As tech giants enter the community group buying market, it's booming. On January 8, Tencent invested $100 million in Xingsheng Youxuan. Including the investments in May 2019 and July 2020, this is Tencent's third investment in Xingsheng, showing its deepening involvement.

-01- Tencent's Fresh Food Map

In May, Didi's Orange Heart Youxuan officially settled in Chengdu; Meituan, not to be outdone, launched Meituan Youxuan just two months later; in August, Pinduoduo entered the race with Duoduo Maicai, with its first stop in Wuhan. Since then, a large number of companies have joined.

Interestingly, Tencent has not yet personally commanded the front lines, but it is reaping the benefits. Tencent holds 12.18% of Meituan and 16.9% of Pinduoduo, making it the largest institutional shareholder in both. It also holds 17.9% of JD.com, also its largest shareholder. JD.com, in addition to its community group buying alliance, has also launched its group buying project Jingxi Pinpin, which has covered 16 cities including Guangzhou, Shenzhen, and Wuhan.

At the same time, Tencent holds a certain stake in Didi. Recently, Didi's app fully integrated Orange Heart Youxuan, driving new sales growth through traffic diversion. Tongcheng Life and Shixianghui have also received Tencent investment.

Pagoda has once again turned its attention to community group buying, launching "Panda Daxian". Not long ago, Panda Daxian moved from an independent mini-program to within Pagoda's mini-program, expanding its online traffic pool. Although Tencent has not yet invested in Pagoda, the two have already established an important partnership. At the 2018 Tencent Global Partner Conference, Tencent invited Pagoda to discuss development, and their connection has since become closer.

It is worth noting that most companies currently rely on WeChat channels for their group buying business, developing WeChat mini-programs, building group buying communities, using WeChat Pay, and leveraging the WeChat platform for advertising and traffic acquisition. It can be said that Tencent currently holds an important position in the community group buying business.

-02- Tencent vs. Alibaba: Who Will Win?

Overall, Tencent has almost monopolized the leading companies in community group buying, with strong strength. Its old rival Alibaba is also not to be underestimated. Since the beginning of 2019, Alibaba has invested in Shihuituan, and has since invested two more times, changing from following to leading the investment. Alibaba has also invested in Suning and Didi. Last November, Suning's fresh food section added a community group buying format, spending heavily to recruit group leaders and adopting full-category marketing.

"Hema Market" is a trump card that Alibaba cannot ignore. Hema President Hou Yi personally took charge, offering group leaders an average monthly salary of 12,000 to 20,000 yuan. On the day of the pre-launch, it had already fully entered all districts of Wuhan, recruiting over 5,000 group leaders. After the victory in Wuhan, Hema entered the Changsha market. It is reported that Hema Market quickly expanded under the promotion of nearly 300 expansion personnel, and warehouses were opened successively from January 6, at a very fast pace.

In contrast, Tencent has more leading players in the track. In terms of coverage, Duoduo and Meituan cover more than 300 prefecture-level cities, and Xingsheng has also achieved full coverage in the eastern and central regions. The "slower" Hema Market only covers four provinces: Hubei, Hunan, Sichuan, and Shaanxi.

Despite this, the outcome cannot be decided in one stroke. Previously, Cainiao Station, Retail Link, and Shihuituan reached a strategic cooperation. Not long ago, Alibaba opened the Taobao Maicai platform to Shihuituan, providing it with a super traffic entrance, and the relationship between the two has become increasingly close.

In addition, industry insiders point out that there is still much room for improvement in the quality of low-priced goods on some group buying platforms. Due to fierce market competition, companies still have to use low prices to attract traffic, and product quality is difficult to improve in the short term.

On the other hand, Alibaba has origin warehouses, sales warehouses, and collection and transportation hubs, as well as "Four Links and One Reach" (a logistics network), with complete supporting facilities in all aspects. For example, Tmall and Taoxianda use sealed boxes for packaging, ensuring the quality of fresh products, and delivery time has been shortened to half a day and one hour, which is a clear advantage.

Due to differences in local logistics efficiency, Alibaba's fresh food supply chain varies by region. Nevertheless, "Hema Market" can be considered an optimized version of the group buying platform. In the future, Hema will continue to improve logistics efficiency, lay out offline small stores more densely, and improve both online and offline ends, building a protective wall for itself.

-03- Where Is It Heading?

Who will ultimately dominate between Tencent and Alibaba depends on how each company develops. China Merchants Securities released a research report on community group buying, citing a certain community group buying company as an example, pointing out that the costs of community group buying mainly include two aspects: group leader commissions and warehousing and logistics, of which warehousing and logistics has great room for improvement.

In addition, for long-term development, it is necessary to maintain stable order density. Order density is related to user retention and repurchase rates, and to products and services. It requires companies to further move towards "more, faster, better, and more economical" operations, returning to the construction of warehousing and logistics related to product quality and return rates. Tencent's continued investment in Xingsheng will not be the end; there is still a long way to go.

Strengthen technology, run through routes, ensure quality and service, and stabilize orders. Community group buying companies should consolidate their capabilities and fear no storms!

Source: Fresh Food Ranking (ID: sxbgfwx)

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