At the start of 2020, affected by the pandemic, people's activity radius across the country was greatly reduced. The once bustling streets became quiet, commercial complexes closed their doors, and staying at home became the "main theme" of most people's lives. Affected by the pandemic, many retail enterprises suffered heavy losses, but while bringing impact, the pandemic also forced businesses to adjust and evolve to a certain extent, with more and more physical retailers and even brands beginning to try the community group buying model. Incomplete statistics of retail enterprises include: Liangpin Shop, Mengniu, Qianji, Zhou Hei Ya, Crown, Cai Linji, Craftsman Bread, Simei Baozi, etc. They have successively launched contactless community delivery, with the slogan "Let citizens stay at home and still eat the most missed delicious food." In addition, many community residents spontaneously established community group buying groups based on residential areas and not for profit. In epidemic areas, local governments and institutions also used community group buying to deliver vegetables and other supplies to communities... Overnight, all e-commerce and retail models seemed to become "community group buying." It can be said that led by the government, assisted by property management, and with all e-commerce helping, the whole country is being educated on this community group buying model. "Community group buying had a user base before; this time more consumers have learned about and participated in it. If they continue to buy groceries online for a period of time, it may change consumers' future fresh food purchasing habits. Coupled with the official endorsement recommended by government agencies, this consumption method will become increasingly widely accepted by consumers," said the person in charge of JD Youjia Puzi. According to a person close to Xingyou Preferred, during the epidemic, the order volume of a cooperative store of Xingyou Preferred increased by 300%, and the number of new users was about 4 times the usual. Xiong Bin, founder of Yun Cai Yuan, also told reporters that during the epidemic, the community group buying business of Yun Cai Yuan increased by about 4 times. The rise and favor of community group buying is also closely related to its model itself. From the platform perspective, community group buying introduces the concepts of "community" and "group leader." The platform hires group leaders (mothers or small store owners) and provides them with comprehensive support in products, logistics, systems, operations, branding, and after-sales. Based on community neighborhood relationships, group leaders maintain community resident users and are responsible for building and operating groups, recommending products, sales and distribution of goods (last-mile delivery), and after-sales service, effectively reducing costs in customer acquisition, marketing, and fulfillment. Taking fresh food e-commerce as an example, whether it is the front warehouse model or the Hema model, the logistics cost to complete an order is usually more than ten yuan. Based on an average order value of 50-80 yuan, the fulfillment cost for logistics alone is as high as 15%-20%. Secondly, for the platform, the cost of acquiring new customers is also high; sometimes acquiring a new transaction user costs 100-200 yuan. In addition, retaining users through marketing methods such as coupons means that customer acquisition and marketing costs in many e-commerce companies also account for 10%-15% of overall sales. In an e-commerce company, the combined costs of customer acquisition, marketing, and fulfillment generally account for 20%-40% of sales, which is also why many e-commerce platforms find it hard to make money. In the community group buying model, these three tasks—customer acquisition, marketing, and fulfillment—are all borne by the group leader, solving the 20%-40% cost in the original e-commerce model with the group leader's 8%-10%. "It seems that the commission given to the group leader is high, but in fact it is a very cost-effective thing." "Group leaders" have always been the core of community group buying and have also been criticized as an unstable factor. How to maintain the stickiness between group leaders and the platform, prevent group leaders from being poached, and even guard against group leaders running away with traffic are almost issues that every community group buying company needs to consider. This involves various issues such as benefit distribution, value output, and traffic control. In order to recruit as many high-quality group leaders as possible, some companies even squat at competitors' warehouses to track them, infiltrate their group buying groups, and even sell group leaders' contact information at marked prices in internal channels. On the other hand, community group buying is actually a very long and complex chain from goods to supply chain and organization. Some group leaders may go out on their own and, in the short term, may obtain higher gross margins through information asymmetry, but in the long run, this model is unlikely to be completed by individuals or small organizations because users ultimately look at service, quality, and cost-effectiveness, and small teams find it difficult to obtain the same low prices as large platforms due to scale issues, cannot guarantee long-term supply chain stability, and thus cannot maintain long-term stable user experience output. Under the pandemic, with communities closed, the connections among community residents have become closer, and community group buying has become popular again. However, with the lifting of the departure restrictions from Wuhan on April 8 and the gradual relaxation of community control measures, the future direction of community group buying still remains highly uncertain.
E-commerce & Instant Retail · Industry Trends
After the Pandemic, Where Will Community Group Buying Go?
At the start of 2020, affected by the pandemic, people's activity radius across the country was greatly reduced. Many retail enterprises suffered heavy losses, but the pandemic also forced businesses to adjust and evolve, with more physical retailers and even brands beginning to try community group buying. This model has gained user base and may change consumers' future fresh food purchasing habits.
