Click to read the original article for details. In 2019, the community group buying model continued to develop rapidly nationwide: • Strong financing capability: Even during the capital winter, a number of platforms continuously secured large-scale financing. • High growth in performance: Several leading platforms quickly surpassed 100 million yuan in monthly transaction volume. • Rapid horizontal expansion: Traditional retail industries also adopted community group buying as a tool to activate online self-pickup services at physical stores. • Deep market penetration: From fiercely competitive second- and third-tier cities to fourth-, fifth-, and sixth-tier villages and counties, numerous small and medium-sized platforms emerged, activating the blue ocean of O2O. • Supply chain attention: From fresh produce origins to FMCG giants, supply chain leaders are closely monitoring whether this channel can bring new growth and are actively exploring collaborations. Behind such rapid development, will it end up like the bike-sharing and unattended shelf models, driven by capital into a frenzy and then collapsing? How can the entrepreneurial platforms caught in the whirlpool stand out in fierce competition and become the ultimate winners? Three months later, I returned to Changsha to investigate the frontline data and actual operations of platforms, to see where the current model's details and core competitiveness lie. All martial arts under heaven are invincible only with speed, but speed must have its reasons. How does a community group buying platform grow rapidly? It can be divided into three stages: 1. Building a model city: validating the business model and team capabilities. The current business model of community group buying is not complex and has no high barriers, so the initial difficulty lies in user acceptance, community promotion and operations, and supply chain integration. At this stage, the genes of each platform basically determine their development direction. Kaola Select: Its genes come from chain convenience stores + B2B supply chain. Group leaders are mainly store owners, products focus on vegetables, and city expansion follows a direct operation + franchise model (city partners). The supply chain uses a matching model, and in the mid-to-late stages, it develops large single-product self-purchasing + matching models based on demand. 2. National replication: quickly capture the market, achieve economies of scale, and build competitive barriers. National replication is a typical feature of internet projects, driven by capital to pursue the fastest speed to become a unicorn. Whoever runs ahead has the opportunity to be recognized by more capital, and with the power of capital, achieve the survival of the fittest. This is the typical approach of capital-driven internet models. Although previous hot tracks like unattended shelves and bike-sharing failed one after another, the capital-driven model remains the mainstream in track competition. There is bound to be a battle between national platforms and local platforms. With many players and capital entering, will the future be one winner takes all, or will it be divided among many? Who can emerge? VCs are betting, and entrepreneurs are fighting. From the model framework to details, those who survive and reach the top rely on every important choice and persistence. 3. Deepening supply chain, strengthening operations and profitability. Regardless of order scale, to achieve rapid profitability, excellent supply chain capabilities are essential. Pinduoduo's "Pin Brand," Suning's "Pin Base," and Meicai's "Direct Sourcing from Origins" have begun large-scale development. Whether it's real estate procurement customization, large-scale national networks, or city distribution with multi-temperature logistics, a strong logistics system must support the flow of goods and information. Analysis of Core Capabilities of Community Group Buying Platforms I. Competitiveness: Order and Disorder in Enclosure Heavy vs. Light Supply Chain Models: Self-operated goods, matching transactions, and SaaS empowerment models are the current mainstream forms of community group buying platforms. Of course, due to the self-pickup pre-sale nature, the supply chain side is naturally lighter. Both light and heavy have their own logic, and at this stage, customer acquisition, product selection, and operations are more important. Excluding warehouse management and sorting, in terms of capital flow and information flow alone, the pre-sale model puts less pressure on supply chain capital advances. The main issue lies in pricing negotiation and games. Whether direct operation or matching, at this stage, platforms are essentially relatively light trading models. Viewpoint: There is no essential difference in models; the future depends on the subsequent development of the supply chain. National Expansion Models: Direct operation, franchising, and city partners are common methods. This stage is also the most competitive, and the top three in the industry and their order are extremely important. Xingsheng Youxuan and Niwoniwa both chose direct operation with self-built teams to expand nationally. Meijia Youxiang even began acquiring local platforms. Kaola Select was the first to propose the "City Heroes Alliance," targeting franchisees at traditional FMCG distributors in various cities, because these distributors have early advantages in business flow, logistics, and store user resources. They emphasized empowerment and partnership models in their promotion to encourage local enterprises interested in community group buying to choose cooperation rather than competition. (Community group buying seems to have no threshold, but in reality, it places great importance on operational skills and methodologies. The establishment and output of this capability itself is enormous value.) Platform offline operations, especially the model of community group buying that serves surrounding users through LBS self-pickup points around a residential area, determine the difficulty of offline management. Leveraging quality local partners is a good way to quickly establish a unified front. At the same time, many local platforms are also trying to unite and jointly build supply chain systems to enhance their competitiveness against external platforms. Viewpoint: Franchising is definitely faster and lighter, but post-franchise operational management is the key to survival. Pre-sale Self-pickup vs. Delivery to Home: For e-commerce platforms also focused on fresh produce, in 2019, the 1-hour delivery model centered on front warehouses and the community group model centered on LBS self-pickup points did not show intense collision or competition. This is largely due to customer acquisition costs and front warehouse and delivery costs; very few platforms dare to attempt national fresh produce delivery. A few leading platforms are concentrated in first- and second-tier cities. Alibaba's fresh produce delivery business is mainly placed in the Taoxianda module of the mobile Taobao app. Currently, whether in market overlap or user acquisition scenarios, the users of community group buying have low overlap with current fresh produce delivery. Of course, due to the cost advantages of the model, community group buying participants and development speed are far faster than delivery platforms. Currently, the penetration rate of the entire fresh produce e-commerce market is less than 3%, so more is about cutting into the huge traditional stock. Consumer habits are still slowly forming, and platforms have not yet reached the point of direct confrontation. More is about jointly creating new consumption habits. Viewpoint: Trillion-yuan fresh produce, the new economy is gradually developing, and the industrialization of agricultural products still has a long way to go. High-tier vs. Low-tier City Competition: Fresh produce 1-hour delivery platforms mostly choose first- and second-tier cities like Beijing and Shanghai. Community group buying originating from Changsha mostly chooses second- and third-tier cities. At the same time, they begin to rapidly radiate to surrounding counties and towns with city warehouses as the core. The supply chain delivery radius of a single warehouse further increases. Following Pinduoduo, they again expand into markets outside the Fifth Ring Road, with the same traffic logic but different category and delivery logic. This means that being able to penetrate low-tier markets or even rural markets at controllable costs, as a retail model with online ordering and offline point delivery, will generate vigorous vitality. Kaola Select case: City central warehouse – county warehouse – rural group. Data: Currently, the Hunan central warehouse is in Changsha, serving 21 cities and counties, with 5,000 city groups and 1,100 county/village groups (18% of total group leaders), daily orders around 100,000, and average county group order value of 396 yuan, slightly higher than city groups. This supports that the rural market is the biggest increment. Viewpoint: The development potential of community group buying lies in low-tier markets. Category and Price Competition: Fresh produce as a traffic driver is the entry point for all community group buying categories. Currently, it is effective. But the problem is over-reliance on fresh produce for traffic and lack of multi-category profitability. It is necessary to use low-margin, high-frequency products to drive high-margin, low-frequency products. For example, a platform's bi-weekly seafood group has consistently good sales. The category competition between each community group buying platform lies in who can quickly profile the community users and find the most suitable categories for that community. "Thousand stores (self-pickup points), thousand faces" will play a core competitiveness with long-term strategic significance in platform competition. Price competition has always been the most brutal, and community group buying itself enters with price as the entry point, while also facing competitors' price cuts. Recently in the Changsha market, a leading platform launched a price war, setting the price of eggs across the city uniformly at 6.9 yuan per jin, directly impacting the retail price of eggs throughout Changsha. A smart approach is to select categories and adjust prices slightly based on the attributes of each community, creating flexible and controllable dynamic pricing. Viewpoint: Category optimization is a technical task based on big data. Group Leader Competition (Key): Recently, media have reported in depth on the covert battles among platforms for group leaders, with tit-for-tat and various spy games, leaving many readers sighing. Compared to traditional offline channel competition, this is really a minor matter. In the early years, competing brands fought fiercely for store placement on a street in a small city, which could be called a business war. Now, it's still various "iron armies" each showing their skills. After many local small platforms gave up operations, their group leaders continued to operate, using traditional relay methods to continue selling in groups, showing tenacious vitality. The group leader competition is mainly divided into three stages:
Early stage – Enclosure to compete for group leaders; quantity is most important.
Operation stage – Cultivation and maintenance; quality is most important.
Upgrade stage – AI and integration; iteration and innovation are most important. Early stage: The early competition for group leaders is mainly reflected in cooperation models and commission ratios:
- Employee model: Group leaders are directly employed, with strengthened management, using a base salary + sales commission model.
- Cooperation model: Store owners or stay-at-home moms, no base salary, only commission. Most platforms choose the lighter cooperation model. Both sides have less pressure, but stickiness is also poor. Commission ratio: This is the most important part of recruiting group leaders. Currently, most platforms set it at 10%–12%. Some platforms pursuing speed once recruited group leaders with higher commissions, which was like drinking poison to quench thirst, and soon ran out of capital. Operation stage: Reputation determines stickiness, and organization determines combat effectiveness. On one hand, it's the platform's operational capability; on the other, it's the cultivation and maintenance of group leaders. Whether stay-at-home moms or store owners, the core role of group leaders is reflected in:
Pulling effective users into groups
Publishing products and operating
Group after-sales management
Self-pickup point operations
The process from recruiting to cultivating an excellent group leader depends on a platform's organizational and operational capabilities. We interviewed the operations officer of Kaola Select to see what an excellent group leader looks like in Changsha: 1. What kind of person is the best group leader? Three conditions:
First, average monthly order volume of about 4,500 orders.
Second, return/after-sales rate of 1%.
Third, can continuously provide feedback to the platform to promote its growth. 2. How long is the cultivation cycle for a group leader? It takes about 3 months. 3. What can an excellent group leader achieve in sales and commission? Sales of 45,000 yuan/month, with commission of about 6,000 yuan. 4. How many groups can one operations staff manage? One operations staff can manage about 150 group leaders. 5. How to retain such star group leaders? Front-end commission guarantee, worry-free after-sales, delivery time guarantee, product quality guarantee, quick response to group leaders' timely needs, and back-end increase in offline interaction with group leaders (adding face-to-face social contact). Upgrade stage: With the continuous development of AI tools like community assistant, community operations will be further handed over to AI. Group leaders' group creation and daily operations will become non-routine work. During this period, the entire community group buying model will have evolved into a new IoT era. With the construction of unmanned delivery systems, the boundary between self-pickup and delivery will become more blurred. Group leaders' responsibilities will return more to social interaction and service, and offline physical stores and online virtual stores will merge. The combination of technology and humanity will usher in a true era of personalized consumption. Competition in community group buying is reflected in group leader commission ratios, hot product pricing, franchise fees, etc. Summary of Rapidly Developing Community Group Buying Currently, the monthly GMV of leading community group buying platforms has exceeded 100 million yuan. The key is that the growth rate is not just for one platform, but multiple platforms are seeing rapid growth in users and transaction volume. This shows the huge potential of the overall market. Kaola Select development data: Number of cities: 25 cities and counties in total (15 in Hunan, including 6 county-level cities; 2 in Shanxi; 2 in Jiangxi)
Number of groups: about 6,100
Order volume: daily average of 50,000 orders II. Preventing Diseconomies of Scale: How Can Community Group Buying Platforms Develop Healthily? Many local small community group buying platforms were initially profitable. Then local platforms began to compete. Then national platforms arrived. Fierce price wars began. Then profitable platforms started losing money. 1. Return to the essence of business: whether direct operation or franchise, whether group leaders are stay-at-home moms or store owners, the profitability of each LBS group is the key to rapid and healthy development. For each community group, as a virtual store, core data such as "sales per square meter" and "daily sales" are the most critical health indicators. I interviewed operations staff at Kaola Select, and based on this premise, here are the specific operational data for the past month (data source: interview with the company):
Average group users: 338 people
Average daily sales per group: 2,500 yuan
Average daily orders per group: 96 orders
Average order value per group: 25.5 yuan
Comprehensive gross margin: 25%
Fresh produce share: 50-60%
Group leader commission ratio: 10-11%
Average monthly income of group leaders: 6,000 yuan Viewpoint: A healthy development model requires not only capital support to achieve rapid growth and reduce marginal costs. It must also have strong operational organizational capabilities, technical capabilities, and supply chain organization and delivery capabilities to face fierce market competition. It also needs down-to-earth, steady progress, achieving self-sufficiency during the capital winter, balancing survival and development. This is also why a batch of enterprises with retail and supply chain genes have rapidly developed in this community group buying trend. 2. While deepening the current model's scale, actively explore the second growth curve. In categories: Direct sourcing from origins for vegetables and fruits, even exclusive sales and customization, is the future, but not the only path. Each platform will eventually find its own label, and channel branding is the future. In points: The value of excellent self-pickup points will appreciate over time, and new functions and values can be explored on this basis. In models: Pre-sale and delivery are both centered on consumer habits, essentially tapping the traffic value of social commerce. Different from the immediate consumption of physical stores, pre-sale self-pickup should explore the sales capability of large-pack products. At the end To realize the dream of the third pole of retail, it is necessary to combine online + offline + community three-dimensional space for new marketing, and through product IP linking to consumers, achieve a fully digitalized industry chain transformation, thereby improving overall industry efficiency. Ultimately, bring consumers better products and shopping experiences. In 2019, entertainment and consumption remain the most resilient tracks, with new opportunities and challenges coexisting. To find a suitable development model, one must have a clear and accurate understanding of the environment and oneself. Wang Jun: Famous new retail expert. Chief retail analysis expert and special columnist for New Distribution. Previously worked at: Quanshi Convenience Group, HNA Zhanghe Cloud Warehouse, and Radio and Television Group. Has rich practical experience in FMCG supply chain and new retail channels. Has in-depth research on innovative fields such as community group buying, unattended retail, and IP commercialization. Extended reading from the author's community group buying column: New Distribution will hold the 2019 (5th) FMCG + Internet Conference during the Chengdu Spring Sugar and Wine Fair from March 15-18. This conference will focus on the topic of "Breaking the Game" , with in-depth discussions with many brand owners, supply chain service providers, distributors, retailers, and others. Compared to previous conferences, this summit will be fully upgraded. In addition to original topics like channel innovation, city distribution logistics, and distributor transformation , it adds multiple parallel forums on new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail . Through three days of ten high-density, high-quality expert sharing and exchanges, we believe every brand owner and distributor can learn the latest business models, expert opinions, and practical methods, finding new tools and methods to break the game in 2019 and return to a high-growth track. Review of previous conferences -END-