Source: Bohu Finance (ID: bohuFN) Author: Tang Bohu

Industry collapse: Is community group buying disproven? Since 2021, the death knell for community group buying has been ringing continuously. Tongcheng Life and Shixianghui have gone bankrupt one after another. Chengxin Youxuan was taken offline less than a year after its launch. Most recently, Shihuituan has been embroiled in layoffs and debt disputes. Of the original 'old three groups,' only Xingsheng Youxuan remains, and it will face the giants Duoduo Maicai and Meituan Youxuan alone. When industry confidence is low, Xingsheng Youxuan has been fortunate, always slowly spreading some optimistic news. For example, in July last year, while Tongcheng Life was in deep water over debt collection, Xingsheng Youxuan secured a $300 million strategic financing. Another example is this time: while Shihuituan is in turmoil, Xingsheng Youxuan says it will start selling clothing. Bohu Finance wants to discuss: What does selling clothing mean for a community group buying platform? After surviving the subsidy war with giants, is Xingsheng Youxuan using category expansion to attack the heart of e-commerce?

When community group buying starts selling clothing The news is brief. Xingsheng Youxuan has added a clothing category, launching a large number of women's clothing styles, covering young to middle-aged users. Bohu Finance opened its mini-program and found that the 'Yuanchen' women's clothing brand occupies two prominent entrances on the homepage, with a splash screen promoting 'free returns and shipping' to gain user trust. Clicking into the channel, most winter clothing prices range from 29 to 400 yuan, and the partner brands Xufangnian and Mengfei are not well-known. The clothing delivery model is not home delivery but store pickup, same as community group buying. (Screenshot from Xingsheng Youxuan mini-program by Bohu Finance) In fact, according to Tianyancha APP, as early as October 27, 2021, Xingsheng Youxuan invested in a Hunan Enyi E-commerce Company, whose business scope includes clothing production and sales. Xingsheng Youxuan holds 40% of Enyi's shares. (Image source: Tianyancha APP equity penetration chart) Before adding women's clothing, Xingsheng Youxuan's main categories were fruits, vegetables, meat, poultry, eggs, aquatic products, tofu, milk, agricultural products, baked goods, and some household daily necessities. Although Xingsheng Youxuan has always positioned itself as e-commerce, compared to the rich categories of online platforms, community group buying in its early stages was still focused on high-frequency, essential consumer goods like fresh produce and daily necessities. High frequency driving low frequency is the category logic of e-commerce. Xingsheng Youxuan finally entering clothing at least means that community group buying has taken a small step toward full-category e-commerce operations. It also reveals its intention to open a profit gap in the vegetable business with a meager 3% profit margin. But everyone needs to think: whose signature category is clothing? It's Taobao. The supply chain advantages accumulated over more than a decade are far beyond Xingsheng Youxuan's reach. Furthermore, with e-commerce live streaming, clothing return rates have remained high. Can Xingsheng Youxuan bear the substantial operational costs?

How many lives does Xingsheng have? As early as the 1990s, Hunan native Yue Lihua started from a small grocery store, transitioning from wholesale to running supermarkets. Constrained by the influence of chain supermarkets like Walmart, supermarkets without brand advantages struggled to develop, and with high cost pressures, Yue Lihua simply closed stores larger than 100 square meters. Thus, Yue Lihua transformed into small community supermarkets, keeping store areas within 80 square meters. Through a franchise asset-light model, Furong Xingsheng expanded rapidly. According to its official website, by 2021, it had accumulated over 19,000 community supermarkets, covering more than 480 cities across 16 provinces. For comparison, the China Chain Store & Franchise Association released the 2021 China Convenience Store TOP100, where the top three—Sinopec Easy Joy, Meiyijia, and PetroChina Kunlun Haoke—had 27,600, 22,394, and 20,212 stores, respectively. This strong scale advantage gives the chain brand considerable bargaining power, allowing Furong Xingsheng to obtain the lowest supply prices from suppliers. These numerous community entrances plus abundant supply chain resources are also the foundation for its transformation into community group buying. In July 2013, Yue Lihua began incubating the e-commerce platform Xingsheng Youxuan, with the original intention of revitalizing stores. There were some detours. He tried store self-delivery, online warehouses, and delivery stations, but all faced high fulfillment costs and insufficient profit incentives for franchisees. It wasn't until June 2017 that they finally figured out the 'pre-sale + self-pickup' model. As the main entity, Furong Xingsheng's profits were not high. It is said that as early as 2016, some board members wanted to prepare for an IPO and opposed pouring more money into the Xingsheng Youxuan experiment. It was also at this time that capital began to pay attention to community group buying, and industry financing heated up. Changsha, as a key city for community group buying, gained favor from investors. With fierce competition on one side and market expansion on the other, Xingsheng Youxuan also opened up to investment institutions. According to Tianyancha APP, to date, Xingsheng Youxuan has received a total of 8 rounds of financing. The earliest round came from Capital Today, GSR Ventures, and ZhenFund. After multiple rounds, founder Yue Lihua holds 10.40888% of shares. (Financing history, image source: Tianyancha APP) In later reports, Xingsheng Youxuan said that 2016 to 2018 were quite difficult, with fierce market competition and the need for ammunition in battles. Two investments were crucial: one was Tencent's strategic investment, which allowed it to hold onto the traffic lifeline. The other was Capital Today's Xu Xin joining, which also built a bridge for JD.com's later strategic investment. Here, Bohu Finance interjects: Similarly clinging to giants' thighs, the fates of community group buying platforms embracing Tencent versus Alibaba are completely different. For example, after Alibaba launched Taocaicai and Hema Fresh, Shihuituan was gradually marginalized and became a discarded pawn. Fast forward to 2020: under the pandemic, community group buying exploded. Just as it seemed profitable, giants like Pinduoduo, Meituan, Alibaba, and Didi entered the fray, escalating the war suddenly. Tongcheng Life and Shixianghui, unable to replenish ammunition in time, were conquered. In the critical period from July 2020 to July 2021, Xingsheng Youxuan received four consecutive rounds of financing totaling $4.8 billion. Overall, Xingsheng Youxuan is quite resilient.

Content to be a feudal lord? A video of Yue Lihua, a sixth-term student at Hupan University, has circulated. He described himself with four words: 'earthy,' 'hardworking,' 'love to tinker,' and 'won't stop until a task is done well.' 'Many people do things cleverly, focusing on resource integration and solving problems in the fastest way. But if you extend the time dimension, you'll find that may not be the best choice at the moment.' Yue Lihua would rather 'stick to simplicity' and 'dig one well and keep digging.' Starting in the second half of 2021, Xingsheng Youxuan's strategy turned conservative. It stopped all activities for user acquisition, order volume rewards, and ultra-low-price product sales. It also completely halted market entry into undeveloped areas and the construction of new regional distribution stations. Additionally, it closed inefficient stores and merged inefficient grid stations. Expansion has been paused. Is Xingsheng Youxuan entering a phase of cost reduction and efficiency improvement? The key question is: will the aggressive 'new three groups'—Meituan Youxuan, Duoduo Maicai, and Taocaicai—give it room to bide its time? Perhaps when there's no room to retreat, Xingsheng Youxuan still has its store entrances. But can it successfully run categories like clothing through community convenience stores? Regarding the endgame of community group buying, the offline faction represented by Xingsheng Youxuan still speculates based on the regionalization pattern of chain stores, believing that by holding onto regional advantages, one can be a feudal lord even if not a unifier. However, from the perspective of internet companies, geographical boundaries have long ceased to be a problem. Attacks have always been sweeping. For Yue Lihua, the tinkering must continue. In the next stage of '4 to 3,' can Xingsheng Youxuan hold its ground?

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