After four years of striving for growth and scale, the only two national players in the community group buying sector, Duoduo Maicai and Meituan Youxuan, have successively entered a new phase in 2024 where profitability is the top priority. It is understood that Meituan Youxuan plans to control its full-year losses in 2024 at 10-12 billion yuan, reducing losses by 8-10 billion yuan compared to the previous year. Duoduo Maicai plans to halve its labor costs in 2024, from 4 billion yuan to around 2 billion yuan, while continuing to reduce costs in other aspects. Currently, Meituan Youxuan's operating loss margin has narrowed from over 20 percentage points to 10-15 percentage points, while Duoduo Maicai's operating loss margin has narrowed to single-digit percentages, meaning that with further cost reductions, Duoduo Maicai is expected to achieve profitability faster this year. In 2023, both platforms were still trying to increase transaction volume and further raise market share, but ultimately both failed to meet their expected growth targets. Previously, Duoduo Maicai planned to complete 250 billion yuan in transaction volume, but actually completed about 190 billion yuan; Meituan Youxuan planned to complete 200 billion yuan, but actually completed about 140 billion yuan. Both platforms have shifted their primary goal from pursuing scale to reducing losses, mainly because the market in which the community group buying industry operates no longer has significant growth. In 2023, both platforms attempted to enter more rural markets, expanding their service scope to village-level administrative units not previously covered. Meituan Youxuan even launched a summer campaign to try to catch up with Duoduo Maicai. By the end of 2023, Pinduoduo's daily order volume remained stable at 40-45 million orders, while Meituan Youxuan was at 35-40 million orders. Neither side saw significant growth, and the market landscape remained unchanged. An industry insider analyzed that the two platforms have attracted over 800 million users to use community group buying, which is equivalent to about 75% of China's internet users having used community group buying. The overall order volume is around 80 million orders, and this scale is close to the ceiling. Now, to achieve profitability, both platforms need to face a certain degree of order volume decline. During the 2024 Spring Festival, Duoduo Maicai and Meituan Youxuan experienced a 10%-20% decline in order volume in multiple regions across the country. Multiple Pinduoduo and Meituan insiders said that headquarters no longer prioritizes order volume, and the focus has shifted more to gross margin. The specific loss reduction actions of the two companies have been implemented since the fourth quarter of 2023, and will be strengthened this year. After realizing the ceiling of this business, Duoduo Maicai and Meituan Youxuan have begun to return to rationality, pursuing to make every order a profitable business. From personnel, processes to products Reduce costs as much as possible in every link When the market still had growth, the two companies had different methods for growth. Today, when they return to reducing losses, they can do similar things, reducing costs as much as possible in all aspects, from personnel, processes to products. Duoduo Maicai's loss reduction began with personnel cuts. Starting in early 2023, the heads of various provinces and regions who had previously been sent from headquarters to Duoduo Maicai were successively dispatched to Pinduoduo's overseas business Temu, and the provincial heads also took away a group of backbone employees from Maicai. Since then, the number of product and research personnel supporting Duoduo Maicai from Pinduoduo headquarters has also continued to decrease. Since the second half of last year, employees who were sent from headquarters to Duoduo Maicai in the early years have received notices that they need to find opportunities to transfer to Temu or the main site. A Pinduoduo insider said that Duoduo Maicai currently focuses on optimizing management and operation costs, including replacing Duoduo Maicai employees with fresh graduates and social recruits, and replacing employees from the main site background with locally recruited employees and Maicai management trainees, thereby controlling salary expenses and reducing labor costs. Meituan's labor cost control also faces considerable pressure. In the past few years, Meituan Youxuan insisted on heavy investment. Even after multiple rounds of adjustments, it still directly employs about 15,000 employees, more than twice the number of Duoduo Maicai. This year, Meituan plans to reduce labor costs by merging or closing some warehouses, cutting redundant positions, and improving personnel efficiency. In the past, platforms competed on core indicators such as delivery speed, category richness, and consumer experience. Now, under the primary indicator of loss reduction, these indicators can be compromised. Since the third quarter of last year, both platforms have chosen to close or merge central warehouses in some regions, while reducing commission rates for central warehouses, drivers, and pickup points. In 2023, Duoduo Maicai divided nearly 30 provinces and regions nationwide into 78 independent business units, giving local managers higher decision-making power and requiring them to be responsible for their own profits and losses and achieve profitability as soon as possible. Since then, most provinces have chosen to reduce the number of fresh products and list more high-margin products such as small home appliances, clothing, beauty products, and adult products. Meituan Youxuan's centralized management model from central to regional levels makes its product selection more cautious. Currently, Meituan Youxuan still insists on selling a certain proportion of fresh products, but has also begun to shift to larger package specifications and significantly increase high-margin daily chemical and general merchandise categories. A person close to Meituan said that Meituan Youxuan's pursuit of gross margin is implemented on every product, requiring that products listed in each category cannot be lower than the specified gross margin level. The account for a product must be calculated to every cent to ensure no loss or minimal loss. In terms of processes, Duoduo Maicai has significantly reduced positions such as quality control and inspection in multiple provinces. A Duoduo Maicai insider's understanding is: "The risk of fresh products during transportation is uncontrollable. Instead of managing the circulation process, it is more practical to directly give users a refund only." Regarding the competitor's actions, the person close to Meituan believes that Meituan Youxuan has noticed the competitor's more aggressive refund-only strategy, and may not rule out learning from Duoduo Maicai in the future to launch a more extreme refund-only policy. Since their launch, the two platforms have long retained low-priced items such as 0.1 yuan and 1 yuan purchases to seek growth. Multiple people from both companies believe that at this stage, these products have limited help in attracting new users, but instead facilitate users who specifically exploit such deals, causing significant losses to the company. Now, such products are still sold in small quantities on Duoduo Maicai, but have been basically stopped on Meituan Youxuan. In the view of the above insiders, the two companies have reached a consensus on loss reduction, with clear goals and consistent paths. The difficult fresh produce business Tuition of hundreds of billions of yuan In 2020, when the community group buying war broke out, major internet companies hoped to use this new fresh retail model to operate high-frequency fresh groceries and thereby enter offline retail. The reason community group buying was highly regarded by the market at the time was that users placed orders in advance to lock inventory, reducing product loss and inventory pressure; through centralized distribution and self-pickup, logistics costs were reduced - in this model, the platform had the opportunity to enter the most difficult-to-penetrate markets at the lowest cost. Large companies hoped to cultivate more consumers' purchasing habits, letting them first buy fresh groceries and then gradually shift to buying everything, thereby expanding their business boundaries; the capital market saw the possibility of another trillion-yuan market. At that time, other fresh retail models also expected by the capital market included the front-warehouse model represented by Miss Fresh and Dingdong Maicai, and the store-warehouse integration model represented by Hema, but these models were more suitable for first- and second-tier cities and could not cover more lower-tier cities. Time has changed: Miss Fresh failed and exited, Dingdong Maicai significantly contracted, Hema explored discount retail formats and learned from Sam's Club to transform its supply chain system. Community group buying platforms have also begun to accept reality: facing huge non-standard demand, they cannot achieve scale, nor can they transform the fresh supply chain in a short time. Large companies have paid tuition of hundreds of billions of yuan for this. Companies such as Didi, JD.com, and Alibaba have ceased operations. The main players in the market now are only Duoduo Maicai, Meituan Youxuan, and Xingsheng Youxuan, which today seek profitability by selling more daily chemical and general merchandise products. So far, the few successful fresh grocery models are Sam's Club and Costco, which actively gave up the larger consumer market, focused on pursuing a portion of consumers with more purchasing power, locked in deterministic demand, and transformed the supply chain system on this basis, achieving economies of scale. Community group buying can still sell relatively low-priced products, but this is based on the company's continuous losses. When they begin to pursue profitability and continuously increase gross margins, their product richness and low prices may not have much competitiveness compared to regional offline retailers and online e-commerce platforms. Meituan Youxuan was established less than four years ago. As of the end of 2023, more people have used it than have ordered Meituan Waimai. Waimai is Meituan's core business and has been operating for 11 years. The fresh produce field, which holds keywords such as "high frequency," "massive users," and "huge market," may never be a good business for platform companies accustomed to scale dividends. Although they are all mentally prepared to bend down to pick up coins today, this is not what they are best at.