---
title: "Community Group Buying Polarizes: Big Players Wake Up, Small Players Improve"
description: "Community group buying has entered a new cycle after layoffs, city closures, and bankruptcies. The industry is polarizing: internet giants are contracting and prioritizing efficiency, while regional players are seeing better performance."
author: "十里"
publisher: "New Distribution"
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published: "2021-12-13"
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# Community Group Buying Polarizes: Big Players Wake Up, Small Players Improve

> Community group buying has entered a new cycle after layoffs, city closures, and bankruptcies. The industry is polarizing: internet giants are contracting and prioritizing efficiency, while regional players are seeing better performance.

Source: Lingshou (ID: lingshouke)

Lingshou Note: On one hand, internet giants are contracting and prioritizing efficiency; on the other, regional community group buying is performing well.

After a series of layoffs, city closures, and bankruptcies, community group buying has entered a new cycle.

The entire community group buying track is showing a "polarized pattern": on one hand, internet giants are contracting and prioritizing efficiency; on the other, regional community group buying is performing well.

According to the latest financial reports from internet giants, Duoduo Maicai and Meituan Maicai have both paid for previous price wars and aimless expansion, becoming the "culprits" dragging down financial results. Startups have disappeared this summer.

Dailaobo went bankrupt after 21 months of restructuring with no one taking over; Shihuituan, a dark horse backed by Alibaba, was exposed by employees for salary cuts and city closures, with poor operating conditions; Tongcheng Life, once valued at $1 billion, also went bankrupt in July this year.

Some even believe that community group buying might end up like shared bikes, with startups either being acquired by big capital and becoming part of the system, or dying in the bloodbath.

Now community group buying is at a crossroads, and players are choosing different development paths.

******How are the giants' community group buying businesses doing?******

In the community group buying track, giants have explored in many ways, but the market has not given corresponding returns. Although they were determined to make a splash, it is hard to truly find the answer to traffic.

Among the giants, Pinduoduo and Meituan are undoubtedly the most exploratory players, but the data from their financial reports is not optimistic.

According to Meituan's Q3 2021 financial report, new businesses like Meituan Youxuan and Meituan Maicai lost about 10.9 billion yuan. The reasons for the loss are, on one hand, the high marketing costs of Meituan Youxuan, which had to increase investment generously to gain a larger share in the community group buying track; on the other hand, Meituan Youxuan's management needs optimization, as it focused too much on dense distribution points, with insufficient internal management.

Therefore, in October this year, Meituan integrated businesses like Youxuan, Kuailv, and Maicai, with Senior Vice President Chen Liang taking unified responsibility. This move means the company is concentrating resources at the organizational level to contract its business.

Pinduoduo, after heavily investing in Duoduo Maicai, has seen its financial reports this year significantly lower and affect gross margin levels, leading to continued losses for several quarters after its first profit.

Since May, Duoduo Maicai has been extremely turbulent. It is reported that on the basis of flat management, it added an elimination system, starting to recall provincial heads with poor performance to headquarters, with better-performing provinces taking over.

According to an interview in the community group buying industry, Duoduo Maicai's average order value in Q3 was still around 8 yuan. Although executives did not give clear data at the earnings call, analysts predict that Pinduoduo's Q3 community group buying losses still exceeded 4 billion yuan.

Facing losses of over 10 billion yuan and tens of thousands of employees, Pinduoduo and Meituan Maicai, deeply involved in community group buying, have no way back.

Alibaba's community group buying business went through multiple trials this year. In September, Hema Market and Taobao Maicai were integrated into Taocaicai, indicating Alibaba's determination to counter Pinduoduo and Meituan. In November, Taocaicai's orders exceeded 13 million.

Just when the market thought Taocaicai would challenge for third place, the official announcement of "suspending services in Guizhou" cast a shadow over Alibaba's attitude towards community group buying.

Xingsheng Youxuan also had a tough year. After establishing a foothold in Hunan, it began a reduction plan in Q3, saying it would reduce costs and increase efficiency. After August, Xingsheng suspended its expansion plans in the northeast and began closing inefficient group points in various places, no longer pursuing expansion but emphasizing holding its ground.

When head players begin to concentrate resources and contract, players in the second tier face more pressure. Instead, community group buying focused on a single city or region is seeing performance gradually recover.

After "casting a wide net," players clearly know that community group buying is also a retail business where regions reign supreme, and they have begun to consolidate their businesses, some eager to retreat, others attacking to fill gaps.

Xingsheng Youxuan still has advantages in Changsha, Wuhan, Nanchang, and other regions; Duoduo Maicai and Meituan Youxuan have basically completed nationwide coverage.

But for both, community group buying is strategic. Especially for Meituan, which is deeply rooted in local life, the community group buying business cannot be given up.

******How long can the giants linger?******

The giants' efforts in community group buying mostly stem from their own business needs, and the original intention determines how far they are willing to go.

When internet giants entered, they may have had the idea of "rather lose money than let competitors have it easy," leading to a series of money-burning behaviors, behind which are difficulties in acquiring new traffic, customer acquisition costs, and slowing new customer growth.

When players without capital background fell and "veteran" players slowed down, they began to think about future paths, triggering adjustments to management teams and management methods.

At that time, the big players believed that introducing fresh blood was key to long-term standing in the field, but as the industry landscape changes, the competition of comprehensive capabilities among community group buying players has just begun.

Like other traditional retail businesses, community group buying is a typical regional economy of scale.

In the lengthy supply chain, it relies heavily on local suppliers and requires city-by-city development. Relying solely on capital to drive rapid national replication is probably a fantasy.

Meituan's losses of over 10 billion yuan are due to rapid early expansion, but for Meituan, this is a strategic investment. Since its establishment, Meituan's "Youxuan Business Unit" covered 12 key provinces in East China, Central China, South China, Southwest, Northwest, and North China in just 3 months.

In the early stage, community group buying was seen by internet giants as a business with low barriers.

In fact, considering population positioning, regional positioning, model selection, market size, etc., there are countless "pits." And community group buying has many links in the chain: upstream involves suppliers, midstream involves grid warehouse franchisees, and downstream may require competing for quality group leaders. The entire process is a comprehensive test of management capabilities.

Even Xingsheng Youxuan, which can achieve an annual operating scale of 20-30 billion yuan in Hunan province alone, has not yet achieved nationwide penetration. The community group buying industry pattern is rarely winner-takes-all, so whether now or in the future, community group buying is more of a regional victory.

******The endgame of community group buying?******

From the perspective of retail's essence—cost, efficiency, and user experience—the community group buying model itself is not much criticized.

First, the community group buying model simplifies the distribution chain, greatly improving circulation efficiency.

The most intuitive feeling is "reducing middlemen's price differences." There are only three price-increasing links: shared warehouses, grid warehouses, and group leaders. This three-level warehouse system is far lower than the traditional retail distribution's six markup links. Even so, continuous price wars and crazy subsidies have disrupted industry rules.

Second, due to lower costs, community group buying can be cheap. Compared with the front-warehouse model, which uses high investment to provide better user experience, community group buying compromises on multi-SKU and instant delivery experience in exchange for low prices.

According to UE model estimates, community group buying's price advantage comes from 10% from purchase price advantage, 5% from improved circulation efficiency, and 5%-10% from platform subsidies.

Platforms can achieve purchase price advantages: first, because procurement scale is large enough; second, because the payment period to suppliers is short. Compared with traditional supermarkets' 2-month payment period, community group buying has only 3 days, with payment as fast as the next day, which makes many suppliers "partial" and brings lower purchase prices to the platform.

For upstream suppliers, distributors, and consumers, community group buying is in line with retail practices. In the future, community group buying will coexist with retail formats like front warehouses and supermarkets.

But looking at the strategies and intentions of internet giants, they cannot simply define themselves as "selling vegetables." Perhaps from finding the traffic password to reshaping retail infrastructure, they can remove the big hat of "touching the people's vegetable basket issue."

And if they can shift from a money-burning model to investing in technology and agriculture, helping agricultural products sell better, increasing rural low-income people's income, and achieving common prosperity, that might be the most beautiful story of this money-burning war, but it is not easy.

Agriculture is Pinduoduo's advantage area. Earlier, Pinduoduo set its next-stage goal: to become the world's largest agricultural product retail platform, meaning Huang Zheng regards Pinduoduo as an important way to help disperse agricultural products.

This year, JD.com implemented the "Agricultural Products Circulation Strategy," with JD Logistics meeting the "infrastructure" requirements for agricultural products going upward—high demands on logistics efficiency, cold chain, and smart warehousing.

Chengxin Youxuan is also incubating a new platform, "Cheng Pifa," which matches retail terminals like small supermarkets and mom-and-pop stores with wholesalers. Goods on the platform are provided by wholesalers, and warehousing and distribution are also handled by wholesalers.

Although the wave of community group buying has receded, for those entering the market, to seize this development opportunity, they not only need to adjust business strategies and establish a coordinated development system for the ecological chain, but also need to form differentiated operations and unique competitive advantages.

On the surface, community group buying is "shrinking scale" and lowering short-term goals, but in reality, it is also pushing the entire industry to truly return to rationality and actively accumulate strength.

After all, fresh food e-commerce is a long track, where endurance is more important than explosive power. (Original work by Lingshou Media)

**Are you "watching" me?**


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