On December 12, 2020, community group buying made headlines as a topic, appeared on CCTV, and was featured in People's Daily. It has become a national issue, and it is an indisputable fact that it has emerged as a phenomenal marketing focus.
-01- Bulls to the Left, Bears to the Right Some are bearish, saying it won't last long. Some are bullish, calling it the third pole of marketing forces. Others are just watching the fun, where the wool-gatherers meet the leek-slicers. Among them, for reasons you know, the voices of bearish criticism have gradually grown louder, with indignant, patriotic, and grandiloquent rhetoric, viewing community group buying as a scourge that must be eliminated first.
I have generally listed the 10 'sins' of this monster called community group buying:
- Monopolizing the people's livelihood and stealing the jobs of vegetable vendors.
- Squeezing the survival space of small and micro businesses.
- Using big data to kill the familiar, engaging in price wars and burning money.
- Luring users with subsidies and then cutting leeks, forming a monopoly.
- Disrupting the social order and undermining the foundation of the real economy.
- Causing massive unemployment and social instability.
- Evading taxes and engaging in capital arbitrage.
- Infiltrating communities and eroding neighborhood trust.
- Promoting unhealthy consumption habits and waste.
- Threatening national food security and agricultural development.
What a familiar voice, how many years of wind and rain. In the 1990s, foreign KA supermarkets entered China, and in 2003, Taobao appeared out of nowhere. These are the same arguments, the same recipe, the same taste. The difference is that the target has changed, but the logic of criticism remains unchanged.
There is a smell called stench, and there are two kinds: one is the sour stench of unwashed socks, the other is the foul smell of rotten eggs left for a long time. The above 10 'sins' are a combination of smelly socks and rotten eggs, both sour and foul.
-02- Community Group Buying: Rumors to the Left, Misreading to the Right December 12, 2020, is a watershed moment in history, as 'community group buying' became the hottest topic, bar none.
Rumors to the Left Big companies have run away, community group buying is over, Hangzhou Ma, Meituan Wang, and Duoduo Huang have withdrawn from community group buying!
An obviously copy-pasted big-character poster spread wildly on the internet, and various industry celebrities and big V's were overjoyed, celebrating with tears of joy, spreading the news, and keyboard warriors even stayed up all night writing lengthy articles to get 100,000+ views.
The actual result is: Alibaba's Hema replied: 'Rumor'; Pinduoduo replied: 'This news is baseless'; Meituan replied: 'Rumor'.
The content of the rumor is not important, but fabricating rumors at this critical juncture is thought-provoking.
Whether it's BAT or TMD, they do need to reflect from the root: why is this happening?
At this moment, four words float across the sky.
Misreading to the Right On December 11, the Political Bureau of the CPC Central Committee studied the economic work for 2021 and, for the first time, proposed 'strengthening anti-monopoly and preventing the disorderly expansion of capital.' Subsequently, Kang Hui of the 'News Broadcast' interpreted this phrase on CCTV video, ending with the six words 'fairness and innovation.'
Before the News Broadcast aired nationwide in the evening, at 4 PM on November 11, 'People's Daily Comment' published a long article titled 'Behind the Controversy over Community Group Buying: More Expectations for Internet Giants' Technological Innovation.'
Chao Ge interprets the spirit of the two mouthpieces in plain language:
- The rule of law is a basic national policy. The state will not and cannot define the emerging business model of 'community group buying,' nor will it beat it with sticks, put hats on it, or label it.
Because of complex non-commercial factors, historically the state only made a blanket ban on pyramid schemes, which were imported. 'Six Stability and Six Guarantees' is the national policy, which does not conflict with community group buying; community groups are also part of people's livelihood.
- Capital is a neutral word, profit-seeking is its genetic orientation, and it harvests different targets at different stages.
But the core purpose of the Party and the state is to serve the people wholeheartedly. Capital serving the RMB vs. national policy serving the people: the latter is more important and is the foundation of social operations.
- The internet in China has been running at breakneck speed for more than 20 years, enjoying demographic dividends, policy dividends, and environmental dividends.
In balancing the conflicting elements of 'efficiency and fairness,' the national policy guides internet giants to focus on technological innovation while continuing to explore business modules.
- The Political Bureau meeting's anti-monopoly and prevention of disorderly capital expansion, as well as preventing the hidden danger of being too big to fail.
Combined with the shelving of Ant Group's capital market listing on the eve of its IPO, you know. The logic of community group buying itself is valid; it is the monopolistic and disorderly expansion of capitalized community group buying platforms that is the problem.
- The black swan event of the pandemic accelerated the upgrade and iteration of community group buying, and also accelerated internet giants' early entry, mostly to seize the position.
Even Didi's Orange Heart Preferred team is still confused; originally, this track could have followed its own pace, with Xingsheng Youxuan leading a group of small brothers to explore gradually and naturally.
- Community group buying is not the right of any specific person. Some original entrepreneurs, such as Zhihua Zhiguo, Youjing Youtian, and Diao Daojia, have already explored profitable models as local leading platforms.
Including physical store chains like Wumei, Bubugao, and Aikeduo have all entered the game, and category giants like Qian Dama, Yipin Fresh, and Baiguoyuan have been doing group buying all along.
- Whose cheese does community group buying move?
Any new force entering the circle will have an impact on the current pattern, and community group buying is no exception. If we must say who replaces whom, it is high efficiency replacing low efficiency. Remember, consumers will vote with their feet.
The emergence of open-shelf supermarkets changed the bureaucratic style of supply and marketing cooperatives; the emergence of Alipay and WeChat improved the efficiency of bank services; the emergence of Didi changed the professional quality of taxi drivers.
What about community group buying? It helps users choose products with the best cost-performance ratio that Taobao and others cannot do for one-piece delivery. Many black pots cannot be placed on community group buying.
- Returning to business, whether it aligns with user interests is the touchstone of any business model. Community group buying gives users another shopping scenario choice. With competition among upstream platforms to attract users and national policy guidance based on fairness, there is no sin or punishment; it is moving toward healthy development.
-03- Community to the Left, Group Buying to the Right The underlying logic of community group buying:
1. Community to the left, group buying to the right. Community determines the local business, which is a decentralized, distributed, grid-based social e-commerce; this is the core of the business model. Group buying is the mode and method of user purchase, that is, reverse wholesale, one piece at wholesale. Therefore, this definition is correct from these two aspects.
2. Community group buying is a new social retail based on communities. Community is the surface, social group is the inside, and the combination of the two is 'social.' From the perspectives of capital flow, logistics, and information flow: in information flow, community group buying follows the logic of online search e-commerce; in product flow, i.e., logistics, it follows the logic of offline central retail.
3. Community group buying aligns with the trinity theory of 'relationship, cognition, and transaction.' At the same time, it connects the three-dimensional space of online, social group, and offline, which is the ultimate gene behind the warmth and stickiness of community group buying.
4. From the payment perspective, community group buying and Tmall/JD are two camps competing for the discourse power of payment methods: online payment vs. offline payment.
5. From the perspective of supply chain reconstruction, community group buying has shattered and broken the original supply chain system. It can be said that for traditional retail, it is a veritable 'naughty child,' and some experts even call it 'toxic sales.' From this judgment, we can see what kind of products we should use to fit this channel, and this conclusion is thought-provoking.
6. From the evolutionary stage, community group buying has gone through three stages: one centered on small B terminals, and one with BC integration, fully serving C-end users. Nationwide, community group buying is making up for B2B lessons.
7. Analysis of the current profit and loss issues of community group buying platforms. They fall into three categories: strategic losses, operational losses, and the rest can be said to be losses from stepping on pitfalls, either not understanding supply chain or logistics, or being held hostage by group leaders. This is an issue platforms need to pay attention to.
8. In product structure, fresh produce differs between first- and second-tier markets and third-tier and below. In first- and second-tier markets, fresh produce must be profitable. But in third-tier and below, the weight of fresh produce is not as heavy; the focus is on standard products overall.
9. Localized procurement, localized warehousing and distribution, localized services (group leaders), and localized users. Anywhere people gather and stay is called a community. As the community scene expands and products sold increase, platforms should leverage aggregation effects.
10. At a higher level, community group buying as a whole conforms to the three basic points of innovation: 'reducing social costs, improving social efficiency, and activating social redundant resources.' Therefore, we believe it is not just an additional business channel, but a completely new model different from all other e-commerce.
A model is business, but it also changes social behavior habits A closed-loop business model, genuine goods going to the countryside, immediately leaves no place for fake products to hide, which can be described as 'sweeping away evil and promoting good.'
Ordering at the same time, receiving goods at the same time, urban and rural integration, can be described as national fair treatment.
On a 5.5-inch phone screen, goods find people. Children far away can order for their left-behind elderly parents at any time, fulfilling filial piety.
A model that is not only commercial but also social can be said to drive changes in consumer behavior habits. Community group buying has achieved this, especially verified during the special period of the 2020 pandemic. Community group buying is on the broad road to becoming the most basic shopping method.
Chen Haichao / Chief Consultant of Mai Marketing New Retail Consulting Agency. Special thanks: Some content excerpted from 'Community Group Buying: Just Do It' by Chen Haichao and Yang Dinggang.