Click the image above for details Following Meituan's announcement on July 7 of establishing a优选事业部 (preferred business unit) and launching its community group buying service, Meituan优选, targeting lower-tier markets with a pre-order + self-pickup model to empower convenience stores, another Chinese food delivery giant, Alibaba's Ele.me, has recently announced its entry into the community group buying market.
-01- Alibaba's Early Layout In fact, since early 2019, Alibaba has been making several strategic moves in the community group buying track.
1. Hema Alibaba leverages Hema's offline stores to create "Hema Fan Groups," where Hema operations staff act as "group leaders," initiating group purchases and aggregating information within the groups. Hema riders serve as logistics personnel, responsible for next-day delivery. However, the intention of harvesting surrounding customers through store-based development is ambiguous. Industry insiders suggest that for Hema, the real goal is to guide group consumers to shop in-store, and community group buying may just be a facade. Therefore, whether Hema can push Alibaba forward in the community group buying track remains inconclusive.
2. Shihuituan Additionally, Alibaba's investment in Shihuituan, which maintains a GMV growth rate of over 30% and an average monthly GMV of around 500 million yuan, is another major move in the community group buying track. Currently, Shihuituan has established 15 large warehouses nationwide, covering over a dozen provinces and more than 200 county-level markets. Moreover, from the outset of the cooperation, Alibaba integrated 1688.com to provide strong supply chain support for Shihuituan, enhancing its competitive edge against Tencent-backed platforms like Tongcheng Life, Xingxuan Youxuan, and Shixianghui, aiming to reverse the passive situation.
3. Cainiao Post Stations On June 23, 2020, Cainiao Post Stations officially announced that it would join forces with courier companies to increase technology investment, further enhance all-weather logistics service capabilities, and upgrade Cainiao Post Stations by adding services such as group buying, laundry, and recycling, transforming them into digital community life service stations. This marks the official entry of Cainiao Post Stations into the local life services industry, and the new model of logistics + supermarket may bring new thinking to the industry's development.
4. Retail Link In early July, reports indicated that Alibaba's Retail Link began building a community group buying team. Although the specific strategy is unclear, backed by Retail Link's millions of small retail stores, Retail Link has significant advantages.
-02- Stirring Up Again: Ele.me Opens in Zhengzhou A month later, Alibaba has deployed another key player—Ele.me—which has begun recruiting for community ground promotion specialists, community group buying operations, and promotion roles, with the first battle in Zhengzhou, Henan. The Zhengzhou market has never lacked strong players, such as Liancai Wang, Chihuo Gongshe, and Youjing Youtian, but after years of competition, no absolute market leader has emerged, which undoubtedly presents an opportunity for Ele.me. Furthermore, Zhengzhou is the capital of Henan Province, a megacity, and the core city of the Central Plains urban agglomeration. It is an important central city in central China and a national comprehensive transportation hub approved by the State Council. As of 2019, the city administers 6 districts, 1 county, and 5 county-level cities, covering a total area of 7,446 square kilometers, with a permanent population of 10.352 million, an urban population of 7.721 million, and an urbanization rate of 74.6%. The large population base, high population density, and convenient transportation are highly conducive to community business operations, making Ele.me's choice of Zhengzhou well-founded.
-03- Pain Points and Advantages Due to the impact of the pandemic at the beginning of the year, the community group buying track has remained hot, attracting much attention and many new entrants. As a new player, Ele.me has its development advantages but also faces common industry pain points.
1. Pain Points Although Ele.me can learn from other Alibaba "predecessors," as a new player, it will also encounter common industry pain points.
1) Stability and Loyalty of Group Leaders In LBS-based community group buying, the group leader is the interface between the platform and consumers and the main front-end sales force. They hold a large number of community and consumer resources. However, due to the lack of a sound management mechanism, after the platform empowers the group leader, the leader often "runs away" to find their own supply chain or defect to other platforms, easily poached by competitors. In short, they are "unreliable."
2) Service Secondly, services based on communities or mini-programs and offline delivery, which generate consumer interactions, are difficult to manage systematically in community group buying. Pre-sale and after-sale issues are prominent, and many store group leaders lose store customers due to such incidents.
3) Supply Chain To ensure smooth front-end sales, the back-end supply chain becomes crucial. Currently, many platforms focus on fresh and frozen products, which require extremely high supply chain standards to meet the conditions of good quality and low price.
4) Delivery Efficiency Many platforms deliver products to community stores or self-pickup points, where group leaders distribute the products. Delivery is often next-day or half-day, and efficiency still needs improvement. The self-pickup model still does not fully solve the last 100 meters problem.
5) Product Selection Unlike traditional supermarkets, community group buying often relies on one or a few products to go viral. Therefore, insight into product popularity and consumer demand is crucial. Many community group buying platforms fail in product selection, turning the group buying platform into an online mall without viral products, lacking the comprehensive product range of professional e-commerce platforms, and without competitive prices, ultimately leading to closure.
These issues are prominent in the industry and are problems Ele.me needs to continuously address in developing community group buying.
2. Advantages However, backed by Alibaba, Ele.me has several advantages over completely new entrants.
1) Leaning on Alibaba's Big Tree On the evening of August 21, 2019, Alibaba Group Chairman Jack Ma visited Zhengzhou's Centennial Dehua Pedestrian Street, and the news quickly flooded the social media feeds of Zhengzhou netizens. Subsequently, major news emerged. On August 22, 2019, the Henan Provincial Government, Zhengzhou Municipal Government, and Alibaba Group announced a strategic cooperation to leverage Alibaba's technological advantages to accelerate digital economy development, help Henan become a strong digital economy province in China, and strive to make Zhengzhou a leading city in the national digital economy within 3 to 5 years. According to the cooperation content, the Henan Provincial Government will support Alibaba in building a Central Plains regional center in Zhengzhou, establishing a Feitian domestic regional cloud platform, and supporting Alibaba's participation in Henan's digital economy construction. Ele.me's layout in community group buying, backed by Alibaba, has strong advantages. Additionally, the Alibaba Research Institute released the 2019 list of Taobao villages and towns. As of the end of June, there were 4,310 Taobao villages and 1,118 Taobao towns nationwide, with 95 "Taobao village clusters." Among them, Henan has 75 Taobao villages and 44 Taobao towns, ranking 7th and 9th nationally, respectively. Zhengzhou alone has 13 Taobao towns, ranking 20th among cities nationwide. This shows that Zhengzhou residents have a natural advantage in internet usage, and combined with the market education by existing local community group buying platforms, Ele.me's entry at this time is poised to reap the benefits.
2) Opening in Zhengzhou: Superior Geographical Location Zhengzhou is the capital of Henan Province, a megacity, and the core city of the Central Plains urban agglomeration. It is an important central city in central China and a national comprehensive transportation hub approved by the State Council. This can improve efficiency in supply chain construction and product transportation, thereby enhancing consumer experience. Moreover, Zhengzhou is the most important small commodity wholesale base in Henan Province, and it also hosts Henan Wanbang International Agricultural Products Logistics City, one of the larger fruit markets in central China. With a rich variety of vegetables, fruits, aquatic products, seafood, frozen products, grains and oils, seasonings, and meat, eggs, and poultry, it offers significant advantages for product selection and supply chain construction in community group buying.
Alibaba's several layouts in community group buying involve Retail Link's millions of small stores, Cainiao Post Stations' local life services and supermarkets, and now Ele.me's entry adds an online dimension. This shows that Alibaba is actually building a strong commercial ecosystem closed loop and a resilient growth model, thereby avoiding the internet traffic dilemma and achieving more long-term, healthy development.
Moreover, the small store + self-pickup model is currently a prominent model in community group buying. Although the supermarket + logistics model of Cainiao Post Stations is still in its infancy, the new model is worth industry consideration and provides some ideas for the online business development of offline retail giants.
Final Thoughts: From Hema, Shihuituan to Cainiao Post Stations, and recently Retail Link and Ele.me, Alibaba has made many moves in the community group buying track, each time deploying a formidable player. Although most of these players are new to the track, they have accumulated development advantages over the years in their respective fields.
Currently, while it is difficult to predict the final outcome of Alibaba's development in the community group buying track, given Alibaba's strong development genes, it is not impossible that the industry's predicted "three strong contenders" situation will change, as many in the industry noted at the beginning of the year.
The community group buying arena has gained more possibilities with Alibaba's entry.
Reference sources: Ele.me does community group buying—Cayman 4000, Six Brother JOJO Alibaba strikes again! Ele.me enters community group buying, first battle in Zhengzhou!—Fresh Food List, Fresh Food List author