---
title: "Community Group Buying: Neither Rejection nor Embrace Is the Best Choice!"
description: "Many friends have privately asked me about how to operate community group buying, but I declined to answer, partly because I don't understand it well enough to avoid misleading others, and partly because I'm not optimistic about it, so I see no need for in-depth research. Having recently had extensive contact with brand owners and distributors, I'd like to share their views on community group buying."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-05-13"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/community-group-buying-neither-rejection-nor-embrace-is-the-best-choice-c8d2f299/"
markdown: "https://xinjignxiao.com/en/articles/community-group-buying-neither-rejection-nor-embrace-is-the-best-choice-c8d2f299.md"
original_source: "https://mp.weixin.qq.com/s/0lHrmtkhnMDabOIwcgWPMw"
translation: "https://xinjignxiao.com/zh/articles/%E7%A4%BE%E5%8C%BA%E5%9B%A2%E8%B4%AD-%E6%8E%92%E6%96%A5%E5%92%8C%E6%8B%A5%E6%8A%B1-%E9%83%BD%E4%B8%8D%E6%98%AF%E6%9C%80%E5%A5%BD%E7%9A%84%E9%80%89%E6%8B%A9-c8d2f299.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/community-group-buying-neither-rejection-nor-embrace-is-the-best-choice-c8d2f299/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Community Group Buying: Neither Rejection nor Embrace Is the Best Choice!

> Many friends have privately asked me about how to operate community group buying, but I declined to answer, partly because I don't understand it well enough to avoid misleading others, and partly because I'm not optimistic about it, so I see no need for in-depth research. Having recently had extensive contact with brand owners and distributors, I'd like to share their views on community group buying.

Many friends have privately asked me about how to operate community group buying, but I declined to answer, partly because I don't understand it well enough to avoid misleading others, and partly because I'm not optimistic about it, so I see no need for in-depth research.
Having recently had extensive contact with brand owners and distributors, I'd like to share their views on community group buying.
****-01-******Low prices are an unavoidable hurdle**
When you open any community group buying app, the first things you see are words like: special offers, direct price cuts, savings, flash sales, shocking prices, etc. When it comes to price, there is no lowest, only lower—so low that distributors want to source from community group buying, and even brand owners want to source from it.
Not long ago, I discussed cooperation with several distributors in the eastern Henan region. **The distributors clearly stated: "If I operate the products, I can give up the regional B2B rights, but the community group buying rights must be in my hands. I may not necessarily do it, but I can't let others pick the peaches after I've planted the tree."**
Indeed, product promotion requires investment in manpower and resources, while community group buying has very low costs in this regard (burning money heavily, but not on products—rather on grabbing traffic).
With capital backing, community group buying platforms have deviated from the conventional FMCG operating framework, separating the front-end and back-end of system operations. The front-end requires suppliers' product gross margins to be no less than a certain percentage, while the back-end provides subsidies based on traffic needs. If needed, subsidies can far exceed front-end gross margins.
That's what distributors often say: **"The front-end only cares about making money, the back-end only cares about spending; they don't connect. They're not doing FMCG business per se."**
I once met a small and medium-sized enterprise owner. His market foundation was stable, with a certain reputation and awareness in some markets, and his distributor team was maturing. To develop faster, he joined community group buying.
After a few months of shocking prices, the result was that corporate profits rose and sales multiplied in a short time, but **the distributor team saw profits plummet due to the low-price strategy, stability was broken, platform thresholds were rising, the enterprise was shackled, and the operational ecosystem was destroyed—a case of more harm than good.**
Indeed, most community group buying adopts a model of multiple suppliers per product or bidding for slots. This model not only leads to price conflicts among brands and their channel partners, but also raises a more worrying concern: brand owners may launch so-called new products (with reduced weight or quality) to gain price advantages.
At the same time, counterfeits and non-genuine products have found room to thrive, failing to provide consumers with good quality and service, ultimately leading to losses.
**Summary: **Any business model has its underlying rules. Forms can change in a thousand ways, but the rules cannot be broken, otherwise it won't last. **The low-price strategy is based on the enterprise's overall cost leadership, combined with meticulous improvements in marketing and other expenses, to create competitiveness—not a product of capital burning.**
China has 1.4 billion consumers. Even if you target a specific user base, the number is staggering. How many days can capital burn a few billion? After burning, can they still guarantee high quality at low prices? In the end, it's the brand owners, distributors, and consumers who get hurt.
****-02-******Be extra cautious when launching new products via community group buying**
Some people think community group buying can promote new products, based on the foundation of **"cognition, transaction, and relationship."** Simply put:
The most efficient way to build cognition is product experience; transaction enables purchase; and relationship enables repeat purchases. Using community group buying platforms to run a few waves of low-price flash sales can quickly achieve promotional goals, giving emerging brands closer access to target consumers. More importantly, community group buying solves the last-mile fulfillment cost for consumers.
But this overlooks a big issue: **How do consumers choose products on a virtual shelf?**
The stronger the purchase intention on a virtual shelf, the higher the probability of clicking to order. Purchase intention is the comparison between the selling price and the perceived price. If the selling price is higher than the perceived price, the larger the gap, the less likely they are to order. Conversely, if the perceived price is higher than the selling price, the larger the gap, the more likely they are to buy. In plain terms, it's about whether the product is worth more than its price.
So, to cater to consumers, the only path for brand owners is to lower the selling price, letting consumers experience an unexpectedly low-price shopping spree to drive volume. At the same time, when consumers have a good product experience, they also label the product as "good and cheap."
Under this "cognition," a "transaction" occurs. To maintain the "relationship," you must use expenses to fill this bottomless pit. **Making a splash online is fine, but offline channel development is extremely difficult.**
**Summary:** According to China Merchants Securities' estimates based on current market data, "the community group buying track is likely to achieve a market size of 400-500 billion yuan this year." Even so, compared to the 40 trillion yuan scale of offline physical retail, it's still not significant.
As for whether community group buying can promote new products, I reserve my opinion, as some brand owners have profited from it. Every entrepreneur has their own goals: some seek short-term gains, some long-term gains, and some plan to build century-old brands. Weighing the pros and cons, new enterprises planning to build brands should choose the vast field where there's much to do.
**For those joining the community group buying track, it's essential to have strong offline operational capabilities, and then proceed with extreme caution.**
****-03-******Views of distributors and terminal stores encountered during channel development**
Recently, I've been in close contact with frontline distributors, and during the channel development process, I've gathered some views from regional distributors and terminal store owners.
**Distributor A: High acceptance of new things; previously suffered losses in B2B**
His view: **B2B and community group buying are both "fake optimizations" of the product supply chain under capital backing.**
Brand owners, as the source of product R&D and production, cannot be eliminated. B2B aims to optimize away middlemen, with the goal of brand owners supplying terminal stores directly through the platform. Community group buying is "pseudo-2C," aiming to optimize away terminal stores through group leaders, with the goal of reaching consumers directly via local distributors. Both are essentially the same.
First, optimization is difficult because **distributors and terminal stores carry not only business but also human relationships and local networks.** Second, even if optimization succeeds, it may not necessarily be good for brand owners, distributors, or consumers in the long run.
**The essence of capital is to chase profits. Whatever is burned today must be recouped double later.** For example, with mature ride-hailing apps, after coupons disappear, consumers actually pay more than before, while drivers' profits haven't increased much.
**Distributor B: Likes taking on new products; has profited from community group buying**
His view: **When new products land, brand owners want to open the market, and the costs are high. Using community group buying platforms, he made many deals with considerable profits, but these partnerships with brand owners didn't last long.**
Most brand owners initially have ample budgets, using low prices through community group buying for product experiences, which generates sales. But the effect becomes less obvious over time, forcing them to cut prices further to stimulate demand.
Moreover, platforms have reference minimum prices, making it hard to raise prices. In reality, community group buying has little impact on offline consumers' purchasing habits; those who habitually buy online rarely buy offline, and bridging online and offline is not easy. Eventually, brand owners weigh cost-effectiveness, reduce investment, and the cooperation fades away.
**Terminal Store C: Occupies a prime community location; does not participate in community group buying**
His view: **The products sold in community group buying are all available in his store, but the profits are far lower than in his own store. The sales volume looks large, but in the end, he's working for the landlord and the platform. Rather than being forced to participate, it's better to focus on consumers' unplanned purchases, leveraging the immediacy and impulsiveness of physical stores to expand business.**
Simply put, a thirsty consumer won't order a drink today to drink tomorrow; they won't check prices online for a small item costing a few yuan; and children's toys must satisfy the immediate need of a crying child.
**Terminal Store D: Participates in community group buying as a consumer and serves consumers as a distributor**
His view: Community group buying products are indeed cheap. He often checks major platform apps, and many products in his store can be sourced from the platforms. There's no minimum order quantity, and prices are even lower than direct delivery from distributors, especially for shocking-price items. By having several family members place orders separately, he can cover several days' sales for his small store, and then he develops consumer users within the community.
For example, he distributes flyers in the community, offering free delivery for orders over 50 yuan (at normal or slightly higher prices), available 24/7, with delivery within 15 minutes on average. Which platform can guarantee that?
**Summary: **Regarding community group buying, opinions vary; there are both pros and cons. Rejecting or distancing oneself is not the best choice. From a profitability standpoint, distributors and terminal stores are not without opportunities, after all, capital has burned so much money, and it has affected your business. So, how much wool have you actually sheared from this revolution?
**Final Thoughts:**
First, I'd like to mention the survivorship bias theory: it refers to the situation where when the only source of information comes from survivors, the information may deviate from reality.
Survivorship bias is a principle naturally selected through survival of the fittest: **Those who did not survive can no longer speak. People only see the results after some filtering, without realizing the filtering process, thus ignoring the key information that was filtered out.**
Regarding whether to participate in community group buying, I hope you'll listen more to the opinions of those who failed. Currently, those active on major stages speaking for community group buying are all beneficiaries and platform promoters. They speak passionately and share success stories.
Remember one thing: **Success is often not replicable, but you can avoid stepping into the same pitfalls of failure. In a sense, the value of information from failures is higher.**
Tips will be paid 400-2000 yuan once adopted.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671