"The foundation of community group buying is trust in the group leader, and this trust carries warmth." "@all, the Lvyangcun order has been dispatched and will arrive around 13:00. Please keep an eye on group notifications and pick up your goods at the designated location in time." Last Sunday at noon, a group named "Erjie Brothers and Sisters" in a Shanghai community sent out such a pickup notice. Previously, the group's group-buying items were mainly fresh produce, such as strawberries, eggs, beef, and seafood. After the group leader Swing got access to Lvyangcun's resources, she immediately solicited opinions in the group. The response was enthusiastic, and the amount for the first trial group buy far exceeded Lvyangcun's minimum order of 6,000 yuan. After the first successful group buy, a warm-hearted neighbor "Xiaojiejie" conducted a small survey to find out which dishes people preferred. Although tastes vary, it at least provided a reference. In the second group buy, the amount doubled directly. For the group leader, this was the first time buying finished dishes from a restaurant, and for Lvyangcun, a time-honored catering enterprise, conducting community group buying during the epidemic was also its first time reaching community consumers through this method. Lvyangcun stated that after the epidemic ends, as long as community group leaders have demand, it will retain this business. As is well known, the main business model of catering enterprises is dine-in. After the emergence of food delivery, many catering companies added delivery services. After the COVID-19 outbreak, dine-in business suddenly dropped to zero, while delivery was constrained by insufficient capacity. As a result, some well-known catering companies, including Haidilao and Yerixiali, began to test community group buying. According to the "2020 Report on the Impact of COVID-19 on China's Catering Industry" released by the China Cuisine Association, compared with the Spring Festival last year, 78% of catering companies suffered revenue losses of over 100%, and 9% suffered losses of over 90%. "From past data, our mall stores' delivery business accounted for about 10%, while community stores were slightly higher, but only 20-30%. The impact of the epidemic has been enormous. Currently, we are also trying to save ourselves through community group buying," said Yang Jian, chairman of Xinjiang restaurant Yerixiali, to Retail Observer. -01- The Chain Relationship with a One-Word Difference Community group buying is not a new retail format. As early as the PC era, the seeds of community group buying existed. At that time, people mostly communicated through website BBS. This group, gathered by common interests, became the soil for community group buying. "It should be said that community group buying truly became a professional term after professional community group buying companies emerged in 2017," said Liang Xiaoqiao, COO of the WeChat mini-program "Qun Jielong". After more than three years of development, with the boost of capital, the term community group buying has long completed the market education stage. Interestingly, to this day, even though traffic giants are laying out community group buying in various ways, no truly monopolistic big brand has emerged in this track, and the entire industry shows very obvious regional characteristics. In today's increasingly mature retail environment, whether in physical stores or online e-commerce, consumers can almost buy wherever they want. What kind of people's needs does community group buying solve? How is it different from other retail formats? "I choose group buying because, on one hand, I look at the group leader, as the items are selected by the leader and quality must be guaranteed; on the other hand, I look at the price, which must be cheaper than buying myself," said Ms. Yuan, a heavy community group buying enthusiast in Shanghai. If the quality is average or the price is not competitive, she would rather not join or choose another leader's group. Obviously, the foundation of community group buying is first based on the trust of group members in the group leader, and this trust is different from pure transactions; it carries warmth. Therefore, community group leaders must have a certain fan (member) base in the community. Having a fan base does not mean you can rest easy. Once the quality or experience of group-buying products is not guaranteed, members are very likely to "leave the group". In summary, in community group buying, fans are the basic condition, and products are the necessary condition; both are indispensable. Looking at the model of community group buying, it is also different from the "supply-demand" relationship of traditional retail models. Community group buying is a "demand-supply" relationship. This one-word difference reflects the importance of member participation in the chain of community group buying. In community group buying, members are not just passive recipients of a product initiated by the leader. In a good community group, often members want a certain product, and the leader goes to find the corresponding supply source, negotiates the price, and arranges details such as delivery or pickup. Compared with group leaders, the emergence of community group buying companies has made products more abundant and logistics warehousing more standardized. But they forcibly insert themselves into the simple chain of community group buying, changing the original simple relationship of "member-leader-supply chain", but not changing the chain from supply to demand. Liang Xiaoqiao pointed out: "The underlying characteristics of community group buying are obviously different from e-commerce or internet companies. The former is decentralized, while the latter two are centralized." Community group buying companies attempt to use centralized methods, with the help of technology and capital, to quickly improve the efficiency of community group buying and thereby expand scale. But from the perspective of group leaders and members, the efficiency and scale of community group buying companies are not their primary considerations. What matters most is who can provide the most competitive products in the simplest way. -02- Many Failures Not long ago, the leading community group buying company "Shihuituan" announced that it had received a new round of investment from Alibaba, Qiming Venture Partners, ZhenFund, and others, with a financing amount of $88.3 million. Its founder and co-CEO Chen Ying said that in the next few years, the community group buying market is expected to reach 500 billion yuan. In fact, since 2017, community group buying has been continuously touted as a "windfall" industry. According to rough statistics, in 2018, apart from companies providing SaaS software and mini-program services for community group buying, there were nearly 50 pure community group buying companies. Starting in the second half of 2018, financing news of community group buying companies constantly stimulated insiders and outsiders. It is reported that since 2018, more than 10 community group buying platforms have received capital injection, with cumulative financing exceeding 4 billion yuan. For example, "Niwo Nin", now acquired by Shihuituan, received a Series A financing of tens of millions of yuan led by GGV in the second half of 2018; "Shixianghui" completed three rounds of investment (Angel, Series A, and Series B) within 2018, with total financing of about 200 million yuan... Capital helped heat up the market, and the list of community group buying companies quickly doubled in a short time. Grabbing territory and group leaders, community group buying entered a "war of a hundred groups" phase. But while territory was easy to occupy, people, like money, came and went quickly. Group leaders attracted by commissions had no loyalty to community group buying companies. In the second half of 2019, community group buying companies experienced a major industry reshuffle. Mergers, alliances, and deaths became the keywords for this period. The most famous was the "marriage" between the two industry leaders, Shihuituan and "Niwo Nin". Although called a marriage, it was actually an acquisition of the latter, and it caused quite a stir. At the same time, "Songshu Pinpin" and "Linlin Yi", which had some scale in the industry, also frequently heard rumors of site contraction and layoffs in the second half of last year. JD.com, which had been eyeing community group buying, announced the establishment of a community group buying alliance, hoping to use JD's product resources, warehousing and distribution network, and data capabilities to find a solution to the difficulty of profitability in community group buying. This inevitably led people to rationally think about the model of community group buying. Some community group buying companies also began to seek change, such as trying to remove group leaders or expand existing product categories, but these methods seem not to have worked. In this regard, Mr. Wang, who works in community group buying, pointed out that a very important point is that, first, an important foundation for the establishment of community group buying is the group leader himself. After removing group leaders, what is the difference between community group buying and traditional e-commerce? Second, expanding existing product categories does not change the logic of community group buying, which forces supply from the demand side, and cannot bring substantial help to community group buying companies to escape their difficulties. "Community group buying companies are actually grafted on forcibly. Personally, I think they will not die in the future, but they will definitely evolve, for example, into relatively pure supply chain enterprises," said Liang Xiaoqiao. The predecessor of Qun Jielong was a community group buying company whose business involved supply, warehousing, logistics, and even group leaders. It was not only too heavy but also did not truly understand the logic of community group buying, and ultimately failed. In 2017, Qun Jielong was born. Although it is still in the community group buying industry, its positioning is different, and its entry point is also different—becoming a bottom-level technology service provider in the community group buying ecosystem, providing tools for community group buying and serving the group participating in it. -03- Unconventional Intruders On one side is the major reshuffle of the industry, and on the other side, community group buying is welcoming a wave of unconventional intruders. Especially after the COVID-19 outbreak this year, industries severely affected, such as catering and retail, have launched self-rescue efforts. As a retail format, community group buying naturally became one of the channels. "From the data of January to February this year, community group buying in Wuhan grew the fastest. Whether it is the number of group leaders, the number of group buys, or the total group buying amount, it increased nearly 10 times compared with usual, while the growth rate in Beijing, Shanghai, Guangzhou, and Shenzhen during the epidemic was about 4 times," Liang Xiaoqiao said in an interview with Retail Observer. From the data of group buying initiated on Qun Jielong, it is indeed true that more and more physical stores are joining community group buying. In fact, near the community where Retail Observer lives, some physical stores have already joined community group buying, such as the fruit chain brand "Sange Yanyi" and "Rou Lian Bang" under Yihao Food. These store-type community group leaders not only have resources on the product side and community resident resources, but also have cold chain storage conditions and function as pickup points, which is a headache for many community group leaders. Not long ago, Snow Beer, Budweiser, and Tsingtao Beer also recruited community group leaders in different regions. Some store and convenience store owners are candidates. Obviously, beer brands also value the pre-warehouse function of these physical stores. However, because store group leaders have relatively single product categories, community group buys can mostly only start with hot products. This leaves opportunities for supply chain companies to join community group buying. During the epidemic, Shuhai Logistics, the supply chain company of Haidilao, took the lead in testing community group buying in Shanghai. Through the Qun Jielong mini-program, consumers could group buy 8 dish packages. Orders placed before 18:00 the same day could be delivered by 11:00 the next day, with a minimum of 10 sets per community. Package prices ranged from 38 yuan to 168 yuan, and product categories ranged from vegetables, meat, and seafood to grains, oils, and flour. However, shortly after the group buy was launched, news came that the packages were being adjusted internally. "I think Shuhai's idea of launching community group buying is correct, but at present, their operational posture is not quite right. As a catering company, they have great advantages in supply chain and service, but to enter the community in the form of group buying, they must truly root themselves in the community," Swing analyzed from the perspective of a community group leader. Liang Xiaoqiao believes that the delivery method of community group buying is actually a warm delivery between people, which cannot be solved by pure e-commerce or technical thinking. "Companies carrying out community group buying must have this awareness and implement it to be successful." Source: New Retail Business Review (ID: xinlingshou1001)