Introduction: Where traffic flows, consumers follow; where consumers are, our products should be. Author | Lao Tao Reviewer | Gou Gou Layout | He Wen Community group buying is destined to be lively. Since Jingxi Pinpin changed its name on July 25, the entire industry has been in turmoil. Liu Qiangdong's return to the field has undoubtedly stirred up waves in this already turbulent sea of group buying. On the evening of July 25, Jingxi Pinpin released a brand upgrade announcement on its WeChat mini-program, renaming itself "JD Pinpin" and gradually updating the mini-program's icon, name, and logo. The move is highly aggressive, directly challenging Duoduo Maicai. Many are surprised, but in my view, JD has been biding its time for a long while, in every sense of the word. Behind Liu Qiangdong's personal leadership is a clear goal to target lower-tier markets and community group buying, proving that channels can always play a vanguard role in battle. So, what can we see through this JD Pinpin move? Essentially, it boils down to the core word of community group buying: cost. When we think of cost, JD's series of actions become traceable. Why can community group buying achieve this? Because platforms accomplish the following three points: lower procurement costs, lower supply chain costs, and lower traffic costs. How do they do it? I believe this is what most people are concerned about, so let's briefly discuss it. Why Procurement Costs Are Low The restart of JD Pinpin precisely illustrates that the community group buying platform channel still holds core competitiveness, and the core competitiveness of the community group buying business model lies in the platform's ability to deliver products to users at lower prices. Liu Qiangdong said, "We cannot ignore the demands of grassroots consumers just because our own lives have improved." This basically sets the tone: to give up profits. Behind the brand upgrade is intense battle preparation. For example, in second- and third-tier cities like Hefei, they have already begun to amass forces. Recruitment for professional positions such as BD and product managers has reached a level of extreme eagerness. It's also clear that the main battlefield for JD Pinpin this time is the Beijing area and Langfang, Hebei, with further penetration into lower-tier markets likely depending on market conditions. Lower procurement costs stem from absolute confidence in channel volume, but obviously, it's easier said than done. From my years of experience, only through close collaboration with distributors can this be achieved. Unlike a one-size-fits-all approach, procurement cares about the gains and losses of each city and territory, and it also involves the concrete expression of the leap in business capabilities of major distributors after distributor reforms. How can the platform achieve lower procurement costs compared to other channels? There are two points, to put it briefly. First, the direct distributor purchase model, which means purchasing directly from distributors. The advantage of this is undoubtedly speed: short payment terms (4-day settlement) lead distributors to supply at extremely low prices. With goods in hand, there's no panic. Although supplier advance payments are common, in the current period of slow economic growth, faster payment collection is still attractive and reassuring for distributors. After all, the essence of a distributor's business is pursuing return on investment, and short payment terms mean faster capital turnover. The more turnovers, the lower the gross margin can be while achieving the same return on investment. At the same time, this also tests the distributor's own operational efficiency and costs: the higher the operational efficiency, the lower the operational costs, so the supply price can be lower. Second, the multi-supplier bidding model, although criticized for breaking industry rules, is precisely within the bounds of the law. So what the platform actually changes is the supply principle originally set by brand owners to benefit their distributors. This change obviously has a strong impact on the original brand-distributor supply price system, but the platform holds the volume, so they have to swallow this bitter pill. As of April 2022, the monthly active users in China's lower-tier markets reached 692 million, accounting for 58.4% of mobile internet users. From the platform's perspective, this is a model innovation, but it seems widely regarded as encouraging speculation. In my view, speculators have existed for a long time; since commerce began, C-end users have compared prices from three vendors, and this applies to the B-end as well. In other words, speculation is a trade that has lasted for thousands of years, and whether we like it or not, it has stood for a millennium. I believe that multi-supplier bidding just makes the platform a mirror, reflecting the previously invisible speculation onto the platform. It's like how speculation used to be like buying cattle in Tibet, where gestures were made under sleeves, with some traders using both hands. Now, speculation is putting bidding rankings on the internet, a form of data visualization where everyone can see each other's bids and feel the platform's preferences. From a fairness perspective, it actually eliminates the need to guess, allowing time and energy to be spent on visible things, creating real efficiency. To some extent, it also forces brand owners to optimize their channel investments and distributor management. Lower Supply Chain Costs? Speaking of channels, we cannot avoid the supply chain; they complement each other. Community group buying is a shopping consumption behavior among residents within a community, a real form of group buying relying on the community, essentially a trust hub between people. Some believe it's a group buying discount activity provided by community stores to surrounding residents, promoting stores' publicity and consumption stimulation for core customers, rapidly enhancing the store's regional visibility and reputation. In the group buying model, this manifests as the community leader's control over pickup points. Platforms have high hopes for community leaders and match this with low-cost supply chains to enable the business model to operate quickly. How to reduce supply chain costs is a priority for platforms. Next, I'll share my successful practical experience: The central warehouse only holds 1-2 days of inventory, only stocks high-turnover items, and strictly controls low-turnover items. This way, warehouse space can be minimized. The idea is to reduce inventory and thus reduce space. Previously, many platforms had misconceptions, thinking bigger warehouses and more people were better, with neat rows of goods showcasing strength. In reality, it's completely unnecessary. Admittedly, during the previous group buying wars, everyone used their own methods to secure investment, but money shouldn't be burned like that. Previously, they often used super-large warehouses, storing goods for ten days to half a month, causing great waste. High-turnover items naturally reduce space and lower inventory backlog, thereby minimizing rental costs. In today's economic downturn, the significance of cost reduction and efficiency enhancement is self-evident. Secondly, the central warehouse conducts the first round of preliminary sorting based on the user demand of pickup points covered by grid warehouses, delivers to grid warehouses, which then perform a second round of fine sorting per order and deliver to each pickup point. The network formed by central and grid warehouses is not just for show; it leverages the capillary advantages of logistics to direct user demand in a targeted manner. Grid warehouses serve as markers, distributing by group to reduce labor costs and effectively lower error rates. Following this approach, the entire process should be completed within 15 hours. The benefit is that users can pick up goods by 4 p.m. the next day, giving community leaders space, and only then will they give the platform space. The entire logistics process uses lower-cost B2B logistics methods to provide users with a B2C shopping experience. Compared to express delivery and food delivery costs, this will be more reasonably compressed. To summarize the entire approach: high turnover, controlled channel efficiency. Lower Traffic Costs Traffic is essential for platforms, but high costs, increasingly demanding consumers, and unaffordable average order values often turn traffic into a passive and difficult action. In my view, this is putting the cart before the horse, building a platform for traffic. Traffic actually has a positive feedback loop. How to learn and manage traffic well? Platforms care, and distributors care too. Currently, an effective method is: flexible SKUs. Categories are fixed, but people are flexible. List high-attachment, high-repurchase categories such as fresh vegetables, eggs, milk, and meat—daily necessities. For these procurement categories, users' active login, opening, and conversion rates are very high. Don't judge consumers with your fixed logic; do more research. Some categories, no matter how cheap or good, if consumers don't need them at that moment, placing them at the top will only annoy people. Consumers don't care about your sweat and tears; they just need a smooth shopping experience. Besides the platform's main site supporting traffic diversion, the next is to make good use of community leaders. Leaders use mini-programs, private domain WeChat social groups, and other promotional methods to push users to log in and make purchases more frequently, without wasting any traffic. That is, as we often say, by mobilizing the enthusiasm of community leaders, community group buying can truly take root and thrive. Now is not the era of blindly increasing volume; the stock era has its own logic. Mobilizing community leaders' enthusiasm will ultimately affect the end consumer, but this end is different from our B-end; it's the user. The longer users stay, the higher the probability of completing a purchase, and these users are more likely to log in compared to other online platforms, especially with the push from community leaders. Brand owners and distributors must first objectively understand why community group buying can wield such influence in the FMCG market, and then they need to sense the market. How to achieve 300 billion? The reason this market was drawn so quickly is precisely because of the above core competitiveness. Therefore, we can summarize the correct strategies for developing our own businesses in response to this model. If we must make some concluding remarks, I believe the multi-supplier bidding mechanism means brand owners need to better manage and design cooperation models and channel investments to ensure more efficient supply. And the supply chain cost advantage means brands can leverage the platform to cultivate more hit products and deliver them to deeper markets. Ultimately, leading to lower traffic costs means it's easier to activate target consumers and encourage first-time trials. We all know that in community group buying, repurchase is not difficult; if products offer good value, repurchase will happen naturally. The real challenge is how to incentivize users to make their first purchase. In a year of transformation, no one can remain unaffected. For brand owners and distributor friends, passively facing the situation cannot change the channel revolution. Where traffic flows, consumers follow; where consumers are, our products should be. In summary, brand owners and distributors need clear strategies and methods, dare to experiment, be willing to innovate, and actively face the changes. Better leveraging community group buying platforms to develop their own businesses is the solution. ** If you want to communicate more with the author, feel free to scan the QR code to add. ** Lao Tao, special columnist for New Distribution, a 26-year FMCG veteran with rich theoretical knowledge and practical experience in brand market channel construction, deep insight into online channel planning, and extensive practical experience in sales expansion, wholesale channels, distributor management, and e-market channels. In 2020, he founded Shanghai Fudi E-commerce Company, becoming a leading supplier serving brands and community platforms.