Beijing, as the capital city, has a consumption demonstration effect.

Community group buying, a retail model particularly suited for the e-commercialization of all categories in lower-tier markets, has finally arrived in Beijing, Shanghai, and Guangzhou. This time, everyone has come to Beijing.

Just one week after Didi's Orange Heart优选 (Orange Heart Youxuan) entered the Beijing market, Meituan优选 (Meituan Youxuan) also rushed in, officially launching in Beijing on January 25. Prior to this, among first-tier cities, almost all platforms had already entered Guangzhou and Shenzhen, and Duoduo Maicai had entered Shanghai in mid-January. With this, community group buying has fully entered first-tier cities. Currently, Orange Heart优选 is mainly landing in the southern part of Beijing, starting with Fengtai and Daxing districts, while Meituan优选 has chosen the eastern part of Beijing, starting with parts of Chaoyang and Tongzhou, each staking out their territory. Over the past two years, the battlefield for community group buying has mainly been in second- and third-tier markets. Whether it's the older players represented by Xing Sheng Youxuan or the internet giants that entered in 2020, they all tacitly avoided the first-tier cities of Beijing, Shanghai, Guangzhou, and Shenzhen. It wasn't until the second half of the year that they gradually entered Guangdong, and Guangzhou is currently the only first-tier city where community group buying has achieved scale. As a result, during this year when everyone in the industry talks about community group buying, those of us in first-tier cities have mostly heard about the fierce battles and the superiority of the model from afar. Now, finally, in Beijing, the main gathering place for Chinese media, we can experience it firsthand, which in itself constitutes a special significance for community group buying entering first-tier cities, especially Beijing.

-01- Is community group buying still effective in first-tier cities?

Over the past two years, the community group buying model has been proven effective. The first layer of value is solving the e-commercialization of all categories in lower-tier markets.

For a long time before this, internet retail giants adopted a heavier form to enter lower-tier markets. From Alibaba's Retail Link (Ling Shou Tong) to JD.com's New Route (Xin Tong Lu), these two B2B businesses at the time carried the grand strategies of "second growth curve" and channel sinking. However, to this day, whether it's New Route or Retail Link, their cooperation with many small stores remains loose, and coverage is very limited. And precisely because these two failed to integrate the lower-tier markets well, Pinduoduo emerged later, and now this wave of community group buying has risen. Previously, Pinduoduo, through its group-buying model, had to some extent solved the e-commercialization of all categories in lower-tier markets. However, in terms of fulfillment, it still adopted the traditional e-commerce model of delivering single items by express to the home. This means that Pinduoduo, relying on the WeChat platform, has well occupied the lower-tier market through group-buying e-commerce, but it is still not the ultimate product of model advancement. At least, the express parcel fulfillment method is not economical for the lower-tier market, and the constraints of logistics costs still exist. Community group buying, by introducing the intensive and low-cost logistics advantages of traditional retail B2B, that is, through batch procurement by group leaders and then self-pickup distribution with zero logistics cost, greatly improves logistics efficiency, correspondingly reduces costs, and ensures the competitiveness of community group buying retail prices compared to general social retail. In fact, fulfillment costs have been an important factor restricting the development of e-commerce in lower-tier markets for a long time. Therefore, reducing logistics costs constitutes the second superiority of the community group buying model, allowing it to comprehensively cover all retail scenarios. Moreover, in terms of brand reach to consumers, the community group buying model also has advantages. Because of the reduction in intermediate links, the platform can directly connect both ends of the brand and consumers. The fewer intermediate links, the better the quality of goods can be guaranteed, and at the same time, prices can be lower. What's even better is that the brand directly connects with consumers, but does not directly deal with consumers. Simply put, community group buying is order-first, fulfillment-second, and brand-direct goods can be organized in an order-based manner. But the existence of group leaders means that brands and platforms do not have to deal directly with consumers. This fully achieves that brands can directly connect with consumers through individual orders without falling into the cost surge of direct connection. From this perspective, the community group buying model can be said to be a semi-revolutionary industrial upgrade not only for traditional e-commerce but also for traditional retail. These advantages are unique to community group buying, distinguishing it from any other retail model. These advantages can also enter first-tier cities. It is worth noting that many public opinions previously believed that these advantages of community group buying, when entering first-tier cities, were actually not favored by many. The reasons are not more than that one-hour delivery instant home service has become standard in first-tier cities, and the online and offline retail systems are relatively complete. In other words, from service experience to product richness, first-tier cities are very developed, even reaching a certain oversupply. Consumers "spoiled" by one-hour delivery and massive product selection have little motivation to choose a "consumption downgrade" community group buying model. Indeed, the advantages of community group buying, on the surface, seem to be ineffective (or redundant) in first-tier cities, but one advantage that cannot be ignored is price. No matter how much the retail industry evolves, price is always the first driving force attracting consumers to make choices. Among goods of the same quality, consumers still tend to choose lower-priced ones, that is, low-price good goods. Either Pinduoduo's low-price good goods strategy or COSTCO's good goods low-price strategy. Just based on price, this is something many channels find difficult to fundamentally change in their original models, and this also constitutes the basis for community group buying to establish a foothold in first-tier cities. From a factual perspective, community group buying has also demonstrated its effectiveness in first-tier cities. As the first high-tier market entered by community group buying, the Pearl River Delta market centered on Guangzhou has now ranked among the top three in the country in terms of community group buying market size. Perhaps it is precisely because the community group buying model has been validated in the South China market that two leading players have rushed into Beijing, and other players seem to be eager to move as well. -02-

The value depression of the Beijing market

Speaking of it, the reason Guangzhou can achieve scale in a short time is largely due to the large market. Guangdong has over 15 million permanent residents, and the consumption scale is already there. Beijing is even more so, with 22 million permanent residents, and the market size is far larger than Guangzhou.

That is to say, even though one-hour delivery and next-day delivery e-commerce are already highly covered in first-tier cities, there are still opportunities to enter. As some industry insiders have said, "Consumers in first-tier cities have more diverse needs and more choices. Community group buying basically does not do individual purchase business, mainly targeting family consumption scenarios, focusing on high cost-performance and planned goods, and can serve as a supplementary channel to meet differentiated consumption needs at different levels and scenarios." At the same time, Beijing, as a mega-city among first-tier cities, not only has a very concentrated urban population, but also a dense suburban population, and there is not much difference in consumption power between urban and suburban populations. This makes Beijing, whether in terms of population base or geographical distribution, equivalent to the scale of several third-tier prefecture-level cities. In addition, compared to Shanghai, Beijing has an imbalance in the distribution of livelihood supplies. In Beijing, there is a clear concept of consumption centers, such as Wangfujing, Guomao, Sanyuanqiao, Zhongguancun within the Fourth Ring Road. But in Shanghai, there are multiple centers standing side by side. In a small area, there will be multiple commercial centers, and it is hard to say which is the absolute city center. Even in the outer ring areas of Shanghai (similar to outside the Fifth Ring Road in Beijing), there will be very high-quality comprehensive commercial complexes. Moreover, Beijing's commercial and residential areas are relatively more separated, meaning the phenomenon of working "inside the Fifth Ring Road" and living "outside the Fifth Ring Road" is more prominent. So from the overall supply and demand, Beijing is a typical retail inverted city where C-end consumption power is currently greater than B-end supply capacity, and there is an uneven distribution of consumption industry regions. Specifically, within the Fourth Ring Road, high-end commercial formats are developed, but low-end commercial formats for daily consumption are limited. Outside the Fourth Ring Road, not only are high-end formats underdeveloped, but low-end formats are also not dense. For example, Beijing's convenience stores, after rapid development in recent years, still lag behind Shanghai to some extent. Therefore, Beijing's existing commercial landscape, compared to other first-tier cities, provides a greater value depression for community group buying. In addition, Beijing, as the capital, also has a strong industrial demonstration effect. At least, the relevant regulatory departments, investment institutions, and media personnel who closely follow the growth of this model mainly reside in Beijing. And in the past two years when community group buying developed fastest, everyone did not personally experience this model, only heard about its expansion in Changsha, Wuhan, Jinan, Chengdu, and other regions across the country. As mentioned at the beginning of this article, regardless of its market effect, from this level alone, the demonstrative reason for entering the Beijing market is already sufficient. The timing of community group buying entering first-tier cities, especially Beijing, also cleverly corresponds to the time node when this new retail track needs overall structural optimization. December 2020 was probably the historical peak of internet companies and large platforms investing in community group buying. Hunan Xing Sheng Youxuan, the main inventor of the community group buying model, experienced the most severe competitive pressure since its establishment. A strange article from a Hunan agricultural product e-commerce seller sparked widespread controversy on the internet about community group buying for more than a month, and the heat has not yet subsided. In addition to the widespread public opinion of internet users, a large number of industry observers and some supplier groups expressed their views on community group buying. With the introduction of the "Nine No's" by regulators, a clear policy boundary was finally drawn for this controversy. But the track's own self-regulation and structural adjustment also need an optimization. After several major platforms began to shift from focusing on order volume to focusing on gross merchandise volume (GMV), the next step will presumably gradually focus on profit margins, showing that players in this track are increasingly settling down to their operational quality, and paying attention to the commercial essence of cost, efficiency, and service as one of the models for selling goods. Community group buying, as the current most advanced productive force for e-commerce all-category sinking and all-scenario coverage, has previously placed too much emphasis on fresh produce categories. This excellent business model, which is so good at operating family purchase scenarios, currently needs to begin exploring all categories of family shopping scenarios, especially the penetration rate of durable goods beyond high-consumption household goods, and strong brand goods. Also, the exploration of regional markets. Obviously, this sinking tool of community group buying has not yet fully sunk to the limit. In many border provinces and townships across the country, community group buying has not yet entered, and these areas are still served by traditional retail with insufficient supply. At the same time, same-city retail and local instant retail based on local physical retail scenarios, as well as family purchase services under local life services, are increasingly forming direct competition with community group buying. Everyone is deeply involved in community-level online and offline integrated retail formats, and the competitive relationship between each other will only become more direct. Perhaps today's timing of large companies entering the Beijing community group buying market is exactly the time node when this track ushers in the second half of the competition. Source: 36Kr - Future Consumption (WeChat ID: lslb168), Author: Xie Kangyu If a tip is adopted, a reward of 400-2000 yuan will be paid. If you like this article, click [Watching] and share it with friends.********************