In March, he ran more than 100 kilometers every day to find new group leaders, and his salary soared to 20,000-30,000 yuan a month.

But he also saw the weakness of the industry this month. The wave of rewards driving group leaders and ground promoters made him suddenly doubt: Are there really that many C-end users with genuine needs?

**The demand bubble brought by subsidies can disappear in an instant.**

In July, Didi faced a regulatory crisis, and related apps were taken down. Chenxin Youxuan lost its traffic entry point, and the recovery momentum after the high-subsidy group opening policy also plummeted. When Qin Fang explained Chenxin Youxuan's sudden fall, he returned to the story of burning money: "Didi is unable to transfuse blood, and Chenxin's confidence is gone."

**Fleeting Discounts, Fleeting Users**

In Chen Xin's view, the problem appeared even earlier.

Before June this year, Chen Xin was a group leader in a community in Shijiazhuang, simultaneously joining multiple platforms including Meituan, Chenxin, Shihuituan, JD.com, and Duoduo.

But when summer came, he voluntarily stopped the platform's community group buying and started his own small-scale group buying for nearby residents.

The main reason that prompted Chen Xin to stop being a platform group leader was the decline in order volume. During the pandemic, his daily income as a group leader was nearly 300 yuan, but by June this year, this income had dropped to 50-60 yuan.

Although platform subsidies for group leaders were still increasing, subsidies were based on order volume, and meeting the target at his pickup point was unstable.

**Although every community group buying platform promotes discounts, in the ups and downs of the money-burning contest, price advantages cannot be stably maintained.**

A group leader represents several platforms, and users coming to pick up goods can naturally compare. Often, a platform that opens later burns money to impact an already established platform, and then a platform that newly raises subsidy policies impacts other platforms again. "**Fleeting discounts, fleeting users.**"

Quality, supply chain, and service were all placed behind subsidies and order volume.

In Chen Xin's observation, Duoduo Maicai has obvious price advantages but poor quality and high after-sales rates; Chenxin Youxuan's group leaders attract new users quickly, but the product supply chain improves slowly, often with category shortages. Every community group buying platform has fulfillment issues.

Based on the experience of several previous internet wars, the war goes through the initial money-burning stage, the mid-game clearing stage of competing on resources like products/supply, and finally enters a stable stage of competing on offline operational capabilities.

**Problems accumulate from the backend to the customer.**

Wang Fei's grid warehouse was deeply affected by uncertain arrival times.

Main warehouse goods always arrived at the grid warehouse in the middle of the night, sometimes at 11 or 12 PM, sometimes at 2 or 3 AM. The main warehouse's sorting and logistics allocation were difficult to complete within a fixed time and could not be predicted.

The most extreme case was when the main warehouse truck was delayed from the expected 1-2 AM to 8 AM before arriving at the grid warehouse. Wang Fei paid the workers overtime for the whole night, and by the time the goods were sorted and loaded out of the grid warehouse, it was nearly noon. Group leaders had to temporarily notify users to change pickup times to the afternoon.

Li Ya experienced even more exaggerated operational mistakes. Shihuituan's first order in Kunming couldn't even leave the central warehouse. That day, after all goods were dispatched, the central warehouse completed sorting in a race against time and even loaded some vehicles, when suddenly someone discovered that the delivery orders for the entire city were printed incorrectly.

The orders had to be reprinted, and the goods were sent out the next day. Users who placed their first orders with Shihuituan experienced the disappointment of "next-day delivery" turning into "day-after delivery." The fresh produce sent out the previous day, after returning to the warehouse for secondary sorting, created loss and quality control issues.

More refined operations mean more manpower and cost investment, but for community group buying platforms mired in price wars, they are already stretched thin.

During summer goods circulation, the main warehouse often places ice packs in insulation boxes to reduce loss during transportation. To shorten the time the insulation boxes are opened, the cost of summer sorting personnel needs to increase.

Wang Fei's grid warehouse ranked among the top in order volume in the Sichuan-Chongqing region. To ensure product quality, he increased many costs for preservation and sorting in summer. But when he calculated, he found that the comprehensive subsidies given by Chenxin were not enough to compensate for his preservation investment.

However, after comparing with grid warehouse owners of other platforms, he helplessly realized that Chenxin's subsidies to grid warehouses were already quite friendly.

Although he still firmly believes that consumer demand for community group buying has been validated, and Chenxin Youxuan has not withdrawn from the Sichuan-Chongqing region, Wang Fei still tried to transfer his grid warehouse.

In his view, the industry is still only trying to compete on low prices, and quality cannot be guaranteed.

**No platform can make up its mind to give up the price war, because that means either slowing down or paying more, and in the process, competitors will have the opportunity to encroach on their territory.** Only the price war is the most effective in the short term, which also means players in the track can only grit their teeth and persist.

Tongcheng Life CEO He Pengyu summarized the external competitive factors of Tongcheng Life's failure in an internal letter. Since September 2020, the community group buying industry has changed dramatically, shifting from an era of "competing on innovation" and "competing on execution" to an era of "competing on capital" and "competing on subsidies."

Competing on capital and subsidies may change the development rhythm and player landscape of the community group buying industry in the short term, but it cannot change the core of the industry, and the flames of war will continue endlessly.

"Everything ultimately has to reach the hands of consumers," Wang Fei said. People come and go amid industry changes. To survive the winter and become a "friend of time," one must first become a "friend of consumers." There is no shortcut in this industry.

(At the request of the interviewees, all names in the article are pseudonyms.)

**Are you "watching" me?**


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