Pinduoduo has entered community group buying, and Meituan Youxuan is also increasing its efforts, showing that giants vying for the community group buying market is inevitable. The question is who can get ahead on this track. In fact, behind the giants' focus on community group buying lies the chess piece of same-city retail.

-01- Giants Make Their Move, Adding Fuel to This Track Giants have already made their moves on the community group buying track. Alibaba's Yizhan Group Buying and its investment in Shihui Tuan, Tencent's investment in Xingsheng Youxuan, Meituan's increased investment in Meituan Youxuan, Suning's Su Xiaotuan, JD's Ququ Gou and Youjia Puzi, Wumart's Duodian Pin Tuan, and Tongcheng Travel's Tongcheng Life—all these giants have entered the fray.

Pinduoduo's entry into community group buying was expected, just a bit late.

Recently, Pinduoduo's community group buying project "Duoduo Maicai" was officially launched via a WeChat mini-program, relying on its supply chain and logistics system to form a "pre-order + self-pickup" model. The first pilot cities include Wuhan, Nanchang, and Xi'an.

For users, they can place orders through the "Duoduo Maicai" WeChat mini-program, with options for designated self-pickup or delivery to home by the group leader. Users place orders online before 23:00 daily, and goods are delivered the next day. After 16:00, consumers can pick up their orders at partner outlets.

Taking Nanchang as an example, Duoduo Maicai's partner outlets include not only supermarkets but also express delivery stations like Yunda and Best Linyi. In terms of products, the items sold at each outlet are identical, basically covering daily necessities such as vegetables, fruits, rice, flour, and oil.

It is reported that Duoduo Maicai currently has a very high priority within Pinduoduo, with the entire platform dedicating resources to support it. To compete for excellent group leaders, Pinduoduo will invest 1 billion yuan in subsidies. This shows Pinduoduo's determination to succeed. Pinduoduo has a significant advantage in online traffic, but the challenge lies in offline warehousing, distribution, and operations.

Meituan is also increasing its efforts on this track.

In July, Meituan issued an organizational adjustment announcement stating that to further explore the community fresh food retail format, meet differentiated consumer demands, and accelerate the integration of online and offline fresh food retail, it would establish an "Youxuan Business Unit" to enter the community group buying track, led by Meituan Senior Vice President and S-team member Chen Liang.

It is reported that the "Youxuan Business Unit" launched the community group buying business—Meituan Youxuan—focusing on lower-tier markets, adopting a "pre-order + self-pickup" model to empower community convenience stores. It selects high-cost-performance products for community households, including vegetables, fruits, meat, poultry, eggs, dairy products, beverages, and household kitchen and bathroom items. Users place orders online the same day and pick them up at stores the next day.

In less than two months, Meituan Youxuan has launched in four locations. In Wuhan, within just one week of launch, daily sales volume exceeded 50,000 items.

After refining the model, Meituan made a big move.

Recently, Meituan Youxuan announced the launch of its "Thousand Cities Plan," aiming to achieve nationwide coverage by the end of the year and gradually expand to county-level markets.

Meituan Senior Vice President Chen Liang stated that through the "pre-order + self-pickup" model, Meituan Youxuan can achieve on-demand centralized procurement, reduce transportation and storage time, lower losses, and save on last-mile delivery costs, making products more price-competitive. It is understood that Meituan Youxuan plans to enter 20 provinces within the next three months, continue to penetrate each province, and rapidly achieve "thousand cities" coverage within the year, providing more community residents with convenient and affordable fresh food shopping experiences.

-02- Space and Variables in Community Group Buying? Let's first look at the mainstream model of community group buying.

Community group buying is based on WeChat mini-programs or WeChat groups, using communities as units, social groups as transaction scenarios, and social relationships as a link—an emerging business model.

Currently, the mainstream model of community group buying is: taking offline real residential communities in second- and third-tier cities as units, establishing WeChat groups online, recruiting community moms, convenience store owners, and express station managers as group leaders, and publishing product pre-sale and group buying information in the WeChat groups. After users place orders, goods are uniformly delivered to the community, and users pick them up at offline pickup points to complete the transaction. The platform provides support in branding, technology, sourcing, logistics, and after-sales service.

Compared with traditional offline stores, community group buying saves on rent and labor costs, uses a pre-sale model, and produces based on sales. Compared with traditional e-commerce, community group buying can deliver directly from origin/factory/large transit warehouses to communities, with the last mile handled by group leaders or self-pickup by consumers, reducing per-order fulfillment costs.

In essence, community group buying is an e-commerce channel driven by C-end and based on real LBS communities, with B-end support.

Whether from market growth or consumption habits, community group buying is becoming increasingly mature.

According to iiMedia data, China's community group buying started in 2016, with explosive growth beginning in the second half of 2018. Stimulated by the pandemic, the community group buying market growth rate exceeded 100% in 2020, reaching a market size of 72 billion yuan. It is estimated that by 2022, China's community group buying market will exceed 102 billion yuan, with a growth rate of 15.9%.

On the consumer side, in the first half of 2020, 15.0% of netizens frequently used community group buying. Among contact methods, 33.8% of surveyed netizens came into contact with community group buying through community WeChat groups.

Accenture's previous consumer insight report showed that in social applications, over 40% of consumers increased impulse purchases due to sharing stimuli. Community group buying, based on offline community relationships, meets the social needs of groups like moms and can stimulate consumption and increase purchase frequency.

But market competition remains full of variables.

In the past two years, Shixiang Hui, Shihui Tuan, Xingsheng Youxuan, Linlin Yi, and Yipin Fresh have all announced funding rounds.

To date, in just the first half of 2020, the community track has attracted at least 6.4 billion yuan in funds.

According to Tianyancha information, on June 10, community e-commerce O2O platform Tongcheng Life completed a $200 million Series C financing. In June, Xingsheng Youxuan also completed a $200 million Series B financing; Shihui Tuan completed an $81.4 million Series C financing. On June 28, community group buying platform "Liancai Wang" received 155 million yuan in Series B+ financing.

Especially Xingsheng Youxuan, which completed an $800 million Series C+ financing in July. Xingsheng Youxuan previously claimed national average daily orders of 8 million, with a 2020 GMV target of 40 billion yuan.

-03- Ultimately, It's Still a Battle of "Same-City Retail" Community group buying has high-frequency and rigid-demand attributes. For giants, the early stage is not about profitability but about the perfection of backend infrastructure and the ability to seize outlets.

In our view, community group buying will become an important chess piece in the same-city retail layout of giants. In the future, the overall competition will be about efficiency.

Now, the "war" in community group buying has escalated.

Source: Retail Business Review (ID: lssync)