For brands, community group buying is truly a mixed bag! From the initial confusion and resistance, to the fear of being too late or missing out, to the troubles caused by various price disruptions after being forced to participate, in the past two years, which other channel has made FMCG brands so conflicted? But now, with giants in chaos, layoffs, unpaid wages, closures, and shutdowns, the remaining platforms are only retrenching and focusing on survival. When talking about community group buying now, it seems only words like "great retreat" and "a mess" come to mind. Some believe that community group buying is no longer a topic for brands, or even a dispensable existence. Is that really the case? Recently, New Distribution learned that some brands are accelerating their efforts in community group buying, not relying on low-price competition, but also effectively solving the problem of offline low-price channel diversion. Their sales have grown 5-6 times, or even 20 times, in just a few months. In a time of high traffic costs and sluggish business growth, this is of great value! How did they do it? To this end, New Distribution interviewed Chen Xin, CEO of Maichun E-commerce, a professional TP (Trading Partner) for FMCG brands in community group buying. Entering the new e-commerce track in 2017, transitioning from B2B to community group buying, Maichun E-commerce is now a professional TP partner for many FMCG brands in new e-commerce channels. What does community group buying really mean for FMCG brands? What pitfalls should FMCG brands avoid when deeply cultivating community group buying? How can FMCG brands turn community group buying platforms into new business growth channels? Chen Xin's sharing is full of insights! 01

A Channel of Doubt

What does community group buying really mean for FMCG brands? According to a recent survey by New Distribution of some FMCG brands, many brands believe that in the long run, community group buying is definitely a channel worth cultivating, but it is not yet a mature channel. Yes, community group buying has always been a channel full of concerns and doubts. There are several reasons for this. First, price stability. Unlike non-standard fresh produce and agricultural products, brands need to consider price stability. From the very beginning, community group buying has been labeled as "low price," and the giants' chaotic battles, rushing in with huge subsidies, have caused many products to be sold at prices below cost. The damage to brands is undoubtedly huge. Second, channel coordination. Online and offline, direct supply and distributors, FMCG products require more channel order than any other category. The combination of online and offline, and the regional mutual penetration of community group buying, puts brands in a dilemma. They cannot miss the fast-growing express, but also must strive to avoid impacting the existing order. It's too difficult! So, when the media loudly proclaims the "great retreat" and "a mess" of community group buying, brands seem to finally breathe a sigh of relief. However, words can create emotional resonance, but they may also obscure the patterns behind the phenomenon: any new thing will go through a process from budding development, to the bubble burst after inflated expectations, to steady development. Community group buying is no exception! When the frenzy fades, we see the remaining platforms retrenching, optimizing supply chains, and focusing on fine management, preparing for a protracted war. This is in fact the beginning of the industry bottoming out and the evolution of community group buying towards a mature and stable model. Since its inception five years ago, Maichun has been focused on the new e-commerce track. Chen Xin told New Distribution that after the industry returns to rationality, brands can find real opportunities here. Many brands have actually realized this, after all, in the current situation of stock competition, relaxing any channel is a gain for competitors and a loss for you. That is unacceptable. The question is, how exactly should you operate on community group buying platforms? Apart from the fear of price-breaking competition and channel chaos, although community group buying has been around for years, many brands are still quite unfamiliar with this model and lack professional operation teams. This is not surprising. Unlike traditional B2C e-commerce, any new e-commerce model, whether B2B or community group buying, requires deep involvement to discover its operational logic and reap the information gap dividend. What is the information gap dividend? 02

Information Gap Dividend

Any new e-commerce model has its unique operational logic. As long as you go deep and keep trying, you can find a model, replicate it, and help brands enjoy the information gap dividend for at least 3-5 years. It was with this idea that Maichun entered the community group buying track. Facts have proven that Chen Xin and his team's thinking was right. In November 2020, Maichun E-commerce entered community group buying and took more than a year to develop a replicable operational model. The brands Maichun took over all achieved high growth without exception: for example, a personal care brand grew from an initial monthly sales of 2 million to 10 million; a grain, oil, and seasoning brand grew from 1 million to 5 million; a liquor brand quickly grew from over 300,000 to 6 million... Maichun E-commerce expects sales of 600-700 million this year, with community group buying accounting for half. What is the key behind the high growth? There are two important points. First, supply chain visualization. All e-commerce platform supply chains are visualized, except community group buying, where you have to rely on your own records. But once you reach a certain volume, problems arise: where are the goods? What is their status? You can't figure it out or take inventory. Many brands fail because they don't control the supply chain well. Maichun E-commerce also stepped on this pitfall at the beginning but quickly realized its importance. They cooperated with Kingdee to develop an internal supply chain system, which allows Maichun to have clear control over the status of all products. Moreover, Maichun also connects with the supply chain departments of community group buying platforms every month and provides relevant suggestions to the platforms. Among the many community group buying TP providers, Maichun is currently the only one that has achieved supply chain visualization, which undoubtedly gives it a great competitive advantage. Second, strategic operation. Many people think that the only way to do community group buying is to compete on low prices. This is actually a misconception. Community group buying platforms have limited shelf space. For example, a platform only lists 1500 products per day, or 1500 slots, and it is dynamically adjusted. Your sales formula on the platform is: Sales = Slot output * Scheduling. Operations should focus on how to increase slot output and improve scheduling. Contrary to our understanding, users are not that sensitive to product prices. Using product combinations and marketing activities to impress customers is far more effective than simply low prices. Of course, this tests your ability in product selection and marketing planning. Behind this is a deep understanding of platform rules, deep insight into consumer needs, establishing an overall marketing strategy, calculating the optimal cost-effectiveness ratio, and then doing continuous activities. If your data is good, you can get continuous scheduling. These two points allow Maichun E-commerce to help brands achieve business growth without breaking prices or engaging in price wars. But brands choose Maichun for other reasons as well. Many brands are troubled by the channel diversion and price chaos on community group buying platforms. An important task for Maichun's national operations is to stabilize the brand's price system on the platform. This mainly relies on two points. First, through joint activities with the platform, eliminate price chaos and even counterfeit goods. Second, through continuous marketing activities to generate slot output, accumulate link weight, and achieve planned growth. The fact that community group buying is starting to develop rationally actually means a dividend for brands. For many brands, they just lack a new e-commerce business unit. What does that mean? Business is getting harder, where is next year's growth point? With channels and business scattered, how can you leverage new channels to create incremental business? If you don't do it, it becomes your competitor's business. Community group buying definitely needs to be done, but how exactly? 03

New E-commerce Business Unit

For brands, sales are one thing, but how can they turn it into a sustainable channel? Can it coordinate with the overall strategy? Many brand owners lack this professional knowledge, but obviously just finding an outsourcing execution team is not enough. Maichun E-commerce positions itself as the brand's new e-commerce business unit. It absolutely does not do white-label products, focusing on customizing operational ideas that fit the brand's characteristics, ensuring prices are not broken and cost ratios are not exceeded, allowing the brand to take root stably in this channel for the long term. Therefore, Maichun has been continuously striving in both quantity and quality. In terms of quantity: let brands see tangible sales growth and see user accumulation in areas where the brand's distribution does not reach. In terms of quality: help brands build long-term business in new channels and achieve coordination with other channels. Why this positioning? This goes back to their early days. In 2017, when B2B was in its development period, Maichun E-commerce took less than two years to surpass traditional TP providers and become the number one in B2B. How did they do it? At that time, Maichun spent half a year going offline, deeply communicating with B2B offline ground promotion teams and local shop owners. They adopted two key methods: one was to link up with the offline ground promotion groups, lowering their posture, making friends with them, and letting them make money; the other was to give gifts to shop owners, such as rice cookers, pressure cookers, Xiaomi TVs, Apple/Huawei phones, using these gifts to drive sales. Traditional TP providers thought, how can e-commerce operations be done like this? But using traffic operation methods to do B2B actually failed. Chen Xin said that later they analyzed why these seemingly simple operation methods were ignored by traditional TP providers. On one hand, they were limited by past thinking. Traffic is not just about resource position operations; traffic operation is about who drives your business, and that is traffic. On the other hand, past success may have made them lose their entrepreneurial spirit, unwilling to do dirty and tiring work. But any new channel, at the beginning, requires doing the hard and tiring work to find a replicable innovative model and enjoy the information gap dividend. So, the Maichun team always reminds itself to maintain an entrepreneurial spirit. For example, in community group buying operations, the early stage was really tough. For about half a year, the whole team slept in the office, understanding channel characteristics, consumer preferences, how to plan marketing cost ratios, how to do activities, what the conversion rate was, and purchasing from other channels temporarily to ensure accurate fulfillment... With the past entrepreneurial and innovative spirit, plus the team's hard work and resilience, Maichun's explosion in community group buying was very rapid. Moreover, Maichun firmly believes in the value of long-termism. For example, now we see Maichun's advantage in supply chain visualization, but this was not accidental. In the early stage, everyone was thinking about quickly increasing volume and grabbing territory, so they didn't have the mind to do this. Later, when things cooled down, there was no motivation to do it either. If it hadn't been for thinking about long-term cultivation from the start, Maichun would not have dug this deep moat. Currently, Maichun has a community group buying team of nearly 100 people, divided into regional supply chain teams and brand-line-based operation teams. We are willing to walk with more brands that want to do community group buying well, seize channel dividends, and firmly believe in long-term value, serving as their new e-commerce business unit, Chen Xin said. 04 Summary In the past two years, community group buying has risen and fallen, capturing people's attention. We often see discussions about which capital entered, which platform closed, which platform retrenched. Many brands wonder: is community group buying viable? Is it worth doing? Chen Xin's sharing actually gives us an important inspiration: community group buying is not a question of whether to do it, but how to do it well persistently. On one hand, under stock competition, relaxing any channel is a gain for competitors and a loss for you. On the other hand, behind the "great retreat" and "a mess" is actually a sustainable channel transforming, and now is the best time to seize this channel dividend. Behind the rise and fall, some brands have taken the lead, laying out and deeply cultivating community group buying through professional operation teams. We hope more brands can discover their own opportunities here. We cannot just watch the show and forget that we should actually be in it.