Preface: The following content is from the speech delivered by Mr. Li Bingyuan, founder of Qugou & Youtuan, at the "FMCG2019·China FMCG Conference" hosted by New Distribution, and was compiled and published by Innovation Retail Society for the readers. My topic today is "How distributors can start community group buying from scratch," with the key word being "launch." The community group buying track is promising; a company can achieve monthly revenue of 30 million yuan within 3-4 months and earn millions in a year. I started on March 1st this year, and in less than half a year, we were fortunate to be among the Top 20 in the community group buying selection organized by New Distribution, not by scale but by the trust of our group leaders and customers.
The underlying logic for brands and distributors to enter community group buying
**China's retail has evolved through three generations. Twenty years ago, the retail format was one supply and marketing cooperative per village. In the last 20 years, supermarkets, fresh convenience stores, hypermarkets, mid-sized supermarkets, and small supermarkets emerged. In the last 2-3 years, almost every community convenience store and large supermarket has been doing community groups, and now it has become a form of convenience store + community group buying. So where did the goods come from in these three periods of retail evolution? Twenty years ago, all retail business was counter-style in supply and marketing cooperatives, with few products, and merchants rarely offered delivery services. Shop owners rode tricycles or motorcycles to towns or wholesale markets to purchase goods, which was called "sitting merchants." Later, supply and marketing cooperatives began to reform. Originally, a store had over 100 categories, but now categories are around 2000 or more. At that time, it was impossible to ride a tricycle to the city to stock up, so many brands began to develop, finding distributors and dealers in each region, penetrating into counties and townships. Many people became dealers from that time. From the first generation to the second, and from the second to new retail and community groups, retail is constantly evolving. If you are a brand, your goods were originally in wholesale markets, then you found retailers in regions. Retail has been changing, but their goods have always been provided by our group. Entering 2019, I learned that a TOP 1 group leader sold 1,146 boxes of Telunsu milk in a day. Many say community group buying is mainly fresh food, but in the top 10 platforms by sales volume, more than half of the product structure is FMCG.
Advantages for dealers in community group buying
**Many community group buying companies previously did education and training, sold shoes, or were micro-businesses. They are essentially cross-industry entrants, needing to spend heavily on building warehouses, buying vehicles, and hiring drivers. But we are brands, dealers, and retailers; these are just our infrastructure. If we dealers do community group buying, others may need to invest millions, buy vehicles, and build warehouses, but we don't. Warehouses, delivery vehicles, human resources, etc., can all be shared. Why is Xing Sheng You Xuan doing so well? The biggest reason is that they have 15,000 of their own stores. In addition to making their own store owners group leaders, they also let small shop owners become group leaders, and they develop their own B2B platform to supply goods to small shops. So when they expand group leaders, they will definitely be faster than mothers and native community group buying companies.
How can dealers start a community group buying project?
1. Mindset shift
**As brands and dealers, we have tried internet projects in the past. Starting in 2015, many friends began doing B2B and city distribution projects, but 99% are losing money. Why? A big reason is that founders and bosses lack "No. 1 position" thinking. Many companies have not established an e-commerce department, and the boss doesn't understand it, so they hire someone with some e-commerce operation experience to be in charge and hand over the matter. This is common. If you do community group buying with this mindset, I guarantee you will not do well. There is a dealer also doing community group buying. He represents Synear, with annual sales over 100 million yuan and very good network resources. He now has 300 group leaders, but only dozens of orders per day. I asked him if he did it personally. He said no, he just found a few young people to do it. I analyzed it for him and found that he indeed has 300 group leaders, but each group has fewer than 100 people, and half of the groups have only 20-30 people. That is, the boss doesn't know how much group efficiency should be generated daily, how many people a group needs to reach to start a group, and many key factors. He thinks he can rely on his resources to make it happen, but often it backfires, and 99% end in failure. If you decide to do community group buying, you can indeed find some young guys and give them some shares to do it together, but you must be the major shareholder. Also, attend more meetings, communicate with founders from other places, and understand the most important factors. For example, whether your group efficiency reaches 500 per day, whether a group starts with 100 people or 20-30 people. You must know many key factors. Young guys have no experience in finance, warehousing, and loss. They are indeed more experienced in recruiting group leaders and operations. But their foundation in finance, warehousing, and loss is weak, and handing all these matters to them will not work well. When you decide to launch a community group buying project, you must push it strongly and have the courage for a second startup. Only then can this matter succeed, and you can achieve 50% to 100% growth on existing revenue, possibly in one day.
2. Organization and supply chain
**Community group buying in the 1.0 era is a platform for selling goods, requiring a solid supply chain, which is divided into local supply chain and national supply chain. Local supply chain is where we dealers have an advantage, having been in a region for a long time. The accumulation of resources in the region is not a problem. Solving local supply chain issues is our strength, and it is the weakness of non-retailers, dealers, and wholesalers transitioning. But in the national supply chain, we are weak. Many say community group buying is a model of national operation + national supply chain. How to understand national supply chain? Our group leaders may be small shop owners. If only local supply chain products are left, they conflict with in-store products. They can sell themselves with a 20%-25% gross margin, but as group leaders selling the same products, they only get 10%-20% commission. For them, it is meaningless. So the biggest attraction is that you can get them many things not available in their stores. Where to find these things?
1. Attend industry conferences to accumulate supplier resources
**Community group buying conferences are numerous and hot. Any brand that comes to exhibit, having seen the track, shows they value it. I have seen steak and toilet paper manufacturers customize small sizes suitable for community group buying. These products, if put in groups, will definitely sell well.
2. Check the mini-programs of leading platforms daily to observe product sales
**Good community group buying leaders spend at least half an hour daily browsing what the industry's top platforms are selling, and also see what others are doing, selling, and what activities they have, and the product category ratio. Then note the categories and have your procurement purchase them.
3. Participate in or organize communities of community group buying operators to exchange and recommend hot products
**In every place, there are many companies doing community group buying. You can contact those that started at the same time as you, form a group with 3-5 founders, and daily share your best products with each other, and share your supplier resources. Then the next day or the day after, put them on the shelf and tell everyone they will be hot sellers. I have joined no fewer than 50 community group buying communities, but the most active is the group of 5 community group buying company founders in Henan. One founder said that with just one hot product a day, they can break even; with 2-5, they will definitely be profitable. Some platforms list 80 to 120 products daily, and about 100 products stand out. Bringing those back and listing them will definitely be a hit. My most important experience in community group buying is to form such a community, where everyone exchanges daily hot products and recommends suppliers. The group should not be large, just 3-5 company founders. A local community group buying company in Shangqiu, Henan, does very well in life services. They have nearly 400 group leaders, each with groups of over 300 people. In the early stage, they recruited 3 full-time staff, wore their work clothes, and cleaned for free for Top group leaders and VIP users. This spread very fast, so soon the whole Shangqiu knew they provided such services, and it also enhanced brand reputation. Now the service has started charging, and it is not limited to cleaning, including confinement nannies, babysitters, etc. They did not outsource to agencies; they do it all themselves. The life services industry in Shangqiu has an annual operating value of 1 billion yuan. A community group buying company doing housekeeping services, with its deep community network, multiple transactions with customers, and numerous distribution group leaders, has advantages that any housekeeping company lacks.
Recruiting group leaders
**New retail is nothing but the reshaping of people, goods, and places. Once goods are solved, who sells for us? It is the group leaders. At this time, you must combine your own advantages. If you are a brand, you will have many dealers below, and dealers will have many salesmen. You must elevate the recruitment of group leaders to the company's strategic height, hold meetings, and train all salesmen. Give awards to salesmen who recruit many group leaders, and punish those who are not proactive. Also, set up dedicated personnel. Our salesmen are in the FMCG industry and are not familiar with internet recruitment and training; they only have good relationships with small shop owners. You must have dedicated personnel to process registration information again, and provide 1-2 days of training before they start. Small shop owners lack operational thinking; if they start groups without training, the results will be very poor. When doing community group buying, you must do it batch by batch. Initially, we found self-media or used resources to open dozens of groups at once, without considering which community to do first. We started with 20 groups, covering 100-200 households, and due to traffic issues, revenue was not particularly high. We found that if the revenue of the first 20 groups is not high, it affects the morale of group leaders. Before you start community group buying, you must research your location to see which communities have the most residents and the strongest spending power. You must determine the first batch of target communities and have a list of communities to conquer. My father is a dealer, so I understand the pain of dealers too well. Upstream manufacturers constantly set tasks for dealers; if you don't complete them, they take away your distribution rights and give them to others. Often, you need to pay first and receive goods later, and sometimes they don't even ship; they deliver when they have stock. Dealers supply supermarkets daily with goods first and payment later, with at least one month of payment terms, and there are fees for barcodes, shelf placement, display, etc. So dealers have a bitter, difficult, enduring, and heavy job. Community group buying is also bitter, difficult, enduring, and heavy, just like FMCG.
So we must break free from the oppression of upstream manufacturers and downstream big stores and become the distributors of the profit pie.
The evolution of community group buying 2.0
Community group buying 1.0 is about selling goods, around the kitchen, dining room, living room, bedroom, and bathroom. 2.0 is selling goods + local life + life services. This concept is not new, but many teachers have not explained it thoroughly or only proposed the concept without practice, and we happened to practice it. On July 13, we held our first group leader meeting, and I told them I would double their income within a month. At that time, I promised to double their income, but in the past month, their income has not just doubled; it has increased 5 or 10 times, far beyond my imagination. This is a local life project we launched. On the far left, Meituan sales are 0, because Meituan is a proactive consumption process. If I want to take my child out on the weekend, I go to Meituan to see if there are any activities. But we are passive consumption. Whether you want to go or not, our group leaders and customers are forwarding, and they get commissions for forwarding. They post various Douyin videos to attract you, like "September is coming, hurry up and bring your kids." In the end, a project with 0 consumption on Meituan for 90 days sold 2,000 tickets here at 39.9 yuan for two hours. We are all dealers and brands, working hard. Can you say you are making money lying down? Many community group buying group leaders earn 5,000-6,000 yuan a month, with a commission of about 10 points. So on average, they need to sell 2,000 yuan of goods a day, and they need to receive, deliver, and pack, which is very hard work, earning 200 yuan a day. From 9 a.m. to 11 p.m., they are happy every day because they are small shop owners. They do make money every year, but it is very painful money. This morning, a guest speaker said that community group buying is a magical traffic pool. Previously, a bottle of drink was sold to 1 billion people. Now, in this era, you repeatedly sell everything in your traffic pool to one person. I believe community group buying is the foundation for building a local online business empire. If you have started, or are already doing it, I hope you can endure. Yesterday, the founder of a social e-commerce company asked me, "Do you make money?" I said, "Slightly profitable, but very hard. Sometimes I only sleep 2-3 hours a day." He asked, "Why do you still do it?" I said, "Many dirty, bitter, and tiring things need to be done. We are not sentimental; we see the value this business model brings to our future. If you are doing it now, you must persist and endure. If you haven't started, I think this is a very good entrepreneurial opportunity." Because in the future, community group buying will definitely change consumers' consumption habits and become an irreplaceable lifestyle.