Alibaba, Meituan, Pinduoduo Battle: Can Community Group Buying Break the Fresh E-commerce Deadlock?

Source: Whale Business (ID: bizwhale) Author: Da Erwen, Fan Xiangdong. This article is reproduced with permission; for reprint authorization, please contact the original source. The mall-based fresh e-commerce model has hit a dead end, and giants are going all-in on community group buying. Today, news leaked that ByteDance is planning to enter community group buying, reportedly establishing a new business unit named "Jinri Youxuan" or "Jinri Maicai," with operations to begin in central Shandong by late October or early November. Whale Business sought confirmation from ByteDance and received a "rumor not true" response. Although ByteDance's move into community e-commerce is not confirmed, its aggressive push in Douyin e-commerce is evident. Since fresh produce is a battleground for platform e-commerce, if ByteDance commits to e-commerce, it's only a matter of time before it enters fresh produce in some form. Last week, Yiguo Fresh, which had received investments from Alibaba, Suning, KKR, and others, chose bankruptcy reorganization after burning through 6 billion yuan. Founded in 2007, this B2C fresh e-commerce leader was once glorious. Now, amid sighs of regret, one question is unavoidable: Has B2C fresh e-commerce reached a dead end in China, and can fresh group buying integrated with offline channels save the industry? In stark contrast to online mall-based fresh e-commerce, after the pandemic, Tongcheng Life, Xingsheng Youxuan, and Shihuituan successively secured massive financing. Giants like Didi, Cainiao, Meituan, Alibaba, and Pinduoduo have also recently announced entry into the community group buying market. Once heavily criticized, community group buying has suddenly become the market's focus. After the baptism of the pandemic, the community group buying landscape is becoming clearer. The logic of this business overlaps with FMCG B2B, and giants with abundant small store resources are gearing up.

-01- Pandemic Reignites "Group Buying" Passion Community group buying's basic business model: platforms recruit group leaders (mostly stay-at-home moms and convenience store owners) in residential communities. Leaders operate WeChat groups, pre-sell vegetables and fruits, and use mini-programs to collect orders for the day, with centralized delivery the next day. Leaders earn a commission based on transaction volume. The earliest reported community group buying appeared in 2016, the same year Pinduoduo used "group buying" to tap into WeChat's private traffic and enter the public eye. In Changsha, Hunan, platforms like Niwonin appeared, achieving 10 million yuan in net profit that year. Community group buying gradually spread from Changsha nationwide. The iteration and optimization of WeChat mini-programs truly triggered its explosion. Users could order via mini-programs, group scenarios were more efficiently developed, leaders no longer needed manual order recording, and companies could analyze data from more dimensions and use more operational tactics to attract users. In mid-2018, numerous community group buying platforms secured funding, with total financing reaching 4 billion yuan in just half a year, involving star capital and top internet companies. Local platforms like Linlinyi, Dailuobo, Shihuituan, and Shixianghui became stars in the fresh produce track, with entrepreneurs flooding in, gradually fermenting into the second "Thousand Group War" in Chinese internet history. However, by 2019, negative news about multiple leading community group buying players emerged: Meicai's Meijia Maicai withdrew on a large scale, Miss Fresh's Meiri Yitao faded away, startup star Squirrel Pinduoduo cut staff by 80%, Dailuobo faced capital chain rupture and bankruptcy reorganization, and Niwonin and Shihuituan merged for warmth... The industry gradually cooled. The pandemic brought a turning point for the community group buying track. During this special period, this business model integrating fresh produce, home delivery, and private traffic once again became the industry's focus. Zhang Ji (pseudonym), an industry insider, said the pandemic greatly educated consumers, accelerating the community group buying track by at least three years. During the pandemic, various offline retail operations stalled, relying entirely on e-commerce for daily supplies. Moreover, during the Spring Festival, logistics networks halted, with only JD's local warehouses maintaining basic delivery. Fresh e-commerce platforms like Miss Fresh and Dingdong Maicai, based on the front-warehouse model, maintained supply but faced demand exceeding supply. (Community group buying business model diagram, cited from China Merchants Securities report) In terms of fulfillment timeliness, community group buying's next-day delivery sits between ordinary online shopping and instant delivery. Ordinary online shopping has lower timeliness requirements, with fulfillment typically taking 3-5 days and a wider product range. Instant demand focuses on immediacy, typically requiring front warehouses or nearby stores, with one-hour delivery and higher costs. With residents staying home, they can accept planned purchasing with next-day or multi-day delivery, giving community group buying room to operate. Zhang Ji noted that after the pandemic ended, order volumes dropped significantly, but the pandemic led more people to try this shopping method. The main audience for community group buying is stay-at-home middle-aged and elderly people, who accept next-day delivery and 5-minute self-pickup to save money. More critically, retail store owners who experienced the pandemic are eager to find online opportunities. Community group buying is well-suited for community grocery and fruit stores to leverage in-store or existing group traffic, helping owners maintain customer relationships and boost both online and offline business.

-02- Giants Enter Group Buying: Can It Break the Fresh Produce Dilemma? Currently, the leading community group buying players still operating normally are mostly backed by internet giants. In July, Shihuituan and Xingsheng Youxuan completed C+ rounds, having been invested by Alibaba and Tencent respectively. Tongcheng Life, which merged with Linlinyi, and Shixianghui also have Tencent backing. Beyond investments, internet giants have begun to enter the field directly.

On July 7, Meituan officially announced its entry into community group buying, launching Meituan Youxuan to expand its vegetable business to community convenience stores, followed by organizational adjustments to elevate the strategic position of its group buying business.

At the end of July, Alibaba was reported to be preparing a new community group buying department under its Retail Link business unit, with Zou Zhijun, former founder of Miao Life, as head, reporting to Lin Xiaohai, General Manager of Retail Link.

Suning launched Su Xiaoning in 2019, and JD launched Youjia Puzi, leveraging their self-operated platform supply chain advantages.

In March, Pinduoduo announced the launch of its group buying tool "Kuai Tuantuan," entering the community group buying market via a tool. In August, Pinduoduo announced a 1 billion yuan subsidy to launch its community group buying project "Duoduo Maicai," touted as a "CEO top-priority project."

In June, Didi began piloting its community group buying project "Orange Heart Youxuan" in Chengdu, stepping outside its ride-hailing domain to test e-commerce. According to LatePost, Alibaba has divided its efforts into four fronts—Ele.me, Retail Link, Cainiao, and Hema—exploring community group buying, with an internal horse-race mechanism. Among them, Hema is the most promising. In mid-September, Alibaba CEO Daniel Zhang announced the establishment of the Hema Youxuan business unit under the Hema business group, led by Hema President Hou Yi, reporting to Dai Shan, President of Alibaba's B2B business group. Regarding the giants' rapid entry, Zhang Ji believes they see a way to make money, but it's not a harvest, because "community group buying has a low threshold, easy to enter, but difficult to scale; reaching provincial level is a completely different difficulty. Players who have survived to this point have relatively healthy cost structures." Moreover, the community group buying market is still in its early stages. "Last year, the largest player, Xingsheng Youxuan, had transaction volume of 10 billion yuan; the second to tenth players totaled about 25 billion yuan. Including scattered players, the current market size is only about 40 billion yuan, with relatively low penetration," Zhang Ji said. (Community group buying profit model forecast chart, cited from China Merchants Securities report) Similarly, community group buying leaders are not highly loyal and won't stick to one platform. Simply put, leaders' product promotion is CPS commission-based; they choose platforms offering better discounts, more activities, and higher commissions. From an industry perspective, competition in first- and second-tier markets is fierce, but giants have other retail formats there, and young people are not the main consumer group for community group buying. There's no need to start in a red ocean; they should first expand in lower-tier markets.

-03- Starting Point: Group Leaders; End Point: Supply Chain In the community group buying model, group leaders serve as the intermediary connecting platforms and consumers, making them a key resource for platforms. Essentially, community group buying is an S2B2C business. The key to community group buying's low transaction costs, or the viability of the model, lies in leveraging group leaders' personal community and social resources to serve end consumers. The difference from social e-commerce like Yunji is that leaders' resources must be highly localized to facilitate consumer self-pickup. This way, platform logistics can deliver to a store once to meet dozens of households' needs, reducing costs. The planned nature also makes fresh produce a more competitive category in this channel. The self-pickup requirement makes small store owners the main group leaders. For example, Xingsheng Youxuan now cooperates with 300,000 stores, and community group buying is an incremental business that helps their original operations. Compared to stay-at-home moms, who are the main force in social e-commerce, small store owners have a need to bring traffic to their stores and increase income, so they are less likely to churn after subsidies end, making them more stable. This is why e-commerce giants like Alibaba enter community group buying through B2B businesses (Retail Link, RT-Mart e-Lufa), which already serve small store owners. Chen Ying of Shihuituan also stated in an internal letter in mid-2020 that they aim to build 3 million self-pickup points. It's foreseeable that, like FMCG B2B, small store owners will become a resource contested by community group buying platforms. The key is that community small stores have limited service capacity. Both community group buying and FMCG B2B platforms aim to empower small store owners, inevitably leading to some degree of substitute competition. Imagine if Meituan's community group buying business replicates rapidly nationwide; the accumulated small store resources would also benefit Meituan's B2B expansion, posing a potential threat to Alibaba's B2B business. This is one reason giants must do community group buying. Perhaps due to model conflicts, Xingsheng Youxuan is completely independent of Furong Xingsheng. Community group buying and small store operations differ in product selection and costs. Moreover, Tmall stores have franchise thresholds like Furong Xingsheng, so Alibaba might also create an independent community group buying platform separate from Retail Link. Looking back at FMCG B2B competition, cost control is the bottom line for survival and development, and the same applies to community group buying. Fresh produce accounts for about 30%-40% of community group buying transaction volume, but platforms can transfer pre-sorting losses to suppliers through non-purchase-sale methods. Besides paying group leaders around 10% commission, the largest rigid cost is logistics. Zhang Ji also stated that the factor limiting community group buying market size is not traffic but logistics: "It's easy to make people aware, but truly placing orders and fulfilling is difficult." Warehousing and distribution require real capital investment, and product supply and fulfillment capabilities will become key in competing for group leader resources. The key to profitability for FMCG B2B platforms serving small stores is warehousing and distribution costs, not product price differences or value-added services. In a fully competitive community group buying market, victory will likely be determined by cost-saving capabilities.