---
title: "Community Group Buying E-commerce Is on Fire?!"
description: "This article explores why community group buying e-commerce has exploded this year, its market size, and the window of opportunity for entrepreneurs. It also examines the role of community group buying in the FMCG supply chain, highlighting the importance of supply chain capabilities and the challenges ahead."
author: "新经销刘少德"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-09-27"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/community-group-buying-e-commerce-is-on-fire-8adbd377/"
markdown: "https://xinjignxiao.com/en/articles/community-group-buying-e-commerce-is-on-fire-8adbd377.md"
original_source: "https://mp.weixin.qq.com/s/Caooed1cVhS0-7NObk6sXA"
translation: "https://xinjignxiao.com/zh/articles/%E7%A4%BE%E5%8C%BA%E5%9B%A2%E8%B4%AD%E7%94%B5%E5%95%86%E7%81%AB%E4%BA%86-8adbd377.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/community-group-buying-e-commerce-is-on-fire-8adbd377/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Community Group Buying E-commerce Is on Fire?!

> This article explores why community group buying e-commerce has exploded this year, its market size, and the window of opportunity for entrepreneurs. It also examines the role of community group buying in the FMCG supply chain, highlighting the importance of supply chain capabilities and the challenges ahead.

Click to read the original article for details.
> **Core导读:**
>
> 1. Why has community group buying e-commerce exploded this year?
> 2. What is the market size of community group buying e-commerce? How long is the window for entrepreneurs?
> 3. What role does community group buying play in the FMCG supply chain?

**Capital never sleeps!**
This phrase aptly describes capital's covetousness for the offline retail market. From FMCG B2B to last year's unmanned vending machines and office shelves, to chain convenience stores, all demonstrate capital's thirst for offline traffic. Especially after the concept of "New Retail" was proposed, it seems any business that can be associated with retail can secure significant funding. Now, capital has turned its attention to a new business model: community group buying e-commerce.

Among the many industry players, there are also some star performers, such as Kaola Select under New High Bridge, Xingsheng Preferred under Furong Xingsheng, Meijia Enjoy under Meicai, Daily Fresh under Miss Fresh, and Xiaoqu Le under Global Grabber. This also makes us think: How did community group buying e-commerce become popular? Why is it so favored by capital? Where is the endgame for community group buying?

1
**Started with Group Buying**
On July 26, Pinduoduo went public in the US with a market value of about $24 billion, becoming the third-largest e-commerce platform in China after Alibaba and JD.com. Although it has been controversial since its birth, this has not affected its rapid development and performance in the capital market.

Pinduoduo's latest financial report shows that the company's active users reached 343.6 million, a year-on-year increase of 245%. In the 12 months ending June 30, 2018, Pinduoduo's GMV reached 262.1 billion yuan, a year-on-year increase of 583%. With Taobao (Tmall) and JD.com dominating the market, Pinduoduo's rise is indeed remarkable, which makes people pay more attention to the logic behind its rapid development: **consumption stratification and social traffic monetization**.

Pinduoduo founder Huang Zheng admitted in a previous interview, "**People living within the Fifth Ring Road are not our target users**." This differentiated user stratification strategy has brought Pinduoduo a huge and undeveloped user base, while WeChat, with over 1 billion users, contributes enormous social traffic driving Pinduoduo forward.

This logic is considered by investors to be still applicable in offline community retail: **Compared with high-frequency offline consumption scenarios, online e-commerce penetration is not high, especially in fresh produce, rice, flour, and cooking oil categories, where there is huge room for exploration; in familiar social networks, there is no need to rebuild trust relationships, and the cost of order conversion is low**.

In addition, due to differences in products and delivery, community group buying e-commerce does not require heavy asset investment in supply chain and warehousing distribution systems like B2B, thus in the eyes of capital, it has the possibility of rapid replication.

According to a community group buying e-commerce platform, **its average order value is about 32 yuan, and in a provincial capital city, daily orders have exceeded 200,000, which means the platform's GMV in a single city exceeds 200 million yuan**. New Distribution conservatively estimates that the overall market size of community group buying e-commerce will reach nearly one trillion yuan, with huge market imagination space.

2
**Thrives on Social**
**So what exactly is community group buying e-commerce?**

In short, community group buying e-commerce is an e-commerce model that takes the community as the unit, the community group as the main trading scene, and familiar social relationships as the link. Platforms often choose stay-at-home moms (community KOLs) or community store owners as "group leaders" and establish WeChat groups based on the community, then conduct group buying pre-sales within the group. The platform purchases products uniformly based on the group buying situation, then hands them to each group leader, and users pick up the goods themselves, thus completing the entire transaction process.

In this business model, the group leader is a crucial link. Not only because the group leader's strong relationships within the community can effectively connect users and reduce purchase decision costs, but more importantly, they can serve as a forward warehouse for product distribution, reducing order fulfillment costs.

The group leader's income mainly comes from the commission on platform product transactions, with commission rates mostly around 10%. Most group leaders' commission income is between 1,500 yuan and 10,000 yuan, ensuring their enthusiasm for organizing groups.

It is not difficult to see that the business model of community group buying e-commerce retains more or less the shadow of WeChat business (micro-commerce). From the current industry development, a large part of group leaders indeed originated from the WeChat business group that once dominated Moments. **So what are the differences between community group buying e-commerce and WeChat business?**

**1. Community group buying e-commerce is based on the community**, and the relationships between levels are relatively close. The relationship between group leaders and users is mostly neighbors with close spatial distance, connected by strong relationships; while WeChat business and Pinduoduo are based on network connections of community and familiar relationships, which are relatively weaker;

**2. Behind community group buying e-commerce is a strong supply chain**. Because community group buying e-commerce is based on the community, the connection between group leaders and users is strong, which places higher demands on products and supply chain. Once product quality issues arise, it is easy to have a trust crisis among the platform, group leaders, and users, and the community may face difficulties in continuing.

In contrast, WeChat business and Pinduoduo have weaker links between different users, and quality issues of a single product are difficult to directly reflect at the regional small circle level, with relatively lower supply chain requirements; after product quality issues occur, the time and communication costs for after-sales are relatively high.

3. In terms of delivery methods, WeChat business and Pinduoduo mostly use third-party express delivery to send products directly from the manufacturer to consumers, while some WeChat business complete the transaction through offline face-to-face delivery; **community group buying e-commerce is delivered by the platform directly to the group leader, who then completes the order delivery, with stronger offline social attributes**.

**If Pinduoduo is a nationwide community group buying, then community group buying e-commerce is more like a localized Pinduoduo, except that Pinduoduo has stronger national scale effects and faster fission speed, while community group buying e-commerce has stronger social attributes and product quality is easier to guarantee.**

"**For consumers, community group buying e-commerce is actually a process of consumption grading and stratification.**" Ren Xiaodong, a well-known community marketing expert, told the author that different distribution levels mean different profit distributions, which leads to several rounds of price increases from the manufacturer to the final consumer. Community group buying e-commerce directly purchases from the source of production upstream and serves downstream consumers directly through pre-sales, effectively reducing product prices by about 10%. Moreover, the products in community group buying are mostly seasonal fruits and vegetables, fresh eggs and milk, daily necessities, etc., which are highly attractive to community users. This also ensures the rapid development of community group buying e-commerce.

3
**Difficult in Supply Chain**
The rapid development of community group buying e-commerce has also attracted the attention of countless capital. According to incomplete statistics from New Distribution, since August, fifteen community group buying e-commerce platforms have received financing, and more than 20 capital entities have entered the industry, including giants and unicorns such as JD.com, Pinduoduo, Meicai, and Miss Fresh.

The other side of the coin is that a community group buying e-commerce platform ignored the coverage density of communities and adopted a franchise expansion approach, ultimately leading to the platform's failure. Let's not discuss the classification and pros and cons of community group buying e-commerce models in the current market for now. Returning to the FMCG supply chain field, **what are the shortcomings of community group buying e-commerce in the development process? What inspirations does the development of community group buying e-commerce bring to B2B enterprises?**

**1. Success depends on supply chain, failure also depends on supply chain**
Unlike B2B, the C-end can rely on the number of users to quickly form scale effects, especially for non-standard categories such as fresh eggs and milk, household cleaning and daily chemicals, and categories with low brand concentration. However, as the platform's user coverage density increases and the user base expands, supply chain capabilities and warehousing and distribution capabilities will inevitably become the main factors restricting the platform's development and growth.

In addition, the loss of fresh products is also a problem that community group buying e-commerce must face in the process of market expansion. Although buyers go deep into food production bases for selection and procurement, which can reduce the problem of multiple price increases in the intermediate circulation of fresh products and ensure profit margins, the storage and transportation of products from the place of origin to various city warehouses takes a relatively long time, and the product loss during this period cannot be ignored.

**2. Delivery efficiency is key, forward warehouses may become standard**
After reaching a certain user scale, Pinduoduo began to invite international and domestic first-line brands and set up a "Brand Pavilion" first-level entrance on the homepage for such brands. This move is also widely interpreted by the outside world as the key to consumption upgrade and Pinduoduo's own evolution.

For community group buying e-commerce, with the continuous enrichment of product categories, the delivery efficiency of products will become the key to the platform's own evolution and enhancement of core competitiveness. At present, most community group buying e-commerce orders are delivered every other day. With the increase in order quantity and coverage density of communities, the backend configuration with city warehouses as the main and forward warehouses as a supplement may become the standard for community group buying e-commerce.

**3. Unsustainability of group leader services**
Success is due to Xiao He, failure is also due to Xiao He. Although group leaders who are stay-at-home moms or convenience store owners have familiar social relationships and rich network resources in the community, their own profit-seeking nature and uncontrollable service quality make it difficult to guarantee loyalty to the existing platform when facing higher profit sharing.

**Serious homogenization is also an urgent problem to be solved in the current community group buying e-commerce industry.** Looking at the community group buying e-commerce platforms currently on the market, it is not difficult to find that most platforms have similar business models, homogeneous products, and extremely high user overlap.

In the early stage of industry development, it is understandable to quickly seize the market in this way. However, with the outbreak of the "Hundred Regiments War" and the intensification of competition, industry participants must find their own differentiated core competitiveness to avoid being abandoned by the market.

The rise of multiple channels will inevitably lead to the diversification of brand distributors' distribution methods. As the traditional grocery stores closest to community consumers occupy a unique traffic entrance. From this perspective, B2B can connect upstream to brand supply chains and downstream to consumers, and community group buying e-commerce will become the inevitable path for it to connect with C-end consumers.

However, with capital competing to enter, the general consensus in the industry is that the window for community group buying e-commerce will not be too long. At this stage, the ability to raise funds and rapidly expand the market has become the core competitiveness of community group buying e-commerce.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671