As regulations are gradually implemented, it remains uncertain whether community group buying companies can develop in a more standardized manner. "Let the bullet fly a little longer," a community group buying practitioner said meaningfully.
On Bayi Road in Changsha, a 2km street, opening the mini-program of any community group buying company shows a dense array of pickup points.
Whether it's a convenience store, print shop, flower shop, hotel, or even a restaurant or barbershop, their owners have been recruited by companies like Meituan, Didi, Pinduoduo, and Xingsheng Youxuan. These owners often serve as group leaders for multiple platforms, responsible for distributing platform products to users.
Changsha is the home base of Xingsheng Youxuan, the pioneer of community group buying. As community group buying became a trend, internet giants entered the fray, sparking a fierce offensive and defensive battle in cities like Changsha.
But unlike the sought-after group leaders, the vegetable vendors in Changsha feel left out. During Sina Tech's visits to wet markets, multiple stall owners said that the low prices of community group buying platforms, influenced by subsidy wars, have significantly reduced foot traffic, and business is getting worse day by day.
Group leaders are not monolithic either. As the number of group leaders increases, the daily orders and commissions for each leader become extremely limited. Especially owners of convenience stores, fruit shops, and other stores directly related to community group buying categories have found that while becoming a group leader can bring some foot traffic and increase sales, the lower prices on community group buying platforms make it impossible to sell their own similar products.
Community group buying was originally created by Xingsheng Youxuan to revitalize its convenience stores, but with the crazy subsidies from giants, it is now cannibalizing these convenience store owners and even vegetable vendors. Recently, the State Administration for Market Regulation intervened, pointing out prominent issues such as low-price dumping and the resulting squeeze on employment, and formulated nine regulations prohibiting low-price dumping and unfair competition.
The development of community group buying is at a subtle turning point.
-01-
Why Giants Are in Chaos
When it comes to community group buying, one must mention Xingsheng Youxuan, regarded as the pioneer. Founded in 2014, it created the community group buying model in 2016.
In fact, Xingsheng Youxuan's birth is inseparable from Furong Xingsheng, the largest local convenience store chain in Hunan. Its founder, Yue Lihua, organized numerous mom-and-pop stores through franchising, providing brand endorsement and supply chain services. However, with the rise of e-commerce, these convenience stores' business was impacted.
The early prototype of community group buying was that Furong Xingsheng store owners operated WeChat groups to collect users' vegetable purchase needs, which were then centrally purchased through Xingsheng Youxuan, delivered to the stores, and picked up by users. This way, Furong Xingsheng store owners could earn extra commissions alongside their convenience store business, increasing their income.
During the pandemic, when going out to buy vegetables was inconvenient, this model became hugely popular. An insider said that Xingsheng Youxuan's annual GMV reached 10 billion yuan in 2019, and it was expected to reach 40 billion yuan in 2020. Although not comparable to the trillion-yuan GMV of the three major e-commerce giants Alibaba, JD.com, and Pinduoduo, its high-growth business model began to attract the attention of giants, and many internet companies sent teams to cities like Changsha and Wuhan, where Xingsheng Youxuan had large order volumes, for research.
In June this year, Didi launched Chengxin Youxuan, with Didi Senior Vice President Chen Ting as CEO; in July, Meituan announced the establishment of an优选 business unit, led by Senior Vice President and S-team member Chen Liang; in August, Pinduoduo began piloting Duoduo Maicai; subsequently, e-commerce giants Alibaba and JD.com also entered the fray.
For Didi, community group buying is a new track, and the high-frequency purchase of fresh produce can contribute significantly to its "0188" goal; for Meituan, it is an important part of its same-city retail; for Alibaba, JD.com, and Pinduoduo, besides acquiring lower-tier market users and traffic at low cost, it is also a defense against emerging e-commerce models. Sina Tech found that in addition to conventional categories like vegetables, fruits, and daily necessities, Xingsheng Youxuan also sells large appliances such as refrigerators, washing machines, and air conditioners, and even ventures into clothing, home textiles, quality furniture, and alcohol.
An internal employee of Xingsheng Youxuan told Sina Tech that although the outside world calls it a community group buying company, internally it has always positioned itself as a community e-commerce company. This may also be the reason for the tension among the three major e-commerce giants. At the current growth rate, Xingsheng Youxuan may compete head-on with Taobao, JD.com, and Pinduoduo in more categories in the future.
Similar stories have already played out with Taobao and JD.com. Pinduoduo rose rapidly on the concept of social e-commerce, forcing Alibaba and JD.com to launch competing products like Taobao Deals and JD Joy.
-02-
Not Enough Group Leaders
Although the giants have different goals, they all initially copied Xingsheng Youxuan's model: orders can be placed via mini-program before 23:00 daily, the platform centrally purchases and sorts, delivers to stores after 16:00 the next day, and users pick up at the stores.
Once the model was running, internet companies like Didi, Meituan, and Pinduoduo began replicating it in multiple cities across the country, especially launching offensives in Changsha, Xingsheng Youxuan's home base.
To enter a city, BD (business development) and group leaders become the foundation for building capabilities. In the early stage, BD is mainly responsible for recruiting group leaders. Didi's Chengxin Youxuan recruitment information in Changsha offered a no-responsibility base salary of 5,000 yuan plus commission, with a comprehensive salary of 8,000-10,000+ and five insurances and one fund, which is quite generous locally.
Group leaders are a key part of the delivery end and have become targets for BD. Multiple platforms have advertised slogans like "easy money, monthly income over 10,000." One group leader said that early on, small and medium platforms offered group leaders a commission of 5% of sales, but later internet companies significantly increased the commission rates. Didi's Chengxin Youxuan advertised 10%, while Meituan Youxuan directly claimed 10-15%.
BDs, eager to earn commissions, also vigorously recruited group leaders, leading to a phenomenon where one store owner serves as a group leader for multiple platforms. For example, a Baishi Neighborhood Station visited by Sina Tech operates as a Cainiao Station + neighborhood convenience store, and is also a pickup point for multiple platforms including Duoduo Maicai, Chengxin Youxuan, Xingsheng Youxuan, Meituan Youxuan, and Shihuituan.
To increase pickup points as much as possible, all kinds of stores become targets for BD expansion. Xiaoyu, a flower shop owner, although unrelated to vegetables and fruits, was also recruited by Didi and Meituan BDs as a pickup point.
She told Sina Tech that internet companies are burning money on community group buying without regard for cost, often running promotions like 0.01 yuan for fruits and vegetables for new users. During intense competition, if users find flaws in the fruits they bought, they can immediately apply for a refund, and sometimes don't even need to return the fruit.
However, as pickup points proliferate, with stores along the entire street becoming pickup points, orders are highly dispersed, and each store gets very few orders daily. "On average, I earn only about 40 yuan a month in commissions," she complained. "There are too few external orders, so later I started placing orders myself. The stuff is indeed cheap, and I basically don't go to the supermarket anymore. Now my commissions are basically from my own purchases."
Wang Cheng runs a small restaurant. Recently, a BD from Didi's Chengxin Youxuan approached him, and his restaurant became a pickup point. "Actually, I didn't really want to be a group leader because I have to focus on my restaurant business," Wang Cheng said, but the BD told him that group leaders don't need to manage much, and even if items are lost, they aren't responsible.
"Income is based on commission per order. They also told me about the reward policy, but I didn't pay much attention. They even helped me download the app. Anyway, even if there are no orders, they don't have to pay me, so they don't lose out," Wang Cheng said. He added that several neighboring restaurants were also recruited as pickup points.
This model of merely pursuing the number of group leaders has begun to show drawbacks. First, it disperses orders among group leaders, resulting in low income for each, making it hard to maintain loyalty to the platform. Second, some internet platforms overemphasize the scale of pickup points and orders while neglecting the construction of warehousing and logistics capabilities, leading to insufficient fulfillment capacity.
Generally, the warehousing and logistics system of community group buying platforms follows a model of central warehouse + grid warehouse + pickup points. If they excessively pursue order scale through subsidies without matching warehousing and logistics capabilities, it will greatly harm the user experience.
For example, during this year's Double 11, many internet companies ran low-price promotions, and order volumes hit new highs. At the same time, complaints about delivery speed and product quality were rampant.
One user complained about encountering delayed delivery on Meituan Youxuan, where the group leader said the driver hadn't delivered yet; another bought moldy fruit on Chengxin Youxuan, and when contacting the group leader, the leader even said they didn't know how to process a refund.
-03-
Vegetable Vendors and Mom-and-Pop Stores Complain
While community group buying companies boast record order volumes, another group is suffering the consequences. Ye Guofu, founder and CEO of Miniso, recently bluntly stated that if community group buying continues for another year or two, supermarkets over 500 square meters will be finished.
Sina Tech visited multiple wet markets in Changsha, and vendors' businesses were bleak. At Jinzhao Shiji Market, it was already noon, and only one customer came to the vegetable stall to pick vegetables. The owners of aquatic and meat stalls had almost nothing to do and even dozed off in front of their stalls.
At the slightly larger Shuguang Agricultural Market, foot traffic was similarly sparse. A female vendor in her late fifties said that even during residents' off-work hours, there were few customers. "Many people buy groceries online; it's very cheap. Some young people buy groceries for the whole family at once, and fewer and fewer elderly people come to the wet market," she said. She added that restaurants don't buy from her but go to larger wholesale markets where prices are cheaper.
"The monthly stall fee is over a thousand yuan, and renting a storefront is even more expensive. I can barely make any money in a month. I'm old and can't do anything else, so I just keep doing this," she said helplessly.
In fact, it's not just vegetable vendors affected by the community group buying subsidy war; some convenience stores, even those serving as pickup points, are also impacted.
Xinjiayi, a local convenience store chain in Hunan, has had to post posters with QR codes for coupons in stores due to the price war. Another store, Meiyijia, directly piled discounted products at the entrance to attract customers. Worse, Sina Tech witnessed a supermarket that, due to unpaid warehouse rent, was ordered by the neighborhood committee to stop using the warehouse and move out within a deadline.
Convenience store owners who became group leaders have mixed feelings.
Aunt Wang runs a food convenience store and is a group leader for Didi, Meituan, and Xingsheng Youxuan. Although the store is near a bustling street, it has almost no customers. She bluntly said, "Small stores are being killed by community group buying!" So why become a group leader? Facing Sina Tech's question, she said helplessly, "Because there's no offline business anyway. When users come to pick up, they see that the store's items are more expensive than online, so at most they buy a bottle of water, which doesn't bring much income."
A mother who runs a franchised Furong Xingsheng convenience store told Sina Tech that after joining, the supply channels are more guaranteed and after-sales service is good. But due to too many community group buying platforms, offline stores are struggling. "They're going to be killed by online platforms," she said.
At the same time, she is a group leader for Didi, Meituan, Pinduoduo, and Shihuituan, but she told Sina Tech that due to the price war, the unit prices are too low, and her monthly commission income is only about a thousand yuan. Combined with no offline business, it's not enough to cover expenses.
-04-
Resistance and Regulation
A community group buying practitioner told Sina Tech that the contribution of community group buying mainly lies in the supply chain and logistics in lower-tier markets. Through direct sourcing from origin and centralized procurement, costs are reduced, and the pre-sale + self-pickup model also helps agricultural products move towards production based on sales. In county and township markets, the pre-sale + self-pickup model greatly shortens e-commerce logistics times, which is difficult for traditional e-commerce models to achieve.
However, he pointed out that with the entry of internet giants, community group buying has changed its flavor and become an arena for giants to compete for users and traffic.
The price war has already triggered backlash from the upstream supply chain. Recently, several companies, including Huahai Shunda Grain and Oil Seasoning Co., Ltd. and Weilong Trading Co., Ltd., issued notices prohibiting the supply of goods to community group buying platforms. The notices stated that the companies had received multiple complaints that platforms like Duoduo Maicai and Meituan Youxuan were engaging in severe low pricing, with some products even priced far below ex-factory prices, seriously harming customer interests. The notices required that platform prices not be lower than terminal retail prices; otherwise, they would be considered low pricing, and in severe cases, distribution rights would be revoked.
Not only suppliers, but in December 2020, the State Administration for Market Regulation and the Ministry of Commerce jointly held an administrative guidance meeting on regulating community group buying order, attended by six internet platform companies including Alibaba, Tencent, JD.com, Meituan, Pinduoduo, and Didi. The meeting pointed out prominent issues such as low-price dumping and the resulting squeeze on employment, and required internet platform companies to strictly regulate their community group buying operations and strictly abide by the "nine prohibitions," including no low-price dumping and no unfair competition.
Under regulation, the development of community group buying may face a new turning point.
China Merchants Securities believes that the guidance meeting explicitly prohibits platforms from attracting consumers through low-price dumping, which will curb price subsidies. In the short term, the price attractiveness of community group buying products will decline, and order growth will be affected. However, in the long run, the business model determines that community group buying inherently has lower fulfillment costs, and even without subsidies, its prices will maintain a certain advantage over traditional channels.
In fact, beyond order volumes and group leader numbers, internet platforms need to shift their focus to warehousing and logistics to improve fulfillment capabilities and long-term competitiveness.
It is worth noting that after the administrative guidance meeting, community group buying platforms have not shown obvious moves to cancel subsidies. There are still many 0.01 yuan promotions and widespread coupon distribution.
Wen Han, founder of the food online mall Cai Laobao, said in an interview with Sina Tech, "The giants' move into community group buying is logically correct because traffic is getting more expensive, and many community group buying platforms are backed by large traffic platforms. The giants want to add a new traffic source and entry point. They are not afraid of spending money, but of being abandoned by this era, perhaps missing the trend."
But he pointed out, "Fresh produce is a tough bone to chew, and many companies have already fallen. The reasons behind this are, first, their initial intentions were not right—they wanted to make quick money and seek traffic monetization; second, they didn't invest enough and lacked firm confidence. This industry is hard and complex, requiring full commitment."
As regulations are gradually implemented, it remains uncertain whether community group buying companies can develop in a more standardized manner. "Let the bullet fly a little longer," a community group buying practitioner said meaningfully.
Source: Sina Tech (ID: techsina)
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