Group-buying stores have grown wildly over the past year, leading many to fall into the trap, and even giants are eager to try their hand. At the end of June, Liu Wei made a difficult decision to close three community group-buying stores he had been operating in Changsha. Over nearly three years, he witnessed the entire process of the community group-buying industry, from massive expansion to contraction, and then to the rescue attempts by group-buying wholesale and group-buying stores. This time, he retreated with his three stores. A group-buying entrepreneur told Ling Shou that Liu Wei's decision was 'not surprising.' Group-buying stores have grown wildly over the past year, leading many to fall into the trap, and even giants are eager to try their hand. Former group leaders naively believed that with accumulated supply chain and online operational experience, they could easily sustain their stores. But in reality, they overthought it, as 'different trades are separated by mountains.' From entering the market to closing the stores, Liu Wei's community group-buying stores lasted only a year. He no longer cares about questions like 'Will the entry of giants affect us?' or 'Can community group-buying stores really work?' In the end, all that remains is a lesson learned from three stores and a cost of hundreds of thousands of yuan: group buying and physical stores are two completely different concepts. Although group buying can drive online traffic to the store, the store must be able to convert that traffic through display and products. Community group buying has always been like a huge, precisely operating machine. After three years of high-speed operation, when the power is suddenly cut off, group-buying stores became the straw that countless group leaders grasped at that moment. Little did they know, this also plunged more group leaders into a 'darkest hour.' Declining Performance of Group-Buying Stores 'In the past month, revenue has declined significantly, with daily revenue sometimes less than a thousand yuan.' Cheng Lu is a community group-buying leader in a fourth-tier city in Hebei. Seven months ago, she opened a 40-square-meter group-buying store in the commercial space of her residential community. This decline in performance is in stark contrast to the situation when she first started operating the store. Cheng Lu recalled that when she was preparing to open the store, there were no other group-buying stores nearby. She attracted customers with aggressive promotions like 10 jin of salt for 1 mao and 10 jin of apples for 1 mao, and 'there were queues in front of the store every day.' However, within less than a month of opening, three other group-buying stores opened nearby, and now there are seven stores around the community. This phenomenon is not an isolated case. In some regions, the market share of community group buying has become relatively concentrated. During the pandemic, a large number of group leaders joined the community group-buying industry, and Cheng Lu was one of them. However, with policy changes, the commissions of internet giant platforms decreased. At the same time, independent group leaders gained more say, and platforms were weakened to the role of upstream product suppliers. The relationship between group-buying wholesale organizations and independent group leaders has become collaborative, transactional, and mutually supportive. Therefore, group leaders with resources began to seek new ways out, leading to the emergence of many 'new models' such as group-buying wholesale and group-buying stores. According to data, it is estimated that the market size for community group-buying store platforms is 300 stores at the prefecture level and 3,000 stores at the county level. Initially, Cheng Lu saw that the group-buying store model, to some extent, made up for the shortcomings of traditional community group-buying in attracting users and managing group leaders, so she began to set up a physical store and put up her own sign. However, Cheng Lu soon discovered that group leaders in the same area were also opening new stores and following her old path. 'There were many customers who came for the bargains, so the foot traffic to my store decreased. Sometimes they would reopen group buying for products that sold well in the past at reduced prices, and both the average order value and profit margins dropped.' Whether it's group buying or group-buying stores, in this fierce market competition, lowering prices to attract consumers is the only choice for group leaders. Liu Wei told Ling Shou that if the market in the area is already saturated, the space for new customers is small, and the consumption demand of existing customers may also decrease, inevitably leading to a decline in performance. Besides competition, Cheng Lu also admitted that she was too hasty in opening the store, thinking that as long as she had supply chain and operational advantages, she could run a good group-buying store. But in reality, she lacked a deep understanding of offline operations, such as product display, tasting, and marketing promotion, which all require in-depth research. She pointed to the store next door, which was performing better. After Cheng Lu's group-buying store opened, it posed a certain threat to existing small stores, such as mom-and-pop shops. After being impacted, these stores also tried to attract 'community group-buying users' again. Cheng Lu analyzed, 'Because these stores already have a certain profit base offline, using online as a traffic tool, they can easily achieve profitability.' Conversely, those who have already done community group buying or group-buying wholesale, even with supply chain accumulation and online operational and product foundations, can only rely on group-buying business to run the store in the short term, and then gradually study offline operations such as inventory management. 'Both of these situations are okay. The worst are the novices who purely rely on the group-buying store model, with a survival rate of only about 60%.' Liu Wei told Ling Shou that offline stores involve site selection, positioning, product structure, marketing promotion, etc., all of which require very professional skills and knowledge, making it difficult for ordinary group leaders. Therefore, users attracted through aggressive promotions are being lost due to price wars and insufficient operational capabilities. Giants Eager to Try For group leaders in the community group-buying industry, once they choose to close their stores, it means retreating from the market. However, for ambitious internet giants, their expectations are just beginning to unfold. Not long ago, Xingsheng Youxuan announced the establishment of a group-buying store division, planning to open 100,000 group-buying stores by the end of 2024; Xiao Xu Dao Jia has already opened more than 300 group-buying stores nationwide; Miao Meilin and Mei Lin Tao have more than 100 stores each; Liangzi Meishi claims to plan to open 100 offline stores in Zhengzhou; Zhihua Zhiguo stated it will open 1,000 stores nationwide. This wave of enthusiasm for the group-buying store model has once again activated the community group-buying market, triggering a new round of competition among internet giants. Not only are local groups opening stores on a large scale, but countless mom-and-pop stores are also transforming into group-buying stores. An insider in the community group-buying industry revealed to Ling Shou that currently, Xingsheng Youxuan is opening stores at a fast pace, with more than 100 directly operated stores. Alibaba is deeply studying the group-buying store model for layout, Didi may soon pilot group-buying stores, and some logistics companies and supply chain-related enterprises have also begun to lay out group-buying store businesses. Compared to the past when they invested hundreds of millions into the market, the giants restarting group-buying stores are much quieter. However, delving into the reasons behind entering the group-buying store market, it is driven by the demand for online traffic and the huge potential of the offline market. On the one hand, the last wave of demographic dividend mainly comes from the middle-aged and elderly population who are about to enter old age, and the group-buying store model can just meet the needs of this group. Looking at the financial reports of various internet giants, they have not disclosed new user growth data for about a year. If group-buying stores are used as this wave of demographic dividend, they may be able to continue writing a new story of growth. On the other hand, the offline retail market of 30 trillion yuan will be a powerful engine for GMV growth, and new user growth and GMV growth are core indicators for internet companies' stock prices, which is also the core driving force for entering the group-buying store market. But there are many reasons behind choosing to keep a low profile. The aforementioned community group-buying entrepreneur told Ling Shou that although the market capacity for group-buying stores is large enough, with current market penetration of less than 1%, the overall private domain operation capabilities of big companies are relatively weak, and the group-buying store business is highly dependent on private domain operations. In addition, big companies currently do not dare to openly sell goods below cost to attract new customers, which undoubtedly limits their ability to acquire new customers. But from another perspective, internet companies entering the group-buying store model also have certain advantages. First, it can centralize a large number of orders, making sales more stable. This not only helps with bulk sales but also makes it easier to cultivate and promote the group-buying brand. Second, by centralizing a large number of orders, group-buying stores can effectively manage inventory, reduce inventory backlog and waste, and especially help large platforms clear inventory. For example, large community group-buying platforms like Pinduoduo and Meituan generate a large amount of inventory due to stocking issues. If daily sales reach 8,000-9,000 orders, they usually stock up to 10,000 orders, which may lead to an inventory backlog of 2,000 orders. 'Supply to large platforms usually has no profit, and if inventory issues are added, the upstream supply chain will feel enormous pressure,' the aforementioned industry insider told Ling Shou. The group-buying store model can handle this part of the inventory, serving as a pre-warehouse in this model. A person in charge of the supply chain for group-buying stores said that although they can help large platforms clear inventory, a key prerequisite is to ensure consistency in retail prices and product quality. Downstream group-buying stores will also compare prices and product quality themselves, worried that if they are found to be overpriced, they will face resistance from group leaders. Changes in Community Group-Buying Stores 'To reverse the declining revenue trend of group-buying stores, the key is to increase the average order value,' said a person in charge of a local group-buying store. Specifically, this involves two core indicators: increasing the unit price of products and increasing the number of items purchased. For increasing unit price, a more effective strategy is to sell higher-priced products and broaden the product range, for example, including higher-priced meats, poultry, eggs, and dairy products in the sales series. To increase the number of items purchased, group-buying stores need to enrich the product variety to provide consumers with more choices. Ling Shou also analyzed in a previous article that the limitations of the group-buying store model mainly face three problems: limited SKU count, complex supply chain system, and specific consumer groups. First, group leaders update 3-5 products in WeChat groups daily. Although this sales method can attract traffic in the early stage, the limited product variety and difficulty in selection will soon cause sales growth to hit a bottleneck. Second, the limited SKU count makes supply chain management particularly important. Product selection needs to consider both market popularity and profit margins to ensure sales sustainability and group leader profits. However, when group-buying stores develop stably or enter the off-season, the weaknesses of the supply chain will be exposed, and the product variety cannot maintain sustained sales growth. Finally, the main consumers of group-buying stores are price-sensitive elderly people who have high requirements for cost-effectiveness, which makes it impossible for the group-buying store model to increase the average order value by offering selected products. Facing these problems, group-buying stores need to adjust their product mix, continuously experiment and correct to achieve the goal of increasing sales. If they want to quickly increase sales, group-buying stores need to expand product categories or carefully select products. 'The second half of the year will be an important watershed for community group-buying stores, and market value will be reflected. It is expected that a large number of investment institutions will enter the group-buying store field, but local groups that cannot persist will also be reshuffled,' the aforementioned local group entrepreneur told Ling Shou. When internet giants intervene deeply, it will inevitably stir up waves in the market. Subsequently, community group-buying practitioners everywhere will gradually notice that the position of group leaders is being replaced by surrounding group-buying stores. At the same time, competition will intensify, and the cost of acquiring new customers will rise, possibly even increasing by 2 to 3 times, and pure offline retail stores will also be impacted. For brand owners, especially emerging brands, group-buying stores have greater advantages compared to traditional community group buying, as they solve the problems of offline exposure and long-term display. Cost-effective brands will gradually move from behind the scenes to the forefront, allowing consumers to establish deep brand awareness, while brand owners who are slow to react may gradually lose market share. However, this does not mean that everyone can get a piece of the pie, especially for stores that simply sell fresh produce, fruits, and other low-margin products. The operation of group-buying stores is mainly in lower-tier markets. At the same time, they mainly rely on additional services, such as integrating services in tourism, health, and other fields. After three years of twists and turns, the current group-buying business is gradually transforming, and this 'great retreat' seems far from over. Perhaps more hidden 'levels' are gradually emerging, and the road for community group buying is long and arduous.