Community 001's Comeback with Mengniu Backing Not Viewed Favorably

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O2O company Community 001, which last year repeatedly faced rumors of funding chain breaks and employee wage protests, has found a giant to back it. Yesterday, news emerged that Community 001 has been taken over by Mengniu Group and may soon make a comeback. In response, a Mengniu Group spokesperson told Beijing Business Today that there is no definitive information to announce yet. However, several O2O industry practitioners believe the news from various channels, noting that FMCG brands face high costs in traditional offline channels and have a certain demand for e-commerce channels. If Mengniu invests, Community 001 could become Mengniu's community distribution channel rather than its original O2O platform. Dairy industry analysts believe that Mengniu had plans to enter the low-temperature pasteurized milk market and may have been attracted to Community 001's urban warehouse setup and community delivery experience.

Zombie for Half a Year, Mengniu Becomes the Rescuer

"It's uncertain whether Mengniu is investing or acquiring," an anonymous supermarket proxy O2O source told Beijing Business Today. They had heard the news of Mengniu taking over Community 001, and before that, there had been no activity from Community 001 for nearly half a year. Since the third quarter of last year, Community 001's official website has been in a "zombie" state, unable to place orders, and the national hotline has been unreachable.

Community 001 was one of the earliest O2O supermarket delivery companies to enter communities. Public data shows that in February 2012, it was co-founded by angel investor Xue Manzi, former CEO of SouFun Shao Yuanyuan, and Malaysian Chinese Du Guoqiang. The operating model was that users placed orders via website, phone, or WeChat, and the platform picked up goods from supermarkets and delivered them to users' doors, solving the "last mile" problem in communities. As of October 2014, it had received three rounds of investment, with both Series A and B rounds receiving investments of 100 million RMB or more.

Business registration information shows that Beijing Jiajie E-commerce Co., Ltd. (Community 001's registered company) has paid-in registered capital of 5 million RMB, with key members including Executive Director Shao Yuanyuan, Manager Zou Yanhong, and Supervisor Wang Yueqing. In the company's 2014 annual report, Shao Yuanyuan held the largest stake at 52.07%. In September 2015, Community 001 faced employee wage protests and inability to shop in multiple cities, and then quickly disappeared. In December 2015, the Haidian Branch of the Beijing Administration for Industry and Commerce listed it in the "List of Abnormal Operations" due to "inability to contact via registered address or business premises."

Self-operated Goods Hindered Expansion

According to insiders in the supermarket proxy O2O industry, Community 001's pain point was the lack of deep cooperation with supermarkets. Delivery personnel purchased from supermarkets like ordinary consumers and settled with customers using receipts, making it impossible to monitor real-time inventory and product prices. Later, to improve profitability, it launched self-operated goods, but "self-operated goods mean you need to find suppliers, establish warehouses, and build a city delivery chain, which is not just community delivery." These heavy assets hindered Community 001's expansion and development. As of October last year, Community 001 had covered more than 20 cities.

However, some analysts believe that what was once a burden has now become an advantage in attracting Mengniu's takeover. "Some beverage brands have also approached us to cooperate, wanting to sell products directly to consumers through the platform," said Bai Xiaoming, Business Director of Xiaoe Daojia. He believes that O2O mobile e-commerce can bypass traditional supermarket channels for FMCG products and serve as a new channel. Community 001 previously had a large number of offline outlets and its own warehouses. If Mengniu's investment is confirmed, it is not impossible to start anew with upstream channels.

Distribution Channel Reduced to a "Milk Station"

Bai Xiaoming stated that cooperating with brand owners would create direct competition with supermarkets, making it impossible to establish long-term strategic relationships with supermarkets. The business model would still be unviable, and it could only serve as a single channel for the brand, rendering the value of O2O nonexistent. Meanwhile, several O2O practitioners who heard the news from different channels also said that FMCG brands face high costs in traditional offline channels and have a certain demand for e-commerce channels. If Mengniu invests, Community 001 could become Mengniu's community distribution channel rather than its original O2O platform. A dairy industry analyst told Beijing Business Today that at the beginning of the year, Mengniu quietly planned to enter the low-temperature pasteurized milk sector, but this requires strict requirements for milk sources and cold chain transportation and storage. Community 001's previously established warehouses and delivery systems are ready-made resources that only need cold chain upgrades.

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