Scan the QR code in the image to register Compared to the vigorous financing wave in the first quarter, community group buying platforms seemed to be in a phase of "peaceful development" in the second quarter, with the buzz gradually fading. However, the controversies surrounding community group buying are still being debated within the industry. From different perspectives, people see different things, leading to varied opinions. Especially at the distributor level, what exactly has community group buying brought? During this period, New Distribution conducted concentrated visits to several distributors in the East China region. As a frontier area with vibrant economic activity, East China has always been a bellwether for new retail. Their views on community group buying are worth pondering for other distributors. Frankly speaking, community group buying has had some impact on their businesses, both positive and negative. Community Group Buying Arrived: My Business Declined! Li Hua (pseudonym), a distributor in Jiangsu representing multiple first-tier beverage brands, experienced a significant impact from community group buying, with a year-on-year sales decline of about 20% in the second half of last year. His main channel was traditional mom-and-pop stores, which typically serve local community residents. When community group buying arrived, these small store owners, leveraging their storefronts and built-in traffic, became prime targets for community group buying platforms, serving as group leaders and pickup points. When giant platforms flooded into his operating area, Li Hua clearly noticed a decline in the order amounts and frequency from small stores, and salespeople found it difficult to push products even during store visits. This was especially evident in inventory pressure. Many stores began resisting stocking up, but few top FMCG manufacturers avoid pressuring distributors to hold inventory. By the end of the year, warehouses were piled with goods, leading to high costs. To understand the root cause, Li Hua and his sales team went to the front lines and discovered the issue. Some store owners told him that, for example, the Chinese Red Bull he distributed was priced at 109 yuan per case on a certain platform, while they paid around 120 yuan per case from the distributor, with the added burden of stocking several cases each time. Running a business, no one is foolish; they all want to earn more. Li Hua told New Distribution that normally, with a promotional offer, a store could take 10 cases to sell over a week or ten days, but now they only order two or three cases at a time, and many customers are unwilling to stock up even when out of stock. Especially for leading brands, which are high-turnover products with low margins, stores calculate the price difference and prefer not to buy from distributors. In simple terms, community group buying offers prices lower than the daily restocking prices for small stores, turning them into procurement platforms. Moreover, beyond the low prices, stores can order on the platform without any inventory pressure. This is a huge blow to distributors, who typically pressure terminals to stock up to stimulate faster product turnover. This leads to a vicious cycle in the entire consumption chain. As terminal digestion capacity declines, distributors gradually lower their inventory expectations, which eventually feeds back to manufacturers, resulting in declining sales—a chain reaction of first, second, and third-level effects. This case illustrates the impact of community group buying on traditional small store businesses from the perspective of a distributor operating through traditional channels. Another case involves a distributor in modern channels. In early May, I visited Li Ming (pseudonym), a condiment distributor in Shanghai operating in modern channels. His business was quite large, but he told me that in March and April this year, his sales declined by over 30% year-on-year. Shanghai, with its developed economy and mature, diverse retail channels, saw community group buying platforms enter cautiously. Even during last year's land grab, few entered Shanghai. However, starting in March this year, as Duoduo Maicai and Meituan Youxuan entered, distributors serving local supermarkets in Shanghai experienced sharp sales declines. Li Ming told me that, frankly, community group buying did not directly compete with him; it was more like a "dimensional reduction strike." Because the brands he represents are high-end products with strict price control by manufacturers, there was no price dumping on the platforms. For this reason, he didn't pay much attention initially and failed to prepare countermeasures. But by the end of March, he noticed poor backend data. He also communicated with supermarket managers, who reported that March sales had also declined by over 20-30% year-on-year. After in-depth research, including personally using the platforms, Li Ming discovered that the penetration rate of community group buying platforms could be described as terrifying. One giant platform had nearly 30 pickup points within a one-kilometer radius of his home. The dense pickup points far surpass supermarkets in convenience. Additionally, community group buying platforms primarily focus on fresh produce, with specials on rice, eggs, vegetables, and meat, sufficiently meeting family consumption needs. Once these needs are met, consumers tend to do one-stop shopping on the platform, also purchasing condiments, daily chemicals, and other periodic necessities. Through this approach, platforms create a perception and experience of convenient, fast, and low-cost online shopping, ultimately cultivating a habit of placing orders online, making it difficult to change consumer habits once formed. Online sales are not a simple one-to-one conversion from offline to online. With the shift in consumption scenarios, fewer people go shopping, fewer go to supermarkets, and offline consumption declines. No matter how good the displays and stacking are, if no consumers come, who will see them? These two issues are likely what many distributors currently face. The core impact of community group buying on distributors is at two levels: stores and consumers. On one hand, it affects pricing, stores, and sales; on the other, it affects people's mindsets and the mentality of all market participants. Community Group Buying Arrived: My Business Grew! Of course, during our visits, we saw many negative impacts, but there were also positive growth cases. A beverage distributor in a prefecture-level city in Jiangsu, upon the arrival of community group buying, immediately delved into understanding its operational model. After studying the entire system, he believed there were development opportunities. When platforms entered his operating area, he chose to cooperate with them as a supplier. Additionally, he compared it with the B2B model from 16 years ago and, within the rules of the group buying model, managed to "fleece" some benefits. In just three to four months, he achieved profits of one to two million yuan. A dairy and beverage distributor in Hubei, also named Li Hua (pseudonym), maintained a growth trend. As the epicenter of the early pandemic, Hubei was a key target for various platforms, and dairy products are a high-proportion category in community group buying. Conventionally, she should have been significantly impacted, but she achieved counter-trend growth. Li Hua told New Distribution that the core lies in a shift in mindset. The emergence and rapid development of community group buying represent a trend. Trends are irreversible. Distributors must think about how to coexist with these platforms and do better business. During the outbreak of community group buying, Li Hua made many innovative moves, such as borrowing the community group buying model to create her own mini-program, having store owners act as group leaders, and launching experiential interactions like scratch cards for consumers and video rewards for stores. Through innovative distribution models and methods, her business not only declined but exceeded the manufacturer's targets. A distributor in Anhui specializing in leisure snacks told New Distribution that new models are not scary; what's scary is that distributors have been stuck in old distribution models for too long, lacking the courage they had when starting their businesses to change themselves. In his view, the price war in community group buying is temporary. No one in business is foolish; small store owners also know the pros and cons and realize this kind of business is not sustainable. In such circumstances, distributors should think about what community group buying cannot do, such as truly high-quality service and logistics. Seizing the opportunity of community group buying's expansion, he implemented a series of "inward-looking" changes internally, building a three-dimensional warehouse and redefining the entire warehousing and logistics system. Externally, he placed no sales pressure on terminals, did not force inventory, allowed stores to order as much as they wanted, and even offered unconditional returns. When facing new models, distributors should first identify the shortcomings of the new model and develop strategies around those shortcomings. That is the opportunity for enterprise growth. The reason for writing these cases is not to praise or criticize community group buying. The core message is to tell distributors that the emergence of new things is both accidental and inevitable. Some may be eliminated, but others will rise and even grow bigger in the process. This phenomenon is worth pondering. You'll find that when new things appear, you may be completely unprepared. External environmental changes can indeed cause sales declines, but the key for distributors is to think about whether there are ways to coexist with these challenges and pull sales back. The above cases of business growth offer some reference. First, from an internal management perspective, review your own operations and management to see if there is room for optimization, and whether you can pull sales back through refined operations. Or, from your marketing strategy, can you provide differentiated services that platforms cannot, achieving off-position strikes? Second, from an external model perspective, when new models emerge, distributors must proactively try them and, if opportunities arise, cooperate with platforms. Why cooperate? Cooperation is not just for sales growth, but to develop your own online operational capabilities. A few days ago, at a distributor conference, Mr. Zhao Bo, founder of New Distribution, cited an example: During the Soviet-German War in World War II, tanks were a new type of weapon. Stalin did not pay enough attention to them and even listened to his subordinates' advice to disband tank units, resulting in millions of troops being surrounded by German tanks, leading to heavy losses. Stalin's insufficient understanding of new technology partly led to the early defeats. Similarly, the emergence of community group buying is just a new model that appears at a certain stage of retail development. In the information civilization era, traffic will be further segmented, and channels will only become more segmented in the future. To what extent? Channel structure ten years ago: Distributors, wholesale, KA, NKA, B2C, convenience stores & CVS & special channels & franchise stores. Current channel structure: Distributors, wholesale, KA, NKA, B2C, convenience stores & CVS & special channels & franchise stores, community group buying, B2B, KOL & KOC & communities, O2O & delivery & flash delivery, live commerce, community e-commerce, content & short video & interest e-commerce, brand private domain & membership e-commerce, and so on. In just ten years, channels have become so fragmented. Offline business has become difficult not because of one channel change, but because distributors have failed to prepare for each change. When B2C e-commerce rose early on, a batch of distributors died, but those who survived eventually developed the ability to cope with e-commerce impacts. Think carefully: the new channels that have emerged over the past decade—e-commerce, O2O, community group buying, CVS, social e-commerce, etc.—have had nothing to do with distributors. Is it that distributors don't want to do it? It's that they simply don't know how. In the future, channels will be further segmented, and the trend toward online will become more evident. Why don't distributors take advantage of opportunities to cooperate with platforms to hone their online development capabilities? This way, even if new models emerge in the future, they won't be caught off guard. Reviewer: Asher -END-