If offline retail is the first pole, and PC internet e-commerce is the second, then community e-commerce new retail, represented by social e-commerce and community e-commerce, is the third pole.
Changsha is the storm center of community group buying. Over 200 community group buying platforms are fiercely competing in Changsha, and even platforms from other cities choose Changsha as the first stop for model validation. It is often said that taking Changsha means taking the high ground.
As of December 2018, according to data jointly released by New Distribution Lab and Magic Cube Cloud Marketing Consulting, more than 2 billion yuan in capital has poured in within just a few months, and nearly 50 community e-commerce platforms nationwide have secured financing.
Below, the author attempts to provide a preliminary overview of the hot community e-commerce landscape in 2018 for readers.
1 What is Community E-commerce?
Currently, this business model is commonly referred to as community group buying or community group purchase. In essence, the author believes it is more accurate to call it community e-commerce.
Based on current practices in community e-commerce, the author defines this new retail format as follows: It is a social new retail model driven by digital technology and community KOLs.
Here are three key concepts:
- Based on digital technology: This includes interactive communities such as WeChat groups, QQ groups, Moments, mini-programs, social e-commerce OMS systems based on information flow and pre-sale, content libraries, WeChat secondary fission technology, group leader management information systems, SCRM, and more. The universality of technology lowers the barriers for user aggregation and consumption, making what you see is what you get.
Overall, it is based on digital technology within the WeChat ecosystem, building a marketing foundation across the three links of cognition, transaction, and relationship, achieving a perfect closed loop. It connects products, users, and platforms. Without mature digital technology, this model would not exist or be rapidly replicated.
- Community KOLs: This is key to achieving fission in community group buying. The formation of this model is necessarily the result of the combined influence of three types of KOLs.
First, buyer KOLs, who redefine hit products;
Second, community KOLs, who have traits such as loving to try new things, sharing, influence, and communication skills, redefining circle needs;
Third, community networkers, strong relationship kings, i.e., group leaders or store owners.
The definition, identification, management, and motivation of these three types of people align with one of the three principles of the tipping point: the law of the few, which includes opinion leaders, connectors, and salesmen.
- New retail model: The so-called new retail is about the reconstruction of people, goods, and places in retail. Due to space limitations, the author will not elaborate here.
2 Is the Logic of Community E-commerce Valid?
We examine this logic from two aspects, looking at the pros and cons.
Current community group buying e-commerce basically starts with fresh produce categories. This is because, in the scenario of WeChat ecosystem traffic + community LBS, the basic conditions for vertical fresh e-commerce are met. The BUG of the previous O2O home delivery model that burned money is solved by the store-visit model; the problem of inventory and sell-through is solved by the pre-sale group buying model; the weak relationship issue of social e-commerce is solved by the semi-strong relationships of group leaders. From the brand's perspective, this is a short-chain production-sales integration, or M2C.
From the consumer's perspective, the group buying model gives consumers the opportunity to buy high-cost-performance products at low prices. Unlike Pinduoduo, which cannot control quality for many products, community e-commerce must have good quality control mechanisms. Because traffic comes from LBS-based communities, conforming to the principle of "geographically close, similar concerns, psychologically close, and opposite needs or relationships" for strong community relationships, this consideration determines that most products must ensure quality and reputation.
However, from another angle, precisely because this model is based on the WeChat ecosystem, once WeChat ecosystem traffic weakens or encounters problems, the disadvantages will follow. This is something industry practitioners must consider. A large amount of cognition and transaction interactions occur in WeChat or QQ groups, and users may feel disturbed.
According to WeChat ecosystem data, 6.5 million WeChat groups are created daily nationwide, but their active cycle is only 34 days. Is there a possibility that future interaction platforms will shift to new traffic platforms, such as Douyin short videos or Toutiao short videos?
At the same time, fulfillment capabilities require strong supply chain support, strong hit product marketing capabilities, and strong platform operation capabilities, such as secondary product planning, from packaging, venue, pricing, transportation, logistics, warehousing, pre-sale, and viral material package dissemination, to build user community operation capabilities. For example, the sedimentation of relationships, from social relationships to membership relationships, whether a membership relationship management system and incentive system have been established.
3 What is the Essence and Operating Mechanism of Community E-commerce?
The essence of community e-commerce is the demand chain forcing the supply chain, a process where the demand chain drives the supply chain. From an operational perspective, six elements must be considered:
Use community strong-relationship groups (convenience stores, mother-and-baby stores, snack stores) as traffic entry points.
The micro mall must consider the density of group leader recruitment based on region; without regional density, fulfillment costs will be high.
Digital technology preparation for the three links of cognition, transaction, and relationship: viral material library, mini-programs, social e-commerce apps.
Under the buyer system, the operation system and processes should revolve around hit products, conducting secondary marketing planning, creating IP through traffic generation, launching pre-sales, and preparing the supply chain.
Community operation construction, including group training, KOL selection, product knowledge lectures, offline activities, fancy venue displays, KOL beta testing, crowdfunding, etc.
Secondary fission distribution system: group leader and KOL hierarchical management system, profit-sharing system, settlement system, honor system, membership management system, etc.
4 Where is the Imagination Space for Community E-commerce?
Marked by the national KA system team AT in 2017 and the 2018 "Double 11" data as a node, the traffic dividend of PC internet has come to an end. If offline retail is the first pole, PC internet e-commerce (Tmall, Taobao, JD.com, etc.) is the second, then community e-commerce new retail, represented by social e-commerce and community e-commerce, is the third pole. This is a new trillion-yuan market opportunity, a new unicorn opportunity, and a chance to achieve a hundred-billion market value.
5 What is the Core Competitiveness of Community E-commerce?
From the consumer side, the core competitiveness of community e-commerce can be summarized in four words: cost-performance, convenience, experience, and product richness. Group buying should achieve saving > fast > good > more.
For merchants to last long, they need five capabilities:
1. Strong product capability: Continuous and stable output of high-quality products (source cooperation, scarcity, exclusivity).
2. Strong supply chain capability: Stable supply chain guarantee for products (short shelf life, fresh, low-temperature storage and transportation).
3. Strong operational capability: Standardized and systematic operational capability, able to manage group leaders in batches.
4. Strong premium capability: The ability to tell good stories and make users accept them.
5. Rapid scaling capability: The ability to quickly replicate the five capabilities, allowing community e-commerce to run higher, faster, and stronger.
Of course, the founder's ability to secure capital is another hidden line.
6 Will Community E-commerce Succeed? Will Capital Burn Money to Make It Happen?
Getting a lot of money is not necessarily a good thing. Sometimes capital is like an aphrodisiac. If you don't focus on building your own product operation capabilities but are used to solving everything with money, the trouble is even greater. Sometimes, capabilities are grown, not burned.
Fresh community e-commerce has advantages in supply chain, such as Meituan and Meicai. The disadvantage is that they are not as fast as self-operated B2B companies with stores, such as Kaola Select and Xingsheng Youxuan. Native community e-commerce platforms that have developed their own operational capabilities will lead.
7 Will Community E-commerce Be the Next Unmanned Shelf or Pinduoduo?
Unmanned shelves: Office scenarios, close to users, but high restocking costs, low transaction efficiency, and fail in supply chain. The current BUG of domestic unmanned shelves is ignoring the dark side of human nature; the author understands that loss rates are around 30%.
Pinduoduo: The Taobao of lower-tier cities, targeting non-essential high-frequency planned and impulsive consumption, winning with Tencent's support and the dividend of new users in lower-tier markets.
Community group buying: The logic holds, but the barrier is low, and the difficulty lies in scaling replication. We believe that in the future, community group buying will coexist with online e-commerce, cutting into fresh, frozen, and household FMCG, becoming the third pole of e-commerce.
The author firmly believes that community e-commerce will have the opportunity to become a new "Pinduoduo." In the future, there will be 3 to 5 community e-commerce platforms. However, the M2C community e-commerce model based on brands will be a new short-chain solution.
8 Where are the Hidden Dangers of Community E-commerce?
There are mainly five aspects: burning money: heavy subsidies to C-end for traffic; blind expansion: supply chain, operations, and system management cannot keep up; group leaders: group leader betrayal or holding multiple platforms; supply chain: huge investment; competition: targeted attacks from leading platforms.
9 What is the Relationship Between Community E-commerce and FMCG B2B E-commerce?
Current FMCG B2B e-commerce is based on the transfer of existing stock of standard products. In the 2B segment, it achieves faster distribution and data visibility, allowing a large number of branded products to move from extensive deep distribution to precise deep distribution coverage. Mainstream FMCG brands that have embraced this channel have achieved 30% to 50% market growth.
However, the biggest problem with FMCG B2B platforms is the "1.5-tier dilemma." This term was coined by the author, and the core judgment is that the current B2B platforms' gross profit distribution within 10% determines that current B2B is like doing business on a snail's horn. The four issues that brand owners care most about cannot be solved, such as: Who bought the goods (user profile)? What do they like about the product (conversion rate)? Do they really like it, and how often (repurchase rate)? Have they recommended it to friends (penetration rate)? After community e-commerce empowers B2B, C2B2F, the demand chain forces the supply chain, perfectly solving a series of problems such as new product promotion.
It is precisely because of the 1.5-tier dilemma that the entire FMCG B2B sector cooled down in the first half of 2018, and capital retreated. Many platforms closed or exited. The author surveyed the top 20 B2B platforms in China and found that those doing well share several characteristics: either providing deep distribution services for brand owners or providing new retail solutions for small B-end merchants.
Only by providing new incremental solutions within the entire FMCG ecosystem can one succeed. Community e-commerce is the third path for FMCG B2B, in addition to providing store-based new retail solutions, achieving the full integration of the F2B2b2C model.
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