---
title: "Community Group Buying: Embrace or Resist?"
description: "Following the top-level penalties on leading community group buying companies before the Two Sessions, the author analyzes the nature and trends of this model, arguing that traditional manufacturers and distributors should seek win-win cooperation rather than resist, leveraging platforms for regional alliances, market expansion, and new retail innovation."
author: "邢仁宝"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-03-18"
language: "en"
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---

# Community Group Buying: Embrace or Resist?

> Following the top-level penalties on leading community group buying companies before the Two Sessions, the author analyzes the nature and trends of this model, arguing that traditional manufacturers and distributors should seek win-win cooperation rather than resist, leveraging platforms for regional alliances, market expansion, and new retail innovation.

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Last week, the National Two Sessions concluded successfully in Beijing. However, just before the opening, news of top-level penalties on some leading community group buying companies quickly spread, causing a stir in the entire retail industry. People from all walks of life expressed their opinions, with more criticism than praise. Based on past experience and some industry development signals released during the Two Sessions, I would like to share my views on this topic.
**-01-**
**See the Essence Clearly**
Relying on platform subsidies and special procurement channels, using low-price strategies for high-frequency consumer products such as fresh produce and mainstream beverages, and leveraging the role of group leaders to continuously attract consumers, while rapidly acquiring traffic and seizing market share in group buying—this is the common understanding of the community group buying model.
Under this model, the first to be affected are the brands selected as ammunition for market expansion, disrupting their traditional channel pricing systems and damaging the profit systems of traditional distributors. Secondly, it suppresses the living space of downstream wholesalers, small vendors, and small supermarket operators. For bottom-level consumers, while satisfying their demand for affordable prices, it gradually changes their shopping habits.
The rapid development of the internet has been impacting various industries since a decade ago, starting from empowering traditional industries and improving efficiency to now competing with traditional industries for retail market share. There are two reasons behind this:
**On one hand, the dividend of online traffic is gradually disappearing, and customer acquisition costs are high. As non-traditional real economy, traffic is the foundation of survival, compelling them to constantly seek new sources of dividends.**
**On the other hand, internet platforms themselves possess vast consumer big data, enabling more precise identification of retail opportunities. The traffic for offline essential products is stable and enormous.**
Coupled with the catalyst of the pandemic, the community group buying trend has become a battleground for major internet giants. Therefore, community group buying is crucial to the future success or failure of major internet platforms and is the direction of capital seeking profits. **To survive or live better in the future, conflicts between e-commerce and traditional industries will not disappear.**
Moreover, the efficient supply chain and information flow integration technology of e-commerce platforms, supported by strong capital for ground promotion, contrast sharply with the disadvantages of traditional industries such as low operational efficiency, complex channel hierarchies, and insufficient consumer insight and penetration. This also reflects that new retail methods like community group buying will not stop developing; they have an important historical mission.
In the future, community group buying will **seek a balance with traditional industries, empower the real economy, and jointly meet the more diverse and personalized needs of the consumer market, while conforming to the national development trend and continuing to tap the potential of the retail market.**
**-02-**
**Clarify the Overall Trend**
From this Two Sessions, I perceived three major directions. First, the state is more determined to strengthen the real economy. China's economy started with the real economy and will rely on it for the future.
Especially in the current environment affected by the pandemic at home and abroad, the real economy is the foundation for China's steady economic development and for gaining the initiative in international economic competition.
Therefore, I believe that key roles at all levels of the traditional retail industry will also receive policy guarantees under this major trend. This may also be an important reason why community group buying platforms, which have been excessively encroaching on traditional industry interests, have been penalized.
Second, accelerating the digital transformation of traditional industries. Digital technologies represented by the internet, big data, and artificial intelligence have greatly enhanced the progress and development of Chinese enterprises, but they have also had a huge impact on traditional enterprises, making digital transformation a trend. Before the pandemic, most enterprises were being pushed by internet companies to transform, both wanting to try and fearing being tricked.
**After the pandemic, enterprises that moved first have reaped benefits, and more enterprises have recognized the importance of digital empowerment for traditional enterprise development, starting to embrace it actively. New retail models like community group buying are gradually gaining recognition from more traditional enterprises, but at this stage, their development is too aggressive and needs to be brought under regulation.** This was also proposed by Ma Huateng at this Two Sessions.
The third aspect is rural revitalization. China's rural permanent population is about 570 million, accounting for 41% of the total population. In 2020, while per capita consumer spending of urban residents fell by 3.8%, that of rural residents rose by 2.9%.
From statistical data, **the growth rate of income and consumer spending of rural residents is higher than that of urban residents, indicating greater growth potential in the consumer sector.**
At the two key junctures of victory in poverty alleviation and the implementation of the domestic demand expansion strategy, the township market will become an important engine of economic growth in the future.
This part of the market is a weak area for many retail manufacturers in their market layout, with huge development potential. But community group buying platforms have already begun to increase their layout in these markets.
The long-term stable development of enterprises requires understanding the path, clarifying the trend, and optimizing tactics. Having seen the essence and clarified the trend, the next step is to think about what manufacturers should do.
**-03-**
**Rather Than Giving Up Eating for Fear of Choking, Seek Win-Win**
Manufacturer friends have suffered impacts and losses from the aggressive development of community group buying, and this time it has also prompted relevant national departments to speak out.
But under the background that the development of community group buying will not stop and can only be regulated, we should **spend more time thinking about whether we can find a balance of interests with community group buying and find possibilities for cooperation. Evasion is far less effective than actively engaging; letting the other party empower our operational shortcomings is the correct response I suggest.**
**1. Manufacturers take the lead in building regional alliances to stabilize prices and establish a basis for cooperation**
In response to the low-price behavior of community group buying, most manufacturers have directly cut off supply sources, but this is not a long-term solution. In the short term, suppressing the behavior of some mainstream suppliers is effective, but under increased sales and inventory pressure, it is inevitable that some will resort to under-the-table methods to complete tasks and ensure their rebates are not lost.
Therefore, we can, within a larger regional market (such as the whole province or city), have manufacturers and distributors jointly establish an e-commerce platform control alliance, sign alliance agreements to form consensus, unify supply prices, and pool management funds with penalties and rewards. At the same time, manufacturers should proactively contact and seek cooperation with various community platform leaders in the region.
For example, supply customers in each market segment can be clearly defined, and resources can be contributed to participate in periodic promotions, but the group buying platform must provide detailed distribution lists of group leaders, which terminal stores are group leaders, and when activities are planned, they should communicate with brand manufacturers in advance. Can large-scale promotions be limited to single points, etc.
After reaching a mutually beneficial consensus, the participating regional alliance distributors will monitor and implement it.
**2. Leverage the sinking market to tap the potential of counties and townships**
**The township market has great potential, but it is a weak area for many manufacturers.** It is generally covered through periodic market shocks or three-tier wholesale models, and the consumption potential of the market is often not fully tapped.
This is precisely the advantage of community group buying. **Currently, mainstream community group buying is sinking into township markets quickly, relying on the model's high consumer stickiness and efficient supply chain system, achieving significant results in these county and township markets.** Therefore, manufacturers cooperating with community group buying in such high-potential markets is also a good way to leverage innovation and increase growth.
For example, choose products with consistent consumption occasions for joint promotions, such as four-pack beer with fresh vegetables, bread with children's drinks, to convey the drinking scenario more directly to consumers.
County and township areas have a strong folk culture. Based on market conditions, special flash sales can be held before festivals (with time and quantity limits), or joint promotions with the best-selling products during festivals. Joint promotions can avoid price sensitivity caused by single product price reductions.
**3. Leverage platform advantages to improve the effectiveness of new product launches**
With the acceleration of consumption upgrading, personalized consumer needs require continuous product innovation. But in the current environment, it is increasingly difficult for new products to successfully launch. The most important reason is that brand communication methods have become more fragmented. Simply relying on traditional distribution and poster posting is far from enough; it is necessary to fully integrate online and offline, and grasp the shopping habits of target consumers.
Therefore, **manufacturers should bravely try various new retail models in marketing, and actively explore the hottest community group buying platforms.**
For example, when launching a new product, use old products to drive new ones with a special package, or for consumer cultivation, conduct periodic free tastings on community group buying. Also, for new products that do not sell well after launch and are approaching their shelf life, seek cooperation with community group buying to minimize losses.
**4. Optimize organizational structure, keep pace with the times, and stand at the forefront**
Before the Chinese New Year, I went on a business trip to western Guangdong and visited some distributor friends. The issue of community group buying disrupting the market price system became a topic of every conversation. 90% of customers scoffed at it, hoping manufacturers would step in to control it, feeling very helpless.
But one customer who made coconut milk was very calm about it. After in-depth communication, it turned out that this customer had established a new retail department within the company a few years ago.
They found a young person born in the 1990s to be in charge. I also met this young leader. Through communication, I found that this leader had a deep understanding of new retail and had already started cooperation with major community group buying platforms.
His view: **New retail is an unstoppable trend. No one can stop it. During the period of exploration and transformation, it is inevitable that the interests of some groups will be harmed. But after the competition among heroes, a balance with traditional industries will be found, achieving a win-win situation.**
Therefore, I also suggest that manufacturers with conditions add a role to their organizational structure to analyze and monitor new retail development trends. It will definitely do more good than harm.
Community group buying is not a flood or a beast, nor is it a casual glance. Discovering opportunities and rushing in savagely is a characteristic of internet efficiency. For new retail models, I have always suggested that manufacturer friends actively embrace them, even if it means paying more tuition. Moreover, the state has also expressed its attitude towards community group buying and implemented regulation.
Internet companies are not willing to just be empowerment tools; they want to diversify and lead trends, which is also the rule of the internet industry. For traditional industries, they also have their own core competitive advantages. In a competitive environment where they are attacked from both sides, can they maintain their channel advantages and continuously improve offline service quality? Can they innovate and seek change in the wave of retail transformation? These are the issues that should be actively considered at this stage, rather than being gradually eliminated while complaining.


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