After the pandemic, people have deeply felt the impact of community e-commerce and its improvement to national livelihood. Even the Ministry of Commerce and provincial commerce departments, inspired by this model, have issued official documents to promote digital transformation of physical enterprises. Digital transformation of traditional enterprises has become a key national strategy to boost domestic circulation and meet consumer demand.
First, let's look at a set of data: in the first half of this year, all categories and e-commerce models declined, except community group buying, which grew rapidly.
This growth is not linear but exponential, several to dozens of times. The entire commercial entity has gone from initial denial, to disdain, to heated discussion, to capital's pessimism, and now to full embrace—like a roller coaster ride.
I have been observing and researching this track for three years, and I find that the scale, magnitude, changes, gameplay, and impact have undergone earth-shaking transformations.
-01- Potential to Become a C-end Standard: The Scenery Here is Unique!
First data point: changes in demographic dividend. China has about 500,000 residential communities, with first-tier cities having 5,700-12,000 communities, and 17 million people born each year. There are 200 million new middle class and 300 million aging population.
At the same time, mobile internet has covered 1 billion people, with everyone having a smartphone, using WeChat, Douyin, Alipay, and watching videos.
Why share this data? For any brand or distributor, to become a national brand, you must do deep distribution, using manpower and capital to achieve controllable coverage of retail outlets.
Specifically, conduct a channel census of all retail outlets and second-tier wholesale outlets in a city and surrounding towns. Based on this, make deep distribution decisions and operational management, with fixed timing, location, quantity, personnel, and routes.
A company typically deploys 10,000-50,000 people nationwide, managing shelf, store, personnel, visual merchandising, inventory, accounts, and sales promotion. This deep distribution configuration is called "winning at the terminal."
That is, to be a national brand, you must cover at least 300 first- and second-tier cities and 3,000 county-level cities.
For an individual distributor, you need to cover all wholesale markets, retail outlets, special channels, and KA stores in the region to achieve structured sales, with good sales volume and profit structure.
This indicates that the basic unit and starting point of all operations is the store. Stores achieve sales conversion through location-based traffic, shelf display, and owner recommendations.
Since the development of community e-commerce, customer acquisition, product display, conversion, and customer relationships have moved to communities, making them one of the basic operating units. There are two traffic pool explosion points: residential community groups and online communities based on interests and values.
When the basic operating unit shifts, new display, communication, and conversion shift. This new demand chain operation, which uses the demand chain to drive the supply chain, catches many brands and distributors off guard, lacking cognitive dimension.
During community e-commerce training last year, I repeatedly reminded and advocated:
"Previously, the slogan was 'win at the terminal'; in the future, it should be 'win at the community leader.' If you can get many community leaders to work for you, sales will increase significantly, because the future retail format is the integration of people and stores."
Second, last year I roughly calculated that all head and waist enterprises had a volume of about 150 billion yuan. What is the future space for this track? We calculated about 1.3 trillion yuan in market potential. When a trillion-level track appears, you must embrace it tightly.
Third, many companies currently starting community group buying are doubling or growing hundreds of times. This is something all physical and traditional enterprises need to think about, so community e-commerce has become a standard for retail enterprises.
When a model becomes a lever for doubling performance, you must study it carefully and use it skillfully. Whoever starts first enjoys the dividend, like the first wave of enterprises that started deep distribution, or the distributor groups that first entered hypermarkets for corporate transformation.
This year, we roughly calculated about 3,800 startups in this track, and basically confirmed this data from various angles.
You might see cooperation between brands and head enterprises, with many only cooperating with the top 5 companies. But there are more waist-level community e-commerce enterprises in second- and third-tier cities that haven't been cooperated with. It's a pity that so many enterprises haven't been included in cooperation.
Don't underestimate them. I've seen many entrepreneurs in second-, third-, and fourth-tier cities grow their community group business to tens of millions per month in just half a year to a year. This ant-army power erodes regional markets and affects your channels.
China's market is too large. My view on community group buying: with the city as the basic unit, one policy per location. China has at least 3,000 cities, with over 300 large cities, offering vast space.
Why do we say C-end is standard? The core is that original offline retail entities and original traffic aggregation models are location-based traffic.
All traditional retail enterprises acquire and convert through location traffic, but in the internet era, consumers no longer go to offline stores; they become digital beings, fully online. Retail entities sticking to offline location traffic will either die or be injured.
Tencent has become a basic internet infrastructure with nearly 1 billion online users. When our consumers are online, and their lifestyles, work, corporate, and administrative methods are all online, many retail enterprises still stick to offline battlefields, so their traffic is severely insufficient.
Community group buying is a way to gain new traffic. For example, Hunan's Bubugao, Shandong's Jiayayue, RT-Mart, and other retail enterprises have gained new traffic through communities, groups, and live commerce, increasing by over 30%. Few can achieve such growth now.
Sixth data point: the pandemic may persist long-term, not disappearing this year, as other countries haven't controlled it. It may become a long-term feature for 5-10 years. Under the Sino-US confrontation, we need to activate the domestic circulation system.
Community group buying and live commerce accelerate retail improvement. Even Hunan Province's Digital Commerce Association and the national level support this, presenting an opportunity for all enterprises.
-02- Contending Forces, Full of Variables: Big Players Enter!
Looking at industry players, the most obvious is that this year Meituan, Pinduoduo, Didi, and Alibaba Retail have all entered.
Alibaba Retail Tong now covers over 1.5 million small stores. This year, Xingsheng achieved 50 billion scale but only covered 250,000 small stores. China has nearly 6 million convenience supermarkets and over 300 restaurant outlets. How attractive is the transformation of the existing market?
So, I believe using the demand chain to drive the supply chain, pulling the entire chain from factory to platform to consumer, truly promoting product sales, has great value.
Now many community group buying companies, when they affect 2,000-3,000 households in a region, will definitely impact local hypermarkets. Many companies become local versions of Meituan, which also poses a strategic threat to Meituan.
A few days ago, a CEO in the warehousing and distribution field asked in my community e-commerce group how I viewed Pinduoduo's entry. I replied, look at Pinduoduo's strategic configuration. Pinduoduo has allocated a large core team, with funds reportedly reaching 7 billion yuan. Many regional enterprises feel this strategic pressure.
This is a strategic market game. If head enterprises enter, it's hard to say who will win.
In the first half of the year, Xingsheng raised about 1 billion yuan in financing, with a May BP of about 200 million USD. Tongcheng Life acquired Suzhou's Linlinyi and Hunan's Kaola Select this year. I speculate their strategic layout is to use Linlinyi to attack the East China market and Kaola Select to compete with Xingsheng.
Because Kaola Select's Mr. Tang Guangliang knows Xingsheng best, having fought with Xingsheng in Hunan with wit and courage. Mr. Tang's planning, attack, and event-making abilities are well-known.
Are these good or bad? I think it's good. Everyone together makes this track bigger, wider, and deeper. I think this is what leaders should do.
What are head enterprises doing now? They are hoarding money, people, and resources to prepare for a big war.
Waist enterprises have different strategic logic. Head enterprises can afford low prices, but regional ones cannot.
Waist enterprises absolutely cannot follow head enterprises in unprofitable games. They should do circle marketing around consumer segments, earning through product price differences, good products, and refined operation of community leaders and fan groups, with layered operations.
Regional enterprises are best suited to focus on regional market differentiation, uniqueness, and segmentation, doing this thoroughly.
In the second half of last year, I visited many community e-commerce enterprises in Shandong. My advice to many CEOs was to do it thoroughly, differentiate, be unique, and segment, not to follow low-price competition, but to focus and do it thoroughly. This is the waist enterprise playbook.
For example, my advice to Mr. Fang of Shandong Aiketo:
"Looking at last year's data, all community e-commerce only tapped 20% of the market. What about the remaining 80% of retail? Everyone is going for the 20%, but I think going for the 80% is also valuable." I said, Xiaoai Alliance could become an industry middle platform for the traditional 80% retail entities. Currently, Xiaoai Alliance has over 80 alliance units.
Are all brands willing to do this? Currently, it's polarized. One view is to cooperate with all channels, initially assigning 1-2 people to cover all platforms. If coverage is poor, what then? An awkward situation is no volume, which is normal because brands haven't established complete functions and teams for these channels.
You should form a team with supply chain, product development, and communication colleagues to connect, study their needs, and match your supply. Your business will definitely grow 2-3 times more than now.
Also, some very large enterprises play differently, like Coca-Cola, Nongfu, Jinluo, Tsingtao, New Hope, CP Group, and Hengxing Aquatic. They will definitely plan ahead because they have enough products and deep categories.
They might consider building their own communities. Is it purely for selling on this channel? The night before last, I chatted with Mr. Shi of Tsingtao Beer's Innovation Business Unit. He said, we only aggregate orders and let offline distributors execute in various regions. This approach is also feasible.
A second approach, which you might not know, is Nongfu Spring's Sesame Store system. Everyone questions this: investing in so many stores selling only your water, won't you lose a lot?
I interviewed an insider at Nongfu two days ago. He showed me many real data. This system is actually preparing for the entire ecosystem.
Nongfu has Yangshengtang, its own oranges, rice, grain and oil, and cherries. Nongfu has already conducted community e-commerce experiments in Beijing, Shanghai, Guangzhou, and Shenzhen. Community group buying targets stay-at-home moms, town ladies, or family consumption scenarios, while white-collar office consumption scenarios haven't been met. Mid-to-high-end scenarios also lack such services.
Nongfu is testing. Mainstream markets have average order values of 30, 60, or 70 yuan, which is impressive. Nongfu's average order value is over 300 yuan. How do they view this strategy?
Boss Zhong's KPI thinking is: allow losses in the first few years, but according to Nongfu's strategic requirements, lose the money each year and complete the layout, then I'll give you bonuses. Saving money is not allowed. This is the strategy of an entrepreneur.
Similarly, during this period, we see other brands being speculative, without such top-level projects. Their marketing executives don't want to do strategic investments, only use channel dividends to sell more.
After talking about Nongfu's system, there's also Hengxing Aquatic's approach. Their products fit such consumption scenarios. The company acquired a community e-commerce startup team and built its own system. This is another way for brands.
Previously, many community group buying startups found they couldn't compete with head enterprises using convenience stores and fruit stores. What to do? They resolutely transformed, focusing on community group buying, combining community traffic with group traffic. Many companies are growing rapidly, with monthly revenues of 50-60 million being common.
From last year to now, I've interviewed over 30 such companies. They realized their core capability is traffic and user operation, without more funds to invest in heavy assets like warehousing and distribution.
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