After a year of turmoil, community group buying has finally encountered the difficulties and predicaments that were bound to appear. For platforms with solid foundations, they may still sustain themselves, but the industry's downturn inevitably brings some pain. For those with weak foundations, the market has issued a death sentence; in the current environment, even seeking acquisition is difficult, as finding a buyer is challenging.

Especially in lower-tier markets, which served as the original driving force and a story for capital markets, the deeper the descent, the more likely it is to lead to self-destruction. Because costs and order volumes, the loyalty of group leaders and users, significant fluctuations in daily order volumes, and price wars from competitors—these factors become the last straw that breaks the back of small platforms or regional branches of large platforms.

For instance, on December 2, it was reported that the community group buying e-commerce platform Squirrel Pinning's Yueqing station issued a notice titled "Farewell to the Jianghu," announcing its closure, with November 30 as the last day of delivery. The company did not explain the reason for the closure.

So, will 2020 bring more "farewells" or a rebuilding of the "jianghu"?

-01- Community Group Buying Cannot Buy Loyalty from Group Leaders and Users

Community group buying is a simple business model, much like food delivery: one end is the platform, the other is the user, and in the middle is the group leader.

This model appears extremely simple, making it easy for platforms to grasp and operate. However, as community group buying rapidly expanded, platforms suddenly discovered that even burning through investor funds could not buy the loyalty of group leaders and users.

This is a deadlock: group leaders come for profit, and if another platform offers higher returns, they will switch, taking their hundreds of users in their communities with them.

An example is a group leader surnamed Zhang from Henan, who started in October last year and now works part-time for multiple platforms: "U-Hao Community" under UU Run Errands, "Youjing Youtian" under Liancai.com, and "Youzhi Youwei" under Sanquan, all local Henan brands. Imagine how such a group leader can deeply connect and serve users for one platform.

Users are also not easy to please; they are price-sensitive and will order from whichever platform offers better value for money. If a platform tries to raise prices for profit, users will leave without a second thought and join another community group buying group.

Freedom, sometimes, is a time bomb for community group buying platforms. But platforms cannot sustain themselves solely by burning money and offering low-priced goods. On one hand, they need sustainable development; on the other, they must justify the massive funding they received. In this context, it's easy to see the immense pressure on platforms facing low-loyalty group leaders and users.

-02- After the Mess, Wait for the Pig to Fly Again or Attempt Transformation?

In fact, this pressure and the lack of loyalty from group leaders and users are largely related to the野蛮 and extensive development of the community group buying sector. Last year, various "immortal" entrepreneurs saw the community group buying trend and joined, even without supply chain resources, team, or community management experience.

The influx of capital pushed many platforms into the first tier in terms of funding. Frankly, community group buying was a rare opportunity during the capital winter, and it's not surprising that capital entered aggressively; everyone needed targets and things to do.

However, the mistake capital made was investing without supporting these platforms to solidify their foundations. This involves post-investment management: you invest in a platform but fail to provide resource connections or help improve management systems, leading the funded platforms to become overly inflated, believing their current state is their most competitive.

Inflation is scary, but what's scarier is the mess after the trend fades. Perhaps those involved are blinded; while entrepreneurs were still expanding, the large funding rounds of 2018 became a thing of the past. Finding money or seeking acquisition became the biggest focus for most small and medium-sized community group buying entrepreneurs in 2019.

In fact, at this point, two situations emerged: one group was urgently seeking funds to survive, while the other was transforming into "water sellers," using information technology to break away from the primitive Excel-based model and become open systems for surviving platforms.

Clearly, the industry split into two approaches: one waiting for the pig to fly again, and the other selling water to gold miners. Whether sticking or transforming, neither can avoid the pain brought by the industry environment.

-03- Competitors Are No Longer Just "Our Own Kind"—Community Group Buying's Shortcomings Become More Apparent

What's more frightening is that community group buying's competitors are no longer just similar platforms, but also fresh food new retail platforms that excel in front-warehouse and front-store-back-warehouse models.

This is because, for users, fresh food is a necessity, but how they buy vegetables and fruits is just a matter of method.

Community group buying has always touted "order today, pick up tomorrow." However, platforms like Hema Fresh, Dingdong Maicai, and even Alibaba's RT-Mart Taoxianda, which have expanded to third- and fourth-tier cities, offer one-hour or even half-hour delivery, better matching the immediacy of fresh food consumption.

If community group buying platforms were to adopt front-warehouses, it would lead to unreasonable cost increases and uncontrollable losses. Because compared to front-warehouse and front-store-back-warehouse models, the "order today, pick up tomorrow" model limits procurement strategy innovation. Especially in the era of Excel-based order and procurement calculations, these primitive platforms have no big data, so they cannot scientifically predict consumer demand like Hema Fresh, Dingdong Maicai, or Taoxianda.

At this point, if blindly purchasing platforms are "foolish and crude," then platforms that tightly control procurement also struggle to achieve much. In short, when competitors come from multiple fields targeting the same user needs, if you don't innovate, build information systems, or leverage big data, you'll be dragged down by your increasingly apparent shortcomings.

-04- Gaining Supply Chain Power Is the Only Way Forward

Of course, the claim that community group buying is dead is a false proposition. For entrepreneurs who refuse to give up, like Meituan veteran Yang Jun, who boldly stated, "Future community group buying will definitely incubate a billion-dollar enterprise." However, even such optimistic entrepreneurs faced various crises in the second half of 2019, with reports of funding issues and layoffs.

So, whether community group buying will say "farewell" or rebuild the "jianghu" depends on whether it can use more refined methods and integrate original supply chains with user demand big data to reshape the industry. Only then can there be room for imagination.

In summary, community group buying should clear the fog in 2020 and solidify its foundations, as "sharpening the axe will not delay the work of cutting wood." Seek new directions and open new horizons. Only then can we be optimistic about community group buying in 2020.

Because we must always believe in science, big data, and the potential energy released by deep integration of supply chain resources to rebuild the "jianghu." Only by attracting users to willingly order today and pick up tomorrow can we succeed, and that is the future. Of course, it's also possible that some platforms will join the same-day or even one-hour delivery camp, but that's another story.

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