---
title: "Besides Hema and Tmall, Who Else? | Why Community Group Buying Is the Third Pole of Chinese Retail"
description: "The following is the speech content of Mr. Ren Xiaodong, partner of New Distribution, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and released for readers. Everyone is certainly curious about community group buying, hearing about various financing news in this sector. According to statistics, about 3-5 billion yuan of capital flowed into this track in 2018. In terms of industry scale, GMV sales are close to 20 billion yuan, and it is estimated that the industry's total sales will reach over 50 billion yuan this year. In the past, we have been focusing on B2B e-commerce, and found that B2B will inevitably drive 2C when it reaches a certain level."
author: "任小东"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-04-12"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/rdX0T_fqzLRJC1SUNIAjOw"
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# Besides Hema and Tmall, Who Else? | Why Community Group Buying Is the Third Pole of Chinese Retail

> The following is the speech content of Mr. Ren Xiaodong, partner of New Distribution, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and released for readers. Everyone is certainly curious about community group buying, hearing about various financing news in this sector. According to statistics, about 3-5 billion yuan of capital flowed into this track in 2018. In terms of industry scale, GMV sales are close to 20 billion yuan, and it is estimated that the industry's total sales will reach over 50 billion yuan this year. In the past, we have been focusing on B2B e-commerce, and found that B2B will inevitably drive 2C when it reaches a certain level.

The following is the speech content of Mr. Ren Xiaodong, partner of New Distribution, at the 5th FMCG + Internet Conference hosted by New Distribution, organized and released for readers.

Everyone is certainly curious about community group buying, hearing about various financing news in this sector. According to statistics, about 3-5 billion yuan of capital flowed into this track in 2018. In terms of industry scale, GMV sales are close to 20 billion yuan, and it is estimated that the industry's total sales will reach over 50 billion yuan this year.

In the past, we have been focusing on B2B e-commerce, and found that B2B will inevitably drive 2C when it reaches a certain level. Personally, I have had interactions with Kaola Select, so I know this track well and am quite interested. Last year, there was a saying: "Everything can be played." Let's play it and see what kind of new species it really is.

**Classification of the Third Pole of Chinese Retail**

Community group buying can be divided into three categories:

First, e-commerce represented by B2C, which accounted for over 18% of total domestic retail sales last year. It is not suitable for entrepreneurs to enter, and it is not beneficial for brands and distributors to cooperate on this track. Last year, the fee-to-sales ratio of enterprises was 36%, no different from traditional hypermarket operations.

Second, models represented by Super Species and Hema Fresh are the hottest, but some stores have suspended operations last year. For the national market, they are far from enough; they only leverage a relatively small market share, not representing a larger share. I remember a book called "The Fortune at the Bottom of the Pyramid." What truly drives social change is the broadest population at the top of the pyramid.

Third, everyone is paying attention to community e-commerce, which we call community group buying. I think group buying is just a means, not the ultimate goal. Community e-commerce is a better method. Why do I say that?

1. New Distribution interviewed about 50-60 community group buying platforms nationwide and had in-depth exchanges with platform companies. After communication, we found that many platforms have these characteristics: first, the market is large enough; second, this is a trillion-yuan market, which is why so much capital has poured in.

2. Community group buying can truly promote consumption upgrade. Yesterday, I listened to the sharing from Yunji and Pinduoduo. What is the core standard for Pinduoduo's sales of nearly 100 billion yuan? Simply put, it is the population outside the Fifth Ring Road, with data showing the needs of consumers in third- and fourth-tier cities with monthly incomes of 3,000-6,000 yuan.

3. The O2O war failed! Why has community e-commerce become so hot and successful in the past two years? The core is the release of mini-programs, such as the formation of the WeChat internet ecosystem, which was not formed before but has now formed. WeChat has become a traffic word. Through many enterprise practices, it has been proven to have surging traffic. Brands and distributors must seize traffic and think about whether this traffic can be used for me. This is what we consider.

4. The famous internet expert Clay Shirky wrote two books. The community e-commerce and social e-commerce models we discuss today are based on trust agency and the era where everyone can become a KOL. Only then can we understand the popular business models of social e-commerce and community e-commerce.

**Community E-commerce Models and Operating Mechanisms**

1. What is community e-commerce?
I think it must satisfy three aspects:

**1. It must be based on digital technology, including communication, interaction, and platforms; whether it's mini-programs, Moments, or WeChat groups, community e-commerce must be done based on digital technology.** We also see many primitive community group buying operations that still use manual order reporting and spreadsheets for group buying, which seems very primitive and backward.

**2. Community group buying KOLs are KOLs with the ability to bring goods. Professional leaders can be roughly divided into three types: professional level, communication level, and network king KOL.** I suggest that you deeply understand the role of KOLs, and you can do this well.

**3. The core of the new retail model is based on the change of people, goods, and scenes.** What is its essence? It can be understood as: In the past, what did brand suppliers do? They had goods and sold them well, which was a method of supply chain driving demand chain. Now, consumers say: I want better goods, high-quality goods, and cheaper goods. For people who haven't visited hypermarkets for years, people now live in digital space and are becoming lazier.

2. What does supply chain driving demand chain mean?
1. Where does the traffic entrance come from? For many community e-commerce enterprises, it may be "mothers," "convenience stores," "community property management," or "snack shops." For brands and distributors, what else? Besides stores, is there also the "shopping guide group"? This is the consideration for traffic entrances.

2. How to set up KOLs? Recruit enough group leaders and group owners for marketing. **The recruitment density must be high.** We have seen many platforms fail because of low density, leading to high fulfillment costs.

3. **Use digital technology to expand connections, use mini-programs, social e-commerce apps, micro-shops, etc., to improve operational efficiency.** As mentioned earlier, many initial community group buying operations still use manual order reporting. That method is also acceptable. In 2015, we used this model to sell conch fish, selling 700-800 million yuan, but later we couldn't continue because we didn't prepare a communication material library. So a viral communication material library is really important.

4. **Buyer system: carry out secondary marketing planning around hot products, attract traffic, build IP, launch pre-sales, and prepare the supply chain.**

5. Community operations, group training, KOL selection, product knowledge lectures, offline activities, fancy venue displays, KOL beta testing, crowdfunding, etc., are all part of the **community operations** and **fission distribution** system.

**Core Competitiveness of Community E-commerce**

The imagination space for community e-commerce is huge. From 2017 to 2018, there were 100 million new users, which is a very big change.

This change is all on mobile. If you make full use of this space, you can do very well.

Fresh food e-commerce platforms sell fresh produce and fruits accounting for 60%. Standard products have been mostly done in B2C. After the entire 2C household consumption becomes online and data-driven, it will become the value of big data in the future. Of course, the community group buying I currently see is based on the WeChat ecosystem, so Alibaba cannot enter except through financial investment. That is the imagination space we see.

What is the core competitiveness of community e-commerce?

**The core of community group buying is the "Iron Man Five Items": strong product capability, strong supply chain capability, strong operation capability, strong premium capability, and rapid scaling capability. Currently, there are two types: one is "buy buy buy," and the other is "strong operation."** For example, last year I talked with the boss of a community group buying company. They now cover more than 100 cities. They develop very fast because of strong operations and excellent product selection. Yesterday, an investor mentioned a case where the average order value reached 90 yuan, while most can only achieve 20-30 yuan. They achieved 90 yuan, which is a differentiated thing.

According to New Distribution's team statistics, there are actually over a thousand companies in this track. Those that just got financing and do good PR number over a thousand. **We divide community group buying platforms into several types: native ones, platform-incubated ones, and FMCG B2B platforms.** Last year, I advocated in the industry that B2B community group buying is the standard configuration. The benefit is that various platforms have started doing it. As a media person and industry researcher, this is a gratifying point.

Who will ultimately be the biggest winner? Everyone is talking about it. Is it those who get more money? Our view is that running fast doesn't necessarily mean running long; starting early doesn't necessarily mean running far. Those who consistently do their operations well on the Iron Man Five Items will win. For other operators and brands that want to engage in community e-commerce, they also face this issue.

What hidden dangers exist in this track currently?

1. Everyone feels that money is being burned. A lot of fake orders and subsidies are used for traffic, which is not good for platforms, but good for supply chain enterprises and brands.

2. Many platforms are blindly expanding, claiming GMV and national scale, but their actual situation cannot keep up. There is a disconnect between the inside and outside.

3. There have been many cases of group leader defections, with people holding identities on multiple platforms.

Last year, I wrote an article titled "The Climbing and Crossing of Community E-commerce." All enterprises participating in this track are facing climbing and crossing. It resonated highly within the industry.

Back to the issues that brands care about: **How should brands and distributors do community e-commerce?**

**Either cooperate with them, become suppliers, or use some tools to handle your new products and inventory.** I have seen many industry practice cases proving that brands can make good use of these tools, whether through image live streaming or video live streaming.

What do you think about community group buying?

Welcome to leave a message in the comment section below.

You can also scan the QR code below to add the author on WeChat for discussion.

We look forward to sparking new ideas with you.

**-END-**


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