---
title: "Community Group Buying Giants, Please Stop!"
description: "Meituan, Didi, and Pinduoduo, now industry giants with ample capital, are heavily subsidizing community group buying, causing significant harm to hundreds of thousands of FMCG distributors, over 20,000 KA supermarkets, and six million traditional retail stores. This article urges these giants to end subsidies and restore normal pricing to protect the traditional commercial ecosystem."
author: "袁来"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-11-20"
language: "en"
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---

# Community Group Buying Giants, Please Stop!

> Meituan, Didi, and Pinduoduo, now industry giants with ample capital, are heavily subsidizing community group buying, causing significant harm to hundreds of thousands of FMCG distributors, over 20,000 KA supermarkets, and six million traditional retail stores. This article urges these giants to end subsidies and restore normal pricing to protect the traditional commercial ecosystem.

****Click "Read Original" for details****
**Preface:**
Meituan, Didi, and Pinduoduo, in their early entrepreneurial days, didn't have much money to burn; burning 100 million, 200 million, or even 1 billion was already extraordinary. But now you have money, having become industry giants and gained recognition from the capital market.
To capture this new track of community group buying, you can now offer 10 billion in subsidies, fighting for half a year, a year, or two years. The giants may suffer some losses, but the greater damage is to the hundreds of thousands of FMCG distributors scattered across the country, over 20,000 KA supermarkets, and six million traditional retail stores.
Looking back over the past month, community group buying has had its moment in the spotlight. It's no exaggeration to say that no capital is not paying attention to community group buying, and no business media is not reporting on it. But amid the cheers and excitement, distributors and terminal supermarket owners across the country are suffering!
**-01-****Who Makes Money, Who Loses?**
A couple of days ago, a distributor from Jiangsu, Wang Hua (pseudonym), called me and told me that Meituan Select, Duoduo Maicai, and Chengxin Youxuan have gone crazy, and his business is on the verge of collapse!
Currently, the community group buying giants have entered a phase of real expansion with crazy subsidies. What's the most direct way to attract attention and win over consumers? **The most direct way is to take best-selling FMCG products and cut prices for promotions.** Yili, Mengniu, Red Bull, Mizone, Haitian, and other well-known brands are prominently listed on community group buying platforms.
Although these first-tier brands have issued clear orders to distributors nationwide, prohibiting them from supplying these platforms. Even if they do supply, the retail price must be higher than the local supermarket retail price, and it is strictly forbidden to supply at a price lower than the local distributor's supply price. Wang Hua told **New Distribution**, **"Although many distributors don't want to do it, they are constrained by the upstream brand's business targets. Besides, even if I don't do it, someone else will. But if I don't dare to do it, what can I do? I have to take a different path."** To clarify the whole "different path" process, let's take Mengniu Telunsu as an example; other first-tier brands in dairy, beverages, condiments, and snacks follow the same pattern.
The distributor's bottom price for Telunsu milk is 40 yuan per carton (payment 42, plus promotional costs, bottom price around 40). They add 1 yuan per carton and supply to a local specialized community group buying supplier (also a local wholesaler), who gets it at 41 yuan per carton.
The distributor tells the wholesaler, **"I earn 1 yuan from you on this batch. Supply it to Chengxin Youxuan (Meituan Select, Duoduo Maicai), and sell it locally, don't cross regions. Even if the company finds out, the goods are mine; I can say I sold them to a second-tier distributor, not that I provided them. That way, the company can't do anything, my targets are met, and you make money too—a win-win situation..."** The supplier then supplies it to the platform at 42 yuan per carton, and the platform sells it at 43 yuan. Of course, there are group leaders on the platform, especially at this stage, to expand the group leader network, there are referral rewards. For each person a group leader brings in, they get corresponding vouchers, totaling about 10% commission.
It seems there's no problem, just a slightly lower price. But here's a key link—the group leader's identity. **This group leader could very well be a platform salesperson, or directly the supplier. As long as I have a good relationship with the platform's business staff, I can register an account, and the supplier can buy the goods back themselves. After deducting the commission, Telunsu costs less than 39 yuan per carton!** This price is far lower than the distributor's purchase price. Wang Hua continued, if it continues to be sold locally, it might not be a big problem. But if these goods are sold to the surrounding Anhui market, it's a disaster.
Telunsu has a stable supply, and the group leader can find friends in the surrounding area to "brush orders." The quantity can be terrifying, possibly reaching 3,700 to 4,700 cartons in a day. If the supplier continues to sell locally, they can't sell it at all; it's worthless because the whole city is brushing these goods.
**But if it's transferred to Anhui, some second-tier cities in Anhui haven't opened community group buying yet. Local distributors in Anhui receive the goods at 41 yuan per carton, receiving thousands of cartons a day. If the distributor reports to the company, they find the source is from a distributor in Jiangsu.** According to company rules, for cross-region channel stuffing, internal coordination between regions is required, and the source distributor must buy back the goods at the retail price of 58 yuan per carton. Assuming 5,000 cartons, that costs 290,000 yuan.
After this round of reselling, (58-42)*5,000 cartons, the local distributor directly loses 80,000 yuan. To clarify the entire transaction process, **New Distribution** has specially drawn a transaction chain diagram to help everyone understand.
Through the above diagram, I think everyone can understand the "subtlety" in this. **Who made money in the chain? Perhaps only the short-term wholesaler made money; the community group buying platform loses, and the local distributor also loses.** **But many distributors, because they don't know the real transaction chain, are often kept in the dark. When the source is found out, they don't know how they lost!** According to Wang Hua, this distributor died without knowing how. Of course, if the aforementioned salesperson/wholesaler sells across regions to terminal stores, with such low prices, the cross-region distributors' days are also tough.
Under normal assumptions, a first-tier brand has 5 distributors in first- and second-tier cities, and 20 second-tier distributors (conservative estimate; the actual number far exceeds this). If one distributor supplies the platform, the other 4 distributors and 19 second-tier distributors all suffer because the price is too low. Additionally, this is just one brand in one city. What about 20 brands, 10 cities, 100 cities? The consequences are unimaginable.
∆ Price list from a community group buying platform in a certain area
Also, the above is one community group buying chain. When retail prices are so low, what happens to other terminal stores? Wang Hua also told me a real story between a terminal store and a consumer.
**-02-****Take All the Goods Away!**
Currently, community group buying often recruits nearby community supermarket owners as group leaders. **On one hand, supermarket owners have customer relationships with consumers; on the other hand, the supermarket can serve as a pickup point.** The platform gives the group leader a 10% commission. Initially, the platform said it wouldn't sell items sold in supermarkets, only fresh produce, aquatic products, fruits, etc., so there was no conflict.
But when the platform actually started selling vegetables and fruits, it found there was no traffic. Then the platform changed its tune, turning to first-tier FMCG products, selling milk, alcohol, oil, salt, soy sauce, vinegar, beverages, snacks, and other necessities.
One day, a resident from the surrounding community came to the store to pick up goods. They had bought Telunsu on the community group buying platform for 38 yuan per carton, whereas the normal price was 55 yuan. Since they were a regular customer, the store had previously sold it to them for 50 yuan per carton.
When the customer entered the store, they directly complained to the store owner, "You sell Telunsu to me for 50 yuan, but I bought it online for 38 yuan, and I pick it up at your store. Tell me, how much money have you made off me?" At that moment, the owner didn't say anything.
This customer not only got Telunsu but also bought soy sauce, vinegar, salt, etc., on the platform. Previously, they bought these at the supermarket store, but now they buy everything on the platform. The customer kept nagging, saying how much money the owner was making off them.
The owner had grievances but couldn't express them, filled with complaints. After picking up the items, the customer wanted to buy a pack of cigarettes, and the owner directly said they didn't have any. At that point, the customer's words became harsher: "I said a few words to you, and you're unhappy, not even selling me cigarettes..."
Because they were in the store, the owner didn't want to get into an argument with the customer. After the customer left, the owner immediately called the platform's regional manager and said firmly, "Take all the goods away!"
The above case, I think, is likely no longer an isolated incident. Traditional supermarket owners are gradually feeling the immense pressure from community group buying, and it's becoming unbearable.
Wang Hua lamented that in the past, when Didi and Meituan were subsidizing, it might only last a month or two. At that time, their financial strength was weaker; burning a few hundred million, if it didn't work, they'd give up. But now these internet companies have become industry giants. Burning 1 billion or 10 billion might not even make them blink.
None of the three giants will easily admit defeat. If this subsidy war lasts half a year, what will happen to local supermarket owners, wholesalers, and distributors?
**-03-****End Subsidies Quickly and Restore Normal Prices!**
Business needs to progress and change, but it cannot rely on sacrificing the market's basic foundation as a premise and cost. Wang Hua said that community group buying should not be abandoned; it should be done, but fresh vegetables, meat, and fruits should be delivered to C-end consumers. While improving social efficiency, consumers can also get a better and higher-quality shopping experience. **Short-term price cuts are also acceptable; survival of the fittest, business progress, and the market needs a catfish effect. But it's best not to last too long; fight a quick battle. Traditional business practitioners can't afford to wait. Return to normalcy, with platforms charging 10% above the regular retail price. Consumers also understand that compared to the time cost of driving out and parking fees, it's reasonable for platforms to charge a certain fee.**
Supermarket stores have to pay rent and utilities, and distributors have to support staff and vehicles. Wang Hua told me a phenomenon: previously, the local fruit wholesale market was so crowded at 4:00-5:00 AM that you couldn't squeeze in. Now at 4:00 AM, you can directly hear the "woo woo" sound of cars. In the wholesale market, many mom-and-pop businesses—where the wife sells snacks and drinks, and the husband sells fruits—used to run a stall and make a small living. But now it's all changed. Alas, e-commerce is killing people...
Back to the consumer's voice just now: "I bought it for 38, you sell it to me for 50, and you call me a regular customer. We're all in business; the platform won't lose money. Look how black-hearted you are. As the saying goes, small profits and quick returns..." **Now, offline store businesses are under a dark cloud. Consumers curse the supermarket, the supermarket curses the distributor, and the manufacturer's salesperson stands by, looking helpless, only able to whisper that they really don't make much...**
**Conclusion:**
The above two cases are real voices from the front line, and they are not isolated cases. Whether the giants fight a short-term or long-term war, the upstream and downstream of the platform are suffering. We hope to make this information public so that platforms and FMCG manufacturers can sit down and have a calm discussion amidst the hail of bullets.
Society is certainly progressing, and business transformation is certainly evolving toward greater efficiency, lower costs, and better experiences. But as we move in this direction, don't forget the broader business partners around us. Those so-called "lower costs" are the soil they depend on for survival!
**—end—**
**Add the editor-in-chief's WeChat to discuss community group buying in depth**


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