Click to read the original article for details. From trial to investment: Why is Alibaba interested in community group-buying? Recently, a reader tipped off New Retail Society that Alibaba has made a significant investment in community group-buying platform Shihui Tuan. After receiving this news, New Retail Society immediately sought confirmation from an internal employee of Shihui Tuan, who replied, "It can be sensed but not expressed," leaving much to interpretation. A senior executive from another community group-buying platform told New Retail Society, "The acquisition was basically finalized in May at the latest, just not publicly announced." Based on images disclosed by the tipster to New Retail Society, Alibaba's capital injection into Shihui Tuan is essentially a done deal, with initial contacts made early in the year. "They were already in talks in February or March. For Alibaba, such a project takes several months to negotiate," the tipster said. As a new business format that only gained traction last year, Alibaba has long coveted community group-buying. As early as the beginning of the year, Alibaba entered this track through Taobao Post Station Group Buying. Compared to the frenzied capital deployment in the second half of last year, investor enthusiasm for community group-buying has cooled considerably in the first half of this year. Given this industry backdrop, why is Alibaba still entering community group-buying? With both Alibaba and Tencent (AT) entering the fray, what changes will this bring to the industry? Is Alibaba's social e-commerce ambition still alive? Signs of Alibaba's investment in Shihui Tuan were already visible in June. On June 4, media reported that Shihui Tuan had officially integrated with Alibaba's B2B businesses 1688 (Caiyuanbao) and Ling Shou Tong, planning deeper strategic cooperation and establishing a laboratory in Chengdu. The specific form of cooperation is that Alibaba selects quality merchants and connects factory merchant resources to Shihui Tuan. Suppliers distribute goods in bulk to regional warehouses, from which Shihui Tuan picks up and delivers to communities. In the cooperation with Ling Shou Tong, small shops that stock from Ling Shou Tong become pickup points for Shihui Tuan, driving traffic to these shops and boosting their revenue. Undoubtedly, this cooperation benefits both parties. Alibaba can leverage Shihui Tuan to find new outlets for its B2B business, making it a new tool and channel to empower merchants. Shihui Tuan, in turn, can use Alibaba's rich merchant resources to expand its product categories, increase SKUs, and fill the gap in standardized products. Notably, investing in Shihui Tuan is not Alibaba's first foray into social e-commerce. Earlier this year, Alibaba quietly launched the "Station Group Buying" section in the Taobao app, turning Cainiao Post Stations into pickup points based on LBS. This model uses pre-sale pickup and traffic diversion, while group buying enables consumers to place orders with ideal discounts, forming a business loop. As one of Cainiao Network's five strategic directions, Cainiao Post Station's importance is self-evident. However, hiding Station Group Buying within Taobao's search module, with a deeper search entry, reveals Alibaba's trial intentions. Moreover, Pinduoduo's rise has further stimulated Alibaba's determination to enter social e-commerce. To some extent, Alibaba's entry is no longer just about "whether it can succeed" but has evolved into a matter of "must succeed." Hence, we see Alibaba officially launched the "Daily Must-Grab" section in the Alipay app, using face-to-face invitations to friends for discounts to continuously lower consumption thresholds in lower-tier markets. This is also a necessary response to Pinduoduo's competition. At the same time, Alibaba launched the Taohuiling Neighborhood Store in the Taobao Union app. From the introduction, Taohuiling is essentially a community-based distribution model, and store owners seeking higher income must rely on sharing and fission based on community or neighborhood relationships. From a business model perspective, the main difference between community group-buying and Taohuiling lies in product categories: community group-buying focuses on fresh produce, while Taohuiling mainly deals in standardized products. If Alibaba can fill the fresh produce gap for Taohuiling, it would undoubtedly increase community users' stickiness to store owners, and Taohuiling could become the community group-buying platform with the most complete categories and largest SKU count. With rising online traffic costs, if Alibaba can firmly grasp community traffic closest to consumers, the imagination for combining online and offline is immense. From this perspective, Alibaba's investment in the community group-buying track is understandable. Why Shihui Tuan? Among so many platforms, why did Alibaba choose Shihui Tuan? Before answering, let's look at the current competitive landscape of community group-buying: Source: Internet; Compiled by New Retail Society According to Aladdin's "June 2019 WeChat Mini Program TOP 200 List," the top 200 community group-buying platforms include Xingsheng Youxuan, Niwoni, Shixianghui, Shihui Tuan, and Squirrel Pinduoduo. These five basically represent the TOP 5 platforms in the community group-buying track. Xingsheng Youxuan, which started from traditional convenience store chains, has firmly secured the top position in terms of city coverage and GMV. With backing from star investors like Today Capital, Jinshajiang Venture Capital, Zhen Fund, and Tencent's Industrial Win-Win Fund, Xingsheng Youxuan's development advantages are further enhanced. So why did Alibaba choose Shihui Tuan as its representative in community group-buying? New Retail Society believes the main reasons are:

  1. Among the TOP 5 platforms, aside from Xingsheng Youxuan, Shihui Tuan covers the most cities, providing huge imagination space for Alibaba's supply chain integration.

  2. Shihui Tuan's investment round is still at the angel stage, so the entry price is relatively low. With similar overall competitiveness among the TOP 5, Shihui Tuan is an excellent investment target for Alibaba.

Additionally, Yi Lijun, deputy secretary-general of the Changsha Retail Industry Association and community group-buying expert, believes Alibaba's investment in Shihui Tuan is also related to its team background and model. "Shihui Tuan has the background of Haodongxi (a fresh e-commerce platform), and CEO Wang Peng was formerly senior vice president of Aixianfeng. The team itself is excellent. In terms of model, Shihui Tuan operates in unit modules, using headquarters brand endorsement, technology, and capital empowerment to greatly boost the development enthusiasm of each branch." Moreover, capital faction issues are also an important reason. Among the TOP 5 platforms, Xingsheng Youxuan has been invested by Today Capital (which invested in JD.com) and Tencent, while Squirrel Pinduoduo has a strong Meituan background. In such a situation, Alibaba's options are limited." AT entering community group-buying: New variables in the industry landscape? Industry giants entering community group-buying is not new. As early as last year, JD.com launched Youjia Puzi, Tongcheng Travel deployed Tongcheng Life, Pinduoduo invested in Chongma Neighborhood Group, and Yonghui, Qian Dama, and Suning used their offline stores to integrate mini-programs, forming groups for group buying. The track was booming. Given WeChat's robust community functions and payment system, Tencent's shadow is inevitable in the community group-buying industry. Especially with smart retail proposed nearly two years ago, Tencent, positioning itself as a utility infrastructure provider, has become increasingly connected to offline retail, and it will not miss this new track. In May, media reported that Tencent's Strategic Investment Department (Industrial Win-Win Fund) had invested in Xingsheng Youxuan, the current industry leader, officially entering community group-buying. Tencent's entry also means the window for community group-buying development has officially closed, leaving few opportunities for small and medium platform entrepreneurs. When head platforms begin using capital to expand nationwide, the industry will inevitably accelerate into a reshuffling period. According to an insider, Xingsheng Youxuan is just Tencent's first investment target in the community group-buying track, "with several more under negotiation." Does Alibaba's investment in Shihui Tuan signify the official start of the AT era in community group-buying? What impact does this investment event have on the industry's development? Wang Jun, a new retail industry expert, commented: Has the so-called endgame arrived? Community group-buying has entered the second half, with the familiar pattern: AT taking sides, and two leaders at the top. Since this is a hot track recognized and driven by capital, and it's an offline-driven online platform model, we can infer from recent financing activities that in the second half of the year, the first tier will take shape and accelerate into a merger and acquisition phase. From the track's peak to the stage of duopoly supported by giants, it has taken less than a year.

  • At this stage, the Tencent camp is firmly ahead. First, Xingsheng Youxuan reportedly has monthly GMV exceeding 500 million yuan, with order volume far ahead. Tencent has made a strategic investment. Then, there's the recent big rumor: Meituan-affiliated "Squirrel Pinduoduo" (ranked fourth by GMV) and "Niwoni" (ranked second, rumored to have funding issues) are in merger negotiations. If they merge, their combined scale could reach or even surpass Xingsheng Youxuan! With this pace, the top positions are firmly held by the Tencent camp. Whether it's the business model naturally incubated on WeChat groups, the online-offline traffic pool, or the precise LBS-based community C-end big data, Tencent should firmly grasp the discourse power in this track.
  • Resolute Tencent vs. groping Alibaba: Alibaba's indecisiveness in the community group-buying track reflects its desire for social e-commerce and deep frustration with WeChat groups. It has never invested heavily; even in this cooperation with Shihui Tuan, it initially started from supply chain and big data interface levels. Whether it will continue to inject capital after cooperation, compete for the top spot, and effectively integrate with Alibaba's resources (Cainiao Post Stations, Taobao, 1688 supply chain, etc.), and whether to de-WeChat and stick to the APP route or maximize WeChat traffic and tools within the WeChat framework, are all considerations for both parties. In contrast, in the live-streaming e-commerce track, Alibaba is much more resolute, attacking at every node, not only supporting numerous first-line cases but also fully utilizing major short-video platforms to divert traffic to Taobao's trading platform. Its ecosystem is solid and complete.
  • Current pain points of community group-buying: Under fierce competition where head platforms prioritize data growth, mainstream community group-buying platforms have all entered a money-burning, land-grabbing mode, heavily reliant on capital infusion. Lower-tier markets respond well, the overall market is fragmented enough, and the scale is large enough. Categories have fallen into price competition, with grocery shopping becoming the main transaction. Continuously using low-priced goods to attract new users leads to low retention. Short-term traffic may increase, but over time, cheap goods damage reputation. There's a need to match high-value-added products for monetization.
  • Opportunities for local small groups to cash out: During the phase of rapid market harvesting by giants, they will integrate and acquire numerous quality local platforms, providing opportunities for quality small groups nationwide to cash out or deepen development. Regarding community group-buying topics, New Distribution will hold a special forum on community group-buying at the China FMCG Conference from August 20-23. We have invited top industry experts and frontline community group-buying platform operators to share insights. Welcome to scan the QR code to participate. Tips will be paid 400-2000 yuan upon adoption. China FMCG + Internet Professional New Media Dedicated to FMCG manufacturer transformation and channel digital solutions