---
title: "Can Giants Prop Up Community Group Buying?"
description: "Community group buying has attracted significant capital and major internet companies like Alibaba and Meituan, but the industry faces challenges from low barriers and intense competition. The article examines whether these giants can sustain the sector's growth."
author: "燃财经工作室"
publisher: "New Distribution"
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published: "2020-07-31"
language: "en"
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---

# Can Giants Prop Up Community Group Buying?

> Community group buying has attracted significant capital and major internet companies like Alibaba and Meituan, but the industry faces challenges from low barriers and intense competition. The article examines whether these giants can sustain the sector's growth.

**Click the image above for details**
**The wind has come, and the giants have arrived, bringing a new story to community group buying.**
For a long time, investors avoided fresh food e-commerce projects because they had seen too many people fall into pitfalls and were scared off. From Qingnian Caijun and Xianpinhui to Xuxian and Aifengbee, the closed fresh food e-commerce projects over the years were like canned saury on a production line, one after another, longer than a college variety show's lineup.
It wasn't until the end of 2018 that community group buying suddenly became popular. In just half a year, billions of yuan poured in, creating a trend. However, the good times didn't last long; some entrepreneurs who rushed into the fray were quickly slapped by reality. Once the financing was burned through, the projects collapsed.
Now, internet giants represented by Alibaba and Meituan have finally set their sights on this business. Financing news keeps coming, giants are frequently making moves, and community group buying is making a comeback. But this time, they've changed their approach.
**-01- Capital Crosses, the Wind Rises**
Changsha, known nationwide for its "stinky tofu" and "Happy Camp," was once seen as a livable city. It has chain convenience stores everywhere, the well-known Hongxing vegetable wholesale market, and various rice noodles, but it lacked entrepreneurship and venture capital.
In the second half of 2018, a new fresh food e-commerce format—community group buying—suddenly emerged on the streets of Changsha and attracted capital attention.
Just like the stimulation of Changsha's red chili peppers, community group buying excited entrepreneurs and investors at the time—"finally finding the best solution for community fresh food e-commerce."
The business model of community group buying is: the platform recruits group leaders (mostly mothers or convenience store owners) in residential communities, who operate WeChat groups for the community. The groups pre-sell vegetables, fruits, and other products, and the WeChat mini-program aggregates the day's orders for the community, with centralized delivery the next day. Group leaders receive about 10% commission on transaction volume.
According to Third Bridge's observation, **there are now four mainstream ways for fresh food startups: delivery to home, delivery to store, self-pickup, and front warehouse. Community group buying belongs to the self-pickup model**, while Daily Youxian, which has received more capital attention, belongs to the front warehouse model.
Centralized pre-sale, direct delivery from origin, no rent, and reduced labor—these selling points make community group buying look much more "sexy" than traditional fresh food e-commerce, attracting a large number of entrepreneurs to enter.
Liu Kai, founder of Niwo Nin, was formerly Tencent's strategic expansion director; Xiao Zhilong, founder of Linlinyi, is chairman of Xian Guo Yi Hao; Yang Jun, founder of Squirrel Pinduoduo, was Wang Xing's earliest entrepreneurial partner and co-founded Xiaonei, Fanfou, and Meituan; Wang Peng, founder of Shihuituan, was formerly senior operations VP at Aifengbee; Dai Shanhui, founder of Shixianghui, was formerly VP of Benlai Life.
The players entering are experienced industry veterans with entrepreneurial auras, most of whom have been in the fresh food industry for years. When they saw community group buying, they felt the opportunity had finally arrived.
**Community group buying was like a gust of wind, rising to the capital's trend overnight.**
Various community group buying platforms announced financing, with Changsha-based startups being representative. In November 2018 alone, at least five community group buying companies announced new financing, each in the tens of millions of dollars. Nearly 10 companies announced a total of about 3 billion yuan in financing within three months. At its peak, Changsha had over 200 group buying platforms simultaneously, the most in the country.
Competing on financing speed was the first dimension of competition among platforms. Besides Xingsheng Youxuan, Niwo Nin, and Shixianghui, which were established before 2018, Linlinyi, Dailaobo, Shihuituan, Squirrel Pinduoduo, Kaola Select, and Meiri Yitao were all founded in 2018 and quickly secured financing.
For example, the star project Linlinyi launched in March 2018, received tens of millions of yuan in seed funding by the end of August, and a month later secured a Pre-A round of tens of millions of dollars, with investors including top global VC Sequoia Capital.
Hot money brought popularity, rallying survivors of the "thousand-group war," food delivery ground promotion, and bike-sharing wars to join the urban ground promotion and community competition. At the most intense times, platforms poached group leaders from each other.
"It was the capital winter, but we felt we were standing at the forefront," said an investor who invested in a leading community group buying platform.
**-02- The Wind Stops, and the Giants Arrive**
The cooldown happened in an instant. Throughout 2019, community group buying entered winter overnight: contraction, layoffs, closures, and mergers. Large and small group buying projects died in batches, head players merged with similar ones, and the industry was full of pessimistic talk.
A founder of a community group buying platform lamented to Ran Finance: in 2018, he was rushing to get financing and doing PR everywhere; in 2019, he was responding to rumors of layoffs and running away.
What broke this situation was Alibaba.
In January this year, Shihuituan announced the completion of a new $88.3 million financing round. Among the investors were a series of familiar VCs and Alibaba, which added more investment. Alibaba had participated in Shihuituan's Series A round in 2019. Four months later, Shihuituan announced another $81.4 million financing round.
On July 7, Meituan announced its official entry into the community group buying track, launching Meituan Select. Five days later, Meituan Select began signing up group leaders in Jinan, Shandong, and officially launched on July 15.
Interestingly, Didi also quietly entered. It started piloting the community group buying project "Orange Heart Select" in Chengdu in June, but it is still in small-scale testing.
Many in the industry don't understand Didi's logic for community group buying. A FA source analyzed to Ran Finance: "Didi is attacking on all fronts to boost its IPO, and also, Didi wants to compete with Meituan."
During this period, Tongcheng Life, incubated by listed company Tongcheng Travel, announced the completion of a $300 million Series C financing. Notably, Tencent holds more than 20% of Tongcheng's shares. Additionally, Tencent has invested in Xingsheng Youxuan and Shixianghui, two of the strongest players in the community group buying track.
Recently, it was reported that Xingsheng Youxuan is about to complete a Series C+ financing of about $800 million, with a post-investment valuation of $4 billion. JD.com established a community group buying alliance early on and launched multiple community group buying businesses such as Youjia Puzi, JD District Purchase, and Xiaoqipin.
An investor analyzed to Ran Finance: "For giants, community group buying is definitely a big market, and everyone can see some opportunities. The key is how to digitize it and integrate it into a big business."
**Community group buying has stood up again, this time propped up by giants.**
This scene is reminiscent of the O2O war back then. **Entrepreneurs test the waters, VCs add fuel, industry chaos and reshuffling, head players choose sides, and giants formally enter.**
From the current industry landscape of community group buying, one can see the penetration and influence of giants.
Two years ago, the head players in the community group buying track included Xingsheng Youxuan, Shihuituan, Squirrel Pinduoduo, Linlinyi, Niwo Nin, Xiaoqule, and Shixianghui. Now, four have left the table—Niwo Nin was merged into Shihuituan; Squirrel Pinduoduo, Linlinyi, and Xiaoqule have significantly contracted their personnel and business, basically withdrawing from the core battlefield.
The Aladdin Mini Program Index for June shows that in the community group buying track, the top five platforms are Xingsheng Youxuan, Shihuituan, Meijia Maicai, Shixianghui, and Tongcheng Life. Among them, **except Meijia Maicai, which relies on Meicai.com, the other four are backed by giants**: Xingsheng Youxuan, Shixianghui, and Tongcheng Life are backed by Tencent, and Shihuituan is backed by Alibaba. Since Meituan Select just launched, it hasn't appeared on the list yet.
But to this day, no player in community group buying has achieved a national, dominant advantage. After more than two years of industry reshuffling, some players have been eliminated, head players have completed mergers and acquisitions, but regional players still form local separatist forces. This poses challenges for venture capital-driven entrepreneurs and also brings opportunities for giants.
**-03- Entrepreneurs' Game or Giants' Arena**
Community group buying is not a high-barrier business. With startup capital, a group of group leaders, a few WeChat groups, and a few people, you can start a group. In the early days of the industry, many regional players sourced goods from local vegetable wholesale markets and sold them in WeChat groups, saving intermediate links, acquiring customers at low cost, and earning a price difference.
But fresh food practitioners know well that the fresh food track has always been a tough bone to chew. It's easy to start but hard to scale.
Han Rui, managing director of Gaorong Capital, said in a conversation: "Pitfalls" are when no one attacks you, but you fall into a pit and can't climb out, killing yourself. "Barriers" are defenses that others can't break through when they attack. **Community group buying is an industry with low barriers but many pitfalls.**
Third Bridge research found that the self-pickup community group buying model has no core commercial barriers from front-end sales to back-end supply chain, so as long as there are players burning money, the threshold for this model won't be high.
Thus, most players try to tell this story: "Use fresh food as an entry point to evolve into a high-frequency, high-trust channel to break through the housewife's wallet." In other words, fresh food is just a traffic driver; eventually, they will expand categories, especially high-margin standard products. As long as housewives need them daily, the platform may sell them.
For example, Xingsheng Youxuan relies on the well-known local convenience store brand Fuxing Furong in Hunan. An insider in the community group buying industry revealed that Xingsheng Youxuan can achieve monthly GMV of over one billion yuan, with 80% from standard products and 20% from fresh food.
Besides fresh food, many community group buying players have started selling daily necessities, local services, and even hotel and travel products. The platform is gradually evolving into a super convenience store existing in community WeChat groups. **Community group buying has laterally entered the local retail war that giants are currently competing in, and the most active players in local retail are Meituan and Alibaba.**
During the pandemic, community group buying unexpectedly became an important channel for community livelihood supplies, so Meituan came, Alibaba came, and Didi also joined the fun.
Meituan has always been known for "arriving later but arriving first." In the past, in group buying, food delivery, and later bike-sharing, Meituan was not the first to enter but was the one that survived.
Lian Jie, founder of Dingdantu, analyzed to Ran Finance: Meituan explicitly proposed to "adopt a pre-order + self-pickup model," indicating that Meituan has figured out the fundamental logic of community group buying. It explicitly proposed to "empower community convenience stores," a cooperation method that Xingsheng Youxuan has already proven, so Meituan can just copy it. Additionally, Meituan has the ability to replicate quickly nationwide, so **Meituan's entry will not only impact community group buying but also offline store retail.**
In July, when announcing its entry into the community group buying track, Meituan established a "Select Business Unit" parallel to the original Xiaoxiang Business Unit and Kuailv Business Unit, directly managed by Chen Liang, senior VP and member of Meituan's S-team (core leadership). This means community group buying will inevitably face a big battle.
Alibaba, on the other hand, has gone from investing initially to now participating directly. After investing in Shihuituan in 2019, Alibaba's Cainiao Station cooperated with Shihuituan at the business level, allowing community station managers in the express delivery business to become community partners of Shihuituan.
Additionally, Alibaba's RT-Mart has started supplying goods to Shihuituan. In mid-July, it was reported that Alibaba's Retail Link business unit is preparing to set up a new community group buying department, with Zou Zhijun as the head, who has recently taken office at level P10. Zou Zhijun previously founded Yixun.com and later Miaoshenghuo.
"**Alibaba entered community group buying through investment in 2019, likely to stake a claim**, as Alibaba's focus in the fresh food sector at that time was still Hema, so Alibaba's motivation might be multi-dimensional," an investor in the community group buying track told Ran Finance.
Lian Jie believes that Alibaba's Cainiao is piloting community group buying, with its community pickup network already in place and Alibaba's traffic resources available. But the problem is that Alibaba is using RT-Mart for supply chain, and RT-Mart's goods are on credit, with suppliers giving RT-Mart higher prices. So the advantage of low pre-sale prices can't be leveraged.
In contrast, **WeChat might be the biggest beneficiary of this battle**, "because currently, community group buying transactions all happen in WeChat groups and must use WeChat Pay," Lian Jie said. WeChat might next give greater support to players using WeChat groups and WeChat Pay to prevent the Alibaba system from growing this scenario.
Like the O2O, ride-hailing, bike-sharing, and unmanned shelf entrepreneurial trends, community group buying is also undergoing capital pursuit, giant entry, and industry reshuffling. What's uncertain is, in this era where true and false trends are hard to distinguish, the final outcome of community group buying—whether it will be a single dominant player, an oligopoly, or a warlord standoff—still needs to be answered by entrepreneurs, giants, and capital together.
Source: Ran Finance (ID: rancaijing); Author: Li Ming


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