****Starting with the Venture Capital Queen's Group Purchase of Milk and Bread Behind major companies like Tencent, Meituan, JD.com, Dingdong Maicai, and Xingsheng Youxuan stands a common woman: Ms. Xu Xin, founder of Capital Today. This time, Ms. Xu, not in her capacity as a top investor but as an ordinary mother in Shanghai's key epidemic area, asked online: Where can I group-buy milk and bread? This incident was widely publicized in the industry! It shows that no matter how influential you are, eating and drinking always come first. Subsequently, the question arose: who is the most beloved person in Shanghai—the group leader. Group leaders and community group buying were thus elevated to a new height in society. Of course, some friends question that this is not community group buying. I can only say this is not the community group buying you think of; in fact, this kind of 'new individual-initiated group buying' is the original form of community group buying. Originally, community group buying was like this. Perhaps the community group buying in your mind, when combined with capital in the second half of 2020, evolved into a new retail format called community e-commerce. Another event also shocked the industry. That is, in recent days, Meituan Youxuan, a leading community group buying e-commerce platform, withdrew from several northwestern provinces and closed its Beijing warehouse. Some onlookers believe that community group buying is ultimately a mess and a sigh. Some practitioners worry whether their businesses will be affected. Many senior observers have expressed different views and opinions. Half fire, half sea. Community group buying platforms, along with other fresh food e-commerce, provide basic material guarantees for consumers in epidemic areas, ensuring people's livelihoods and supplies. So, what is the state of community group buying in 2022? Where is it headed? Historically, every commercial change is closely related to major social events. The three-year pandemic outbreak seems to have an inextricable connection with community group buying. Over the past three years, whenever the epidemic broke out, social group buying platforms always rushed to the forefront, acting as white knights, welcomed by the public and affirmed by relevant national departments. On the other hand, this new thing also impacts the original business landscape, so relevant national departments have continuously regulated it through laws and policies. This combination of deregulation and regulation is the norm. After the germination in 2015, the rise in 2017, and the small climax in 2020, this track has now reached its seven-year itch. ****Chinese Business History Yesterday in Luoyang, I met a group of friends from supply and marketing cooperatives. Actually, our attention is just not here. This ministry-level unit with branches nationwide has always existed; it's just no longer a hot topic. Those born in the 60s, 70s, and early 80s have this impression: back then, we bought a dime's worth of vinegar and two dimes' worth of soy sauce across the cold cement counter of the supply and marketing cooperative. That was the era of the planned economy. In times of shortage, what sold well? Even with money, you couldn't buy things. There was something called food stamps, which younger people might not know about. After reform and opening up, wholesale markets sprang up all over the country, forming the global Yiwu small commodities market and the national distribution center, Shandong Linyi's large market. Of course, provinces with better locations had different markets, such as Changsha Gaoqiao and Zhengzhou Bairong. In 1998, Walmart opened its first store in Shenzhen. When comprehensive, one-stop, open-shelf retail formats came to consumers, big supermarkets were the new retail at that time. After that, there were basically few new things. Through the era of direct selling and MLM, the micro-business era, and the community era, these were mostly niche, narrow, or serving a very small number of people, not entering the mainstream of public life. Until 2015, when WeChat instant messaging became prevalent, business sense is the most sensitive. A model called community group buying, more closely integrated with WeChat, emerged. This was different from the previous micro-business era. Especially in Changsha, known as the center of the community group buying universe, it was vividly demonstrated: nearly a hundred platforms sprang up like bamboo shoots after rain. Currently, Xingsheng Youxuan and Zhihua Zhiguo stand tall in the industry. Of course, platforms like Bangnisheng and Niwonin, which have already left the scene, have become sunk costs of this feast. In one sentence: Where users' attention is, traffic is; where traffic is, transactions are; where transactions are, business is; when quantitative change reaches qualitative change, business models are there. ****Analysis of Community Group Buying Models This is a short-chain business model. Centered on the platform, looking forward two links: brand manufacturers and supply chains; looking backward, there is basically only one link: the group leader, who directly serves users. In terms of fulfillment timeliness, the industry calls it the 211 project. What does it mean? Orders placed at 11 PM the previous night can be picked up at the group leader's pickup point by 11 AM the next day. This time point is interesting because major platforms generally stipulate 4 PM, but the actual requirement is 11 AM. Why? Because it aims to capture the important scenario of lunch. In the third part, we sort out the underlying logic of community group buying. Starting from the original community group buying business logic, there are three value loops. The flip side of each group leader is the store owner identity. Therefore, from the group leader's perspective, this is a business model where store and group are integrated. From the platform's perspective, there is no physical shelf, only electronic shelves. In logistics, goods go directly from warehouse to users. Therefore, based on this direct-to-community form, it is a model where people and warehouse are integrated. From the manufacturer's perspective, we've talked about the integration of brand and effect for years. Every sale is a communication, and every communication generates new sales. Community group buying is a standard model of brand-effect integration. From the dimension of reconstructing people, goods, and scenes, community group buying is a standard model of goods finding people. It is fully traceable, with capital flow first and logistics second. The entire chain is relatively short and efficient, eliminating many redundant links. Therefore, what is new retail? It is retail with higher efficiency. After listening to Teacher Chao's class, don't debate this with others anymore. It's common sense and doesn't need much explanation. Any impressive business model must be simple, easy to understand, and clear to every ordinary person at a glance. Here, I summarize 16 characters to explain community group buying. ——That is: online pre-sale, next-day self-pickup, production based on sales, and落地极配 (landing and extreme distribution). Old listeners over the past three years should know this 16-character mantra. Today, I'll briefly explain it to new friends. Online pre-sale means it's an electronic shelf display method, following e-commerce logic. Next-day self-pickup means capital flow goes first, logistics second. Users sacrifice some experience by getting goods the next day, and it's not home delivery but self-pickup at the pickup point. Of course, in Fujian and Zhejiang markets, some group buying platforms' group leaders deliver to homes themselves. This is due to competition from the front-warehouse model and is the group leader's own behavior, not the platform's standard practice. This needs clarification. Production based on sales means the platform's warehouse is merely a sorting point. For the platform, it's not a traditional circulation channel link for goods, but a place where goods are instantly allocated based on user demand. After receiving traceable orders, goods are repackaged, divided, and sorted. In one sentence, from the product perspective, it's buying first and selling later, proving that transactions are efficient, precise, and have a low after-sales service rate. From the perspective of goods delivery, all e-commerce can be divided into two types: express delivery e-commerce and collective distribution e-commerce. All traditional search-based e-commerce, including Pinduoduo, Taobao, JD.com, and live-streaming e-commerce, are based on the one-piece drop-shipping model. Community group buying, however, is clearly a landing, centralized distribution delivery and fulfillment model. These two models naturally have requirements for product characteristics. That is, some products are suitable for one-piece drop-shipping, while others are suitable for landing and matching. I have specialized training on product strategy, which I'll share with you when the opportunity arises. Combining these 16 characters and four phrases, the underlying logic of community group buying becomes clear: online pre-sale, next-day self-pickup, production based on sales, and landing with extreme distribution. From the perspectives of logistics, capital flow, and goods flow, this is an efficient value loop model. Children discuss right and wrong; adults discuss interests. Most friends listening today are partners on the business front. In this business model, what should we do? How should we do it? That might be our most concerned question. From a strategic direction, I propose the 5-Degree Cultivation Law. Manufacturers and brand owners should study users' consumption motives, behaviors, and habits, focusing on brand depth; Supplier friends should mainly study users' consumption scenarios and how to lay out. This can be called product breadth. On the platform side, it's necessary to plan the density of each pickup point to achieve efficient coverage. Here, the focus is on the density of pickup points. From the group leader's perspective, the study is about the warmth of stickiness between group leaders and users. Therefore, whether it's the brand depth that manufacturers need to achieve, the scenario breadth that suppliers need to achieve, the community density that platforms need to achieve, or the stickiness warmth that group leaders need to achieve, the ultimate goal is only one: user satisfaction and experience. ****Community Group Buying Track Landscape Recently, many friends, whether on WeChat or Douyin, have debated whether community group buying is a channel for selling cheap goods or a scene for selling junk products. In short, where you sit determines what you see, and the arguments are fierce. Behind this issue is a lack of understanding that community group buying has developed rapidly and has now divided into five camps. The first camp is capital-backed community group buying, also called community e-commerce. Everyone is familiar with Pinduoduo, Meituan, Taocaicai, and Xingsheng. The second camp is local community group buying, which is the authentic original model of community group buying. The third camp is community group buying initiated by physical stores or chain stores in reverse, which can be called store group buying or new store commerce. The fourth camp is independent group leaders, especially the younger generation of group leaders—knowledgeable, cultured, and aware. They platformize themselves, connect supply chains independently, and serve one or more residential communities. In effect, they form a small platform, which we call independent groups, and in some places, wild groups. Correspondingly, there is a collaborative organization that is developing well, such as the Group Alliance and Group Batch initiated by some good friends of mine, and the Group Leader Collective Procurement Alliance. They actually serve as professional service providers offering product-centric supply chains and strategy-centric community operations for platforms. The fifth camp is property group buying. Community group buying is based on communities. Property companies under real estate developers do group buying. Currently, national companies like Country Garden and Vanke, and local ones like Jianye, are all doing community group buying, but the scale is generally not large, around 500 to 600 million yuan per year! For property companies, the difficulty is not in introducing the model but in integrating it with existing projects. As far as I know, not many are operating ideally. The above five sub-tracks actually form the overall community group buying track. Among them, the mainstay, most influential, and most relevant to everyone is the capital-backed group, i.e., the community e-commerce camp. In 2021, WeChat statistics showed 300 billion yuan. The recent annual reports of internet giants and their first-quarter earnings this year have come out, and the data is increasingly poor. In March, JD's Jingxi Pinpin contracted to retain only four markets nationwide. This month, Meituan just closed its northwest market and Beijing warehouse, which is another example. Even internet giant e-commerce must return to the fundamentals of retail. Therefore, cost reduction, efficiency improvement, and profitability become the natural goals of operations. Adjusting market scope, closing, stopping, merging, and transferring are normal behaviors. Personally, I think this is normal. Of course, partners in specific markets must pay close attention to platform changes and fluctuations, prevent and avoid operational risks and losses in advance. Another characteristic is that many local platforms are restarting and recovering this year. Especially those who served as middle-level cadres or executives in capital-backed or local groups in the past are starting anew everywhere. Because they have paid tuition fees, their moves this time are quite impressive. What does this prove? Group buying is addictive; once you enter, it's a lifelong commitment! As for how to deal with capital-backed groups and local groups, this is a relatively professional issue, and I can only share it with you when the opportunity arises. I particularly emphasize that, contrary to what you might think, capital-backed groups sell relatively cheap goods, while local platforms often position themselves by value, targeting middle and high-end people and selling expensive items. If we don't have a clear understanding of the characteristics of each camp in this track, we might make big mistakes and pay high tuition fees. Regarding the rise and fall among capital-backed giants, I believe you constantly see information in major media. Currently, Meituan Youxuan and Pinduoduo Duoduo Maicai are in the first camp, while Alibaba's Taocaicai and Xingsheng Youxuan are in the second camp. Their goal for 2022 is to reduce losses and achieve profitability; unlike last year, which focused on scale and speed. Because the requirements and goals of capital platforms have changed, the requirements for supporting partners have also changed. We must understand this and keep pace with the times. ****Community Group Buying Track Trends It can be said that after the germination in 2015, the first year in 2017, and the small climax in 2020, 2022 has entered an adjustment year. But one fact is that the infrastructure of the entire track is already in place. At the Xi'an conference in December last year, I proposed a viewpoint: The biggest contradiction in the community group buying track is the class contradiction between platforms and group leaders; the biggest uncertainty in the community group buying industry lies in the balance between strictness and leniency of national policy enforcement. Now it seems that it can basically be concluded that no matter how the players perform, this track is no longer a problem. Some friends might ask: What about this platform? What about that platform? My conclusion here is that even if all capital-backed platforms close down, this track will still exist, but this demand will be occupied by more granular local platforms. Of course, this includes independent group leaders who collaborate with group batch organizations like ant soldiers, and supplementary property group buying. Recently, some peers have proposed a concept called resource providers—those with huge and impressive resources who also want to enter community group buying, such as China Post, supply and marketing cooperatives, and China Tobacco. These national-level giants are worth waiting for. So, what exactly does the infrastructure of the community group buying track refer to? Currently, the recognized data is 2 million community group buying group leaders. Our unified understanding of FMCG is 6.8 million retail outlets. Less than one-third have become group leaders, and it has become a basic professional position. This data judgment is objective. These 2 million group leaders, based on WeChat's 200-person scale, cover 400 million consumers. This is my exclusive judgment, and you can raise different opinions. In addition, there are nearly 20,000 socialized grid warehouses supporting capital-backed groups. This was told to me by the most authoritative person in the industry, so it should be accurate. In short, users in the hundreds of millions, group leaders in the millions, and grid warehouses in the tens of thousands constitute the infrastructure of the community group buying business model. As for upstream brand manufacturers and suppliers, for them, of course, where traffic is, their business is. For brand manufacturers, whether passive or active, they have actually participated. Because once users have demand, platforms will always find ways to procure products. After 2022, brand manufacturers that refuse, deny, or slander community group buying are extremely rare, because although awareness comes at different times, they will not refuse business opportunities and traffic. As for suppliers, it seems there have been three waves of entry opportunities in history. The first wave was in 2017 when Xingsheng Youxuan started, with more individual businesses and speculators entering; the second wave was in the second half of 2020 when Meituan, Pinduoduo, and Didi entered, and basically local brand agents and distributors broke in; the third wave was on September 14 last year when Alibaba ended its internal horse-racing mechanism, and Taocaicai emerged, launching a total attack on the community group buying track. At that time, truly large supply chain players entered, such as a hundred-billion-level company, Hongjiu Fruit, which laid out 70-80 fresh food warehouses nationwide. For ordinary circulation distributors, the door to supply chain entry in 2022 has closed, with only a few windows remaining. That is, the disadvantages of late-mover advantages have become apparent. In the above parts, we have separately explained from the group leader, platform, supply chain, and brand manufacturer perspectives. I believe you now have a clearer understanding of this track. Finally, let's evaluate community group buying as a new retail model within the context of overall social retail. In the next 10 to 20 years, we will have four basic shopping scenarios: visiting supermarkets, browsing Taobao, swiping through group buying, and playing on Douyin. Please note my wording: physical stores must be visited; that is, the core competitiveness of physical stores lies in on-site experience. Traditional e-commerce has a clear purpose: search directly for what you want to buy. If physical stores need to be visited one by one, then community group buying mini-programs need to be swiped open one by one, thereby completing the purchase intention and mission. What about live-streaming e-commerce, with live streaming and Kuaishou as the core? It satisfies users' potential needs. Through anchors, it stimulates consumers' inner needs. In addition to the 'more, fast, good, and economical' aspects, it adds a character '趣' (fun), meaning interest. Source: Teacher Liu's Digital New Marketing (ID: liuchunxiong1964) Author: Chen Haichao -END-