The following is the speech delivered by Luo Ming, CEO of Sudongpo, at the 'FMCG2019 China FMCG Conference' hosted by New Distribution, compiled and released by Innovation Retail Society for readers. Sudongpo was founded in 2017, specializing in fresh supply chain and community group buying system management. I often joke that Sudongpo is like a grand scholar, accompanying the crown prince in his studies. All of you here doing community group buying are the crown princes, and we have accompanied many crown princes in their running. Today, from the most neutral standpoint and the most god's-eye perspective, I will share with you what community group buying looks like as seen by Sudongpo. Just now, Mr. Fang mentioned that he operates in a small city, making only 200 million a year, which is very profitable and enjoyable. But many people still wonder whether community group buying is at the endgame or halftime. Today, Sudongpo will clear up the confusion. How is community group buying doing now? From the hype at the beginning of this year to the current lack of major media reports on community group buying, the focus has shifted to community sub-warehouses and community stores. The iron triangle of community group buying—whether the business succeeds depends on three points: price, supply chain, and community resources. In China, an enterprise that masters any one of these three advantages can survive and thrive in the community group buying track. Among the over 1,000 community group buying clients on Sudongpo's backend, there are three types of enterprises that have survived. Many enterprises that started out of impulse or dreams may not be doing well now, but those that can master these three resources are doing extremely well. 1. Enterprises with community resources. Sudongpo is currently doing very well with major newspaper groups, the most representative being Southern Newspaper Group, which is the largest media resource in China except for central media. Southern Newspaper's customer numbers and daily transaction volume are astonishing. Not only Southern Newspaper, but many other newspaper groups and system-based clients are doing very well. Later, we analyzed why they can do so well. Because they occupy a large resource: group leaders and delivery personnel are free. Why free? I remember at the last New Distribution Chengdu conference, someone asked Mr. Tang this question: As traditional enterprises, media, and newspapers that don't understand internet genes or financing, can they do community group buying well? The answer he got was negative: don't do it, it's very difficult, better to join or use similar methods. But now it's proven that the ones surviving best are the media/newspaper groups with community resources. They have certain government requirements to maintain a certain number of delivery personnel and jobs. With this batch of newspaper delivery personnel, they can support the community group buying business, and they have many supply chain and other resources behind them, at least not weak. 2. Enterprises with supply chain advantages. Many enterprises with deep supply chain advantages are doing very well. In Chongqing, there is an enterprise that, at its peak, handles over 10,000 orders a day, focusing only on a few seafood categories. They control the first-line seafood resources and use seafood to support community group buying. Such clients are not few. 3. Lower-tier cities. As just mentioned, in Jining, Shandong, and Xianyang, Shaanxi, these second-, third-, fourth-, and fifth-tier cities are developing very well. If you are considering community group buying, you might think about this approach. You don't need to make 100 million a month; you can make 5 million or 10 million a month, and earn 3-5 million a year. Why not? This is the real situation Sudongpo sees in community group buying so far. It's not so optimistic that everyone becomes rich, nor so pessimistic that no one is known. It's like a hurricane on the African savannah blowing in all the clouds and rain, but when the wind passes, are there no creatures left? No, some migrated to another city, but some, like the African lungfish, buried themselves in the soil and survived. Front Warehouse: A New Trend in Community Group Buying There is an enterprise in Anhui called Dailuobo, which previously did community group buying, and many other enterprises also started with community group buying. But up to now, they have built their own community front warehouses. Many people may not understand the difference between opening a store, opening a warehouse, front warehouse, and community group buying. I compared a front warehouse model with previous business models. Actually, front warehouses are very hot now, and the one everyone can think of is Dailuobo. JD Daojia (JD's fresh grocery delivery) raised over a billion in Shanghai, and many store-opening enterprises like Yipin Fresh have received Tencent investment. This is community group buying 2.0. How to view this? In 2014, capital was crazy, and everything revived. At that time, in Beijing, there were community stores like Linlinyi and Aixianfeng, which raised over $50 million in 2014. You may have some understanding of front warehouses, but perhaps you've only heard the concept without knowing what it is. How did the front warehouse come about? An indispensable part of community group buying is the group leader. Pupun Fresh is developing very well, with 15,000 franchised stores nationwide, and the store managers are the group leaders. Without such strong control, the biggest headache for most people doing community group buying is the group leader—they cannot truly control them. Many enterprises propose further ideas: if the group leader is not a community member or a stay-at-home mom, could it be their own employee? At first, this proposition didn't exist because individual employees have limited capabilities. Later, they thought of another way: if they make the group leader a super group leader, can they sustain income? Later, an individual could make 1 million a month, so if 10 people, could they make 20 million? Gradually, people found that by placing front warehouses in communities and connecting them to stores, expanding the front warehouse area to 300-900 square meters or more, expanding categories from 50-100 to 5,000 SKUs, and expanding marketing—for example, spending 5 million in sales expenses for a 3-kilometer radius—they could achieve results. In Wuhan, I saw Dingdong Maicai's approach: they grab all surrounding customers, resulting in short-term low-density orders. A community group buying front warehouse of about 500 square meters can cover a 3-kilometer radius, handling nearly 2,000 orders a day, becoming a super group leader. And super group leaders can be replicated infinitely, with very high income, possibly higher than all those doing community group buying themselves. This model has become what we now call the front warehouse. For distributor friends here, if you want to find distribution channels, you might look for many front warehouse players. Their product-moving ability is the same as community group buying, and some even stronger, especially in poultry, eggs, and dairy. Why did the same tactics in 2014—like Linlinyi and Aixianfeng—fail, but now succeed? The success of the business model is related to current changes. Five years ago, although mobile phones were widespread, usage habits were not. The main consumer groups of community group buying—housewives and middle-aged and elderly—had not risen; they only used phones for calls. But now, all major household consumers under 60 use Pinduoduo and place orders via mobile, making front warehouses viable. Previously, with the same cost, you might get 500 orders a day, but now you can get 5,000. Discussing these concepts involves different models. Sudongpo mainly provides software services for community group buying, fresh food delivery, and fresh food stores, with unique insights into commercial store analysis. We might be the group that understands business models best. Why? Like 'feeders,' we know what donkeys like to eat, what horses like, and what mules like, so we naturally know the essential differences behind them. Like on the African savannah, even meat-eating animals like lions, leopards, and hyenas have completely different survival modes. The business logic and sales curves behind community group buying, front warehouses, and store-warehouse integration are entirely different. The main differences lie in three points: 1. More. Diversity of SKU categories. Community group buying cannot have too many SKUs, not exceeding 300-500, so group buying emphasizes low-price bestsellers. The most categories are undoubtedly in front warehouses, which have far more than stores or supermarkets because supermarkets must consider sales curves, cleaning, and category placement. 2. Faster. The fastest is definitely the front warehouse, because to meet the daily sales of 2,000 orders, they must equip many delivery personnel, who may deliver 10-20 orders at a time, delivering to homes. Currently, front warehouses are challenging the cost limits of the home delivery model. The slowest is definitely community group buying, where goods shipped today arrive at the earliest tomorrow, possibly the day after. 3. Cheaper. The cheapest is community group buying; the most expensive is in-store. Now ordering takeout is not cheap; initially, Meituan Waimai offered free meals. Distributors should also note this when looking for channels: the cost structure and premium methods differ across channels. Those doing community group buying or competing with front warehouses or store-warehouse integration should not use their weaknesses to attack others' strengths. New Exploration of Community Services Recently, I'm not just selling software but also sharing many new insights and ideas. The community service market space has not been fully opened. Many enterprises facing development bottlenecks or difficulties can think backward and broadly: can they push products to the community? What are the community's service needs? What hard needs can truly be embedded? Let me give some examples. The highest frequency community service is walking kids and square dancing. Kids need walking several times a day, and square dancing is very frequent—once in the morning and once in the evening—with extremely high stickiness. Second are express delivery, moving, and cleaning services. The most important is garbage recycling. I don't know how garbage recycling is doing in Shanghai; I just arrived and found it hasn't been promoted yet. When it truly gets promoted, what impact will it have on communities? That's another topic for deep thought. Today, I'll share these points: First, community group buying has survived, just in corners invisible to people, like on the African savannah where rain comes and goes, leaving animals adapted to the dry season. Second, a large group of animals have migrated, doing community group buying 2.0, front warehouses, and other businesses. Third, what will community-based profitability and business develop into in the future? I hope to have more exchanges with everyone and see a farther future together.