---
title: "Community Group Buying: Mid-Game or Endgame?"
description: "At the Central Plains Community E-commerce Summit held on July 26, Ren Xiaodong, partner of New Distribution, shared insights on whether community group buying has reached its endgame or is still in the mid-game. He analyzed industry changes, challenges, and strategies for regional players, emphasizing the importance of differentiation and supply chain advantages."
author: "任小东"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-07-29"
language: "en"
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# Community Group Buying: Mid-Game or Endgame?

> At the Central Plains Community E-commerce Summit held on July 26, Ren Xiaodong, partner of New Distribution, shared insights on whether community group buying has reached its endgame or is still in the mid-game. He analyzed industry changes, challenges, and strategies for regional players, emphasizing the importance of differentiation and supply chain advantages.

Click 'Read Original' for details.
On July 26, the **Central Plains Community E-commerce Summit** was grandly held at Zhengzhou Huazhi Hotel, hosted by New Distribution, Innovation Retail Society, Community Social E-commerce Insider, and Central Plains Community E-commerce Club, co-hosted by Boda Noodles.
At the forum, Mr. Ren Xiaodong, partner of New Distribution, gave a presentation titled "Has Community Group Buying Reached the Endgame or Mid-game?" which was compiled and published by Innovation Retail Society for readers.
As everyone knows, the latest news from yesterday is that Xingsheng Youxuan raised tens of millions of dollars; earlier this year, Shihuituan claimed to have secured investment from Alibaba; Squirrel Pinning is now well-funded, and I have confirmed that it will acquire Niwonin. This means that the top ten platform rankings discussed in March-April have now become five, and a trend is emerging: **the strong get stronger, the weak get weaker**. So for regional enterprises, what should we do in this situation? Through industry interviews and observations in recent months, we have noticed the following changes:
**Changes**
**Mindset Changes**
Many entrepreneurs are now doubting whether what they are doing is valuable, feeling mentally exhausted, and many do not want to continue. After participating in many exchange conferences recently, I found that when communicating with many entrepreneurs, everyone wants to find a big platform to acquire them.
**Business Changes**
During this period, we have heard various news: some platforms have started refunding group leaders' deposits and suppliers' payments, then began large-scale business adjustments, and many small and medium-sized platforms have started selling to large companies.
**Public Opinion Changes**
The entire media circle is generally pessimistic, with some media fully criticizing, directly stating that community group buying will basically be a bubble. This is the current media situation.
**Capital Changes**
When talking with many capital investors, I found that they are also considering whether this track is worth continuing to invest in. If investing, which one is better now? Is this the most suitable time for investment?
Overall, capital data is pessimistic, but it is more focused on leading companies. So in the future, leading companies will get more financing, while small companies will have fewer opportunities.
**Dividend Changes**
If we treat community group buying as a business, we have not yet seen a platform make a profit. One platform claimed profitability based on three months of shared data, but when all their data is examined, none are profitable, including Xingsheng Youxuan.
Tang Guangliang, CEO of Koala Selection, shared a pessimistic view at a recent conference, saying that **after more than a decade of entrepreneurship, he has found a pattern: using losses and repeated burning of cash to form competitive barriers is an awkward thing**. Is it really awkward? But in fact, this has already happened in the O2O war, in the war between ofo and Mobike.
So I think many of the current rules in community group buying can learn from the development patterns of some industries and companies in the past.
Recently, I communicated with senior executives from Squirrel Pinning and Niwonin, and the biggest feeling is that **different company genes determine different strategies, resources, and market operation feel, which ultimately determine different outcomes**.
**The Essence of Community Group Buying**
Through current development, we have confirmed a previous judgment: **community group buying is a supply chain enterprise**. Therefore, even if it is merged by a large platform in the short term, once it returns to value competition rather than traffic competition, it will face competition from new entrants. This is the first thing we need to think about.
Currently, most community group buying platforms have 60% of their products as fresh produce and fruits. I believe practitioners all follow this **product selection logic**. But if product selection is only focused on fresh produce, will we be profitable?
At present, this track is not capable of profitability. If you want to solve future profitability, you need to expand your full category space.
**Imagination of Scenarios**
Now extend consumption scenarios to maternal and infant consumption scenarios and middle-aged and elderly consumption scenarios. In the maternal and infant consumption scenario, we see many suppliers cooperating with Xingsheng Youxuan or other platforms, thinking that selling goods with big platforms will definitely work. But they find that goods simply do not sell.
Why does this happen?
Because community group buying targets users' daily household consumption scenarios, and group leaders can only push vegetables and fruits more; instead, many high-value, high-price explosive products do not sell, and they are forced to come to us for consultation, asking what to do.
We are doing social e-commerce, so we must always consider the matching between our KOLs, group leaders, and products, and whether we can achieve "trust agency." Are they matched with our consumers and supply chain? For example, the consumption scenario for diapers is the circle of mothers. Where is the largest community of maternal and infant consumers in the community?
Besides the mother exchange groups in the community, more likely are communities in pediatric massage clinics and children's swimming pools, which have high social and experiential attributes. So we developed 1,100 pediatric massage clinic store managers as group leaders, and through a software tool, we achieved an average order value of 600 to 800 yuan per order, which is astonishing!
For fresh produce and fruits, the national average data we get is 47 yuan per day, and most group buying companies have an average order value of 20-30 yuan. But if you go the maternal and infant community route, you can achieve 600-800 yuan per order, and the stickiness is very high.
So when doing community e-commerce, we must always consider that the essence of social e-commerce is circle economy. When thinking, the path should be broader.
For example, some people are refuting our industry, saying it is just an online vegetable buying platform. **If we position it as online vegetable buying or a vegetable market, that is a dead end or a bubble path**. Fresh produce categories can bring traffic, but they cannot bring other value.
**Industry Penetration Rate**
Many people are saying that the end of the community group buying industry will be at the end of this year, with only one or two leading platforms left, and all other companies dead. I think this view is debatable; it is still unknown who will win.
Of course, from the perspective of known participants, by the end of the year, there will be 1-3 national platforms. Because the current industry penetration rate, with Xingsheng Youxuan as the leader, but the combined share of a city's total social retail is still far behind. So whether in the entire industry's market share or absolute market share, it is far from reaching 50% to 60% or more; most are only around 20%.
Without completing such occupation, I think it may only be with the help of capital, because it is platform investment, and the strong getting stronger is clear, but it is far from the endgame. The GMV gap between leading platforms and other platforms will widen exponentially.
At the same time, we have observed that many retailers are now starting to rise. Among them, Shandong's Aikduo, which now has about 100 stores, has been running for several months and achieved over 20 million in two months. For example, Hunan's local Better Life is also starting this, and the results are very good. So a large number of retailers will also rise through the group buying model. There is also a courier company that started doing this through strategic cooperation with ZTO. This is a bit like the B2B company I was in before; everyone thought the largest B2B in the country were Retail Link and New Path, but RT-Mart's e Road unexpectedly achieved 5 billion and was profitable, which no one expected.
Some brand owners are also doing this through private domain traffic strategies. This is ignored by many brand owners or pure internet companies. If interested, we can discuss privately; this M2C model is also being tested with several brand owners.
Going back, this model is worth the attention of all brand owners in the future. It is not a business model; at best, it is a better promotional tool, so as a business model, it does not exist. But when we consider the entire community e-commerce and put group buying into the larger community e-commerce sector, we see more of a trend of integrated production and sales, or integrated production, supply, and sales. This model definitely exists because the essence of business is traffic. Traffic is currently divided into four types:
> The first is location-based traffic, mainly KA stores and offline retail formats;
>
> The second is search-based traffic, including Baidu search or Taobao/Tmall;
>
> The third is brand mind-share traffic, mainly formed by brand names, symbol systems, and related advertising;
>
> The fourth is social traffic, divided into Moments traffic, community traffic, official account traffic, mini-program traffic, and video traffic.
From this perspective, we can see the problems of our current brand owners; you can lay out in each traffic type. Overall, this is just the beginning.
I have digressed; let us return to our community e-commerce industry. We estimate that last year the entire industry did less than 50 billion, and this year, adding all industries together, it is less than 100 billion. Compared with the total of 40 trillion, it cannot achieve a very large magnitude change. Here I borrow a saying from Jiang Xiaobai's boss, Old Tao, that the change in magnitude and the change in order of magnitude are different. He said that to see the stage of development of a thing, or its strength, you need to look at its magnitude, not the order of magnitude. That is, a 10%, 20%, or 30% growth of a thing is meaningless; it must be one, three, or ten times growth to change the situation. For example, 10 compared to 10,000; this 10,000 is meaningful to 10. So currently, this track is far from having enough influence.
**C-end User Assets**
We are also thinking about how group leaders will develop. My judgment is that group leaders will become cloud merchants. In brand owner terms, previously the battle was at the terminal, now it is at the store. As the market matures, the future battle point will be at the group leader, at the community, because group leaders will become independent.
Currently, group leaders are like second-tier distributors. Although many platforms claim to have established user profiles and tags, they cannot truly apply them, nor can they use them for big data; it is still just a gimmick.
The development direction of group leaders is professionalization, specialization, and independence. Group leaders are an object of love and hate for us. After looking around the industry, group leaders are an awkward existence; it is difficult to turn them into independent innovative entities.
My other judgment about community group buying companies is that they are innovative supply chain companies that connect the entire origin, sales area, and local supply chain. So the current leading companies may not necessarily be the ones who laugh last; regional platforms still have opportunities, but this opportunity depends on how you do it. If you treat it like other platforms and burn money, you will basically be close to death. But if you take a differentiated path and treat it as a business, measuring everything by profitability, you may get good results.
**Current Hidden Dangers in Community Group Buying**
Now we see many big group leaders doing C2B reverse supply chain, and they are also making money. If you earn a few million a year, it is okay in this module, but if you consider turning it into a capital game with investment companies, I really do not recommend participating, unless you grow it and sell it to such an investment platform.
The current hidden danger is burning money. No one is profitable while burning money; there should be a painful lesson. Leading platforms are now burning 50 to 60 million yuan per month.
Blind expansion, many local supply chain operations cannot keep up, and there is a lot of corruption, and product selection is out of control. The Hunan Provincial Retail Industry Association is now formulating relevant industry standards, and our New Distribution is also discussing with the Social E-commerce Professional Committee whether to make corresponding basic industry standards.
Group leaders, as you may have experienced, cannot be on just one platform; they are on at least three or four platforms. So the current ten points distributed to them is not enough, and in the future, if brand owners attract your group leaders, for example, the wine we just mentioned, you now give them about 10 to 12 points.
For example, wine can directly give 30%, diapers also 30-40% profit sharing, so group leaders are very willing to promote because they are independent business entities and cannot be controlled. We saw that in the first half of the year and last year, we were climbing slopes and crossing hurdles. From April this year to now, what has happened? A lot of mergers and acquisitions, a lot of exits. So many platforms are thinking, should I survive or die? At this time, it depends on your thinking: do you hug the thighs of leading companies or take a differentiated path?
**How Long Until the Battle Ends**
By the end of the year, the leading platforms may become three or four. Regarding the front-warehouse model, frankly, I do not agree. I especially want to talk about the difference between the internet model and the supply chain revolution. Practitioners from the internet industry have a big inertial thinking: use internet means with large subsidies to change the industry in two or three years, making my company the lever for traffic distribution in the entire industry.
Even this year, I still question this conclusion. Although there is this trend, I have been doubting whether capital investing in leading platforms and then burning others to death through subsidies and discounts, and burning yourself out, is still something I doubt.
Another is the term supply chain revolution. Who did I first hear about community group buying from? We had already concluded this when we were doing B2B... For example, why is Xingsheng Youxuan running so fast now? Because through more than a decade of accumulation, they have established 28 warehouses nationwide and cultivated 300-400 people who understand supply chain, so now they can have more than 4,000 people nationwide. Without previous supply chain experience accumulation, it is impossible.
Since it is a supply chain revolution, then "bitter, tiring, heavy, annoying, and enduring" are the thresholds and journey we must go through.
This chart is borrowed from Li Botao, vice president of Niwonin. His judgment is the same as mine, because everyone knows that Niwonin has just been acquired by Squirrel Pinning, and at this time he gave me this chart. According to him, it is now in the early stage of a growth period, and I agree with him.
Now, looking at the Aladdin data, you can see the rankings of different platforms from January, February, March, April, May to June.
Xingsheng has always been first, and the rest are different. Whether it is Shihui, Shihuituan, or Squirrel Pinning, who can stand out? We will wait and see.
For brand owners cooperating with small platforms, I suggest first cooperating with leading brands as much as possible because your sales will be very large. Second, pay attention to the risk of payment for goods. Although we are practitioners, I think the value of our industry must not have problems with funds.
**Breakthrough in the Track**
So how to upgrade next?
First, stick to the current path, sink channels, deeply cultivate counties and townships. When you build the entire network of a region, I think it is valuable.
Second, turn yourself into a community e-commerce company. Based on my current understanding of community e-commerce issues, beauty products are more suitable, but fresh produce communities are not very good. Here, Brother Jun's sharing on the 1.5 stage of community group buying is worth reading; what will the future 2.0 model look like?
Third, for the benefit of FMCG or standard product enterprises, you can now use community e-commerce to handle a large amount of your surplus or inventory goods. This module is also OK, but we do not agree with doing other things.
**Building Supply Chain Competitive Barriers**
The following is my summary of the industry. If we want to do community group buying, what methods can we use to build our barriers? I think although everyone is doing it, the focus of each enterprise is different.
First, full categories, full scenarios, fresh produce. We focus on several aspects: in product selection, prioritize life services, then beauty and daily necessities, food, fresh produce, and fruits. In this way, your fresh produce and fruits should become the basis of your traffic, with fresh produce accounting for 60% to 70%.
Look at the proportion structure. This is the fresh produce category of Sam's Club; in Sam's Club, fresh produce accounts for 60%. From this, it can be seen that fresh produce is the easiest to bring traffic.
Second, product category selection. I see many companies have also done many brand networks and category selection networks. This is a good direction, but the details are not good, because this is a rule of Xingsheng: an average of about 80 SKUs per day, selected SKUs.
The difficulty is how to find the explosive product for each product; this is very difficult. Let me provide an idea from Yunji. Yunji's idea is wide, few, and refined. The product categories must be rich, otherwise your audience will still be narrow. This tests the ability of your product selection team.
Third, explosive products. I now find the biggest problem is that explosive products are different in different cities and regions across the country. **It is difficult to replicate in the national operation system**, which is a pain point in community e-commerce. But it may also be an opportunity.
Our explosive products in different regions are different; it may also be an opportunity. This is the path of 7-Eleven's manufacturing retail. My suggestion is that those of us in this industry still need to study the most powerful company in our retail industry.
Fourth, origin supply chain. For example, Suning Xiaodian claims to do 28 industrial supply chains, but the problem now is that it can meet this demand, but we have not seen too many successful cases.
Fifth, self-built supply chain. We currently see Xingsheng doing many things in this regard. Own brands are also things we do; let us briefly go over them because everyone is doing them, and the depth and width of each are different. Let me give an example of current internet celebrity buyers. Everyone knows Li Jiaqi and Viya. Now some companies will take all the explosive products pushed by internet celebrities, use time differences and regional differences to find such resources, and then spread them to various regions. This project has also received tens of millions in financing, through the online explosive product method.
As for regional financial characteristics, these are roughly the aspects; no profitability has been seen yet. The future core may be e-commerce networks, possibly both online and offline. Regarding offline store opening, I do not recommend everyone to open stores because competing with offline convenience stores is no different. I think this is a huge pit. So although what we are doing now is a gold mine, will it be a bubble? Because many of the products we are doing now, although they seem to be explosive, are essentially low-price driven.
Your operational orientation replication will be very slow. For example, the group leader thing, right? You love and hate it at the same time. For example, under explosive product driving, your explosive products are always scarce, and the detonation logic cannot be replicated. If the company requires you to do zero inventory, many things cannot be done big; these are some pain points.
If you take the more than a dozen competitive barriers just mentioned, and achieve each aspect, find a path and strategy that suits your regional development, and form such consistency, I believe you can do well.
The above practices and logic are from my discussions with some platform bigwigs; thank them for their wisdom and support.
**To do well, I think there are several standards:**
> First, this thing must be able to make money; I do not recommend doing it at a loss:
>
> Second, if you want to lose money or grow big, you actually need to aim to sell yourself to a big platform. So, the opposite of the Tao moves; what you do not want to see may be what you lack. After throwing out so many views, I am only responsible for killing, not burying. I have raised many questions; I hope we can discuss privately at the dinner how to solve them.
In the future, I think adding the community group buying module to various retail formats is of great value. The community group buying model will definitely become a standard configuration for retailers, and may also be a match for many brand owners doing private domain traffic. Now a large number of platforms are starting to merge and acquire. We also see that after acquisitions, some platforms are doing well. I did not favor them before, but now it seems they are doing well. I think it is related to the company's genes. For example, Shihuituan's genes; President Chen is particularly good at mergers and acquisitions. In the future, I think the benchmark may be Costco. I suggest entrepreneurs study it when they have time.
So overall, we are just at the mid-game, not the endgame, and there are still 1 to 2 years. By the end of the year, there will be no national top ten platform rankings; there may only be 3 to 5 national rankings. Finally, I recommend a book to better view your company's growth, called "Five Lines of Growth," a book by Dr. Wang Sai of Kotler Group. Of course, if you want to learn more, come to our Shanghai conference in August; we have 16 transformation topics to discuss with you.


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