---
title: "How Can Community Group Buying Brands Trapped by Price Undercutting Be Saved?"
description: "In the previous article, the author discussed the surging trend of community group buying. Following its publication, rumors emerged that JD.com would acquire Yonghui, though multiple sources suggest this is unlikely. However, Liu Qiangdong's involvement, the competitive dynamics between Douyin and Pinduoduo in community group buying, and the resurgence of this channel have become increasingly clear. Behind the acquisition rumors lies the market's concern for traditional channel power and the confusion of brand owners and distributors regarding community group buying."
author: "老陶"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-08-23"
language: "en"
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# How Can Community Group Buying Brands Trapped by Price Undercutting Be Saved?

> In the previous article, the author discussed the surging trend of community group buying. Following its publication, rumors emerged that JD.com would acquire Yonghui, though multiple sources suggest this is unlikely. However, Liu Qiangdong's involvement, the competitive dynamics between Douyin and Pinduoduo in community group buying, and the resurgence of this channel have become increasingly clear. Behind the acquisition rumors lies the market's concern for traditional channel power and the confusion of brand owners and distributors regarding community group buying.

In the previous article, I discussed the surging trend of community group buying. After the article was published, rumors emerged that JD.com would acquire Yonghui. I checked with multiple sources, and it seems unlikely at present. However, Liu Qiangdong's involvement, the competitive dynamics between Douyin and Pinduoduo in community group buying, and the resurgence of this channel have become increasingly clear. Once things show signs, they will develop in a certain direction. Behind the acquisition rumors, first, there is the market's concern for traditional channel power, and second, the confusion of brand owners and distributors regarding community group buying.

Last time, I mentioned costs. Community group buying often involves more than just costs; our distributor and brand owner friends are particularly concerned about the operational model. How can we use a reasonable operational model to avoid most malicious speculation? How can we improve the coordination rate among the four parties? How can we avoid price undercutting? These are likely questions of great concern to everyone, so this will be the focus of my discussion next.

**Two Current Operational Models for Brand Owners**

When it comes to operational models, they can be broadly divided into two types: either the e-commerce team handles it, or it is handed over to the regional sales team.

Currently, in most brand operations, the e-commerce team is responsible for development and operation. The reason is simple: operators are doing community group buying as a side business, and most are not specialized in B2B. Many operators previously ran 2C businesses on Tmall, so they lack certain capabilities in organizational structure and logistics supply chain. Their advantage lies in unified pricing and even unified product listing, which allows for limited data feedback. I think having some data is better than none, but it is only a temporary measure. Of course, the disadvantages are also obvious. Local distributors will engage in competitive bidding, and the motives for operating community platforms are inconsistent, leading to clearance of near-expiry products, high inventory, and high-target supply. This is similar to the situation before the supply-side reform: excess inventory in a single channel cannot be digested quickly and requires substantial capital. It's like a person who eats but doesn't digest; in business, this translates to unstable operations. Therefore, the e-commerce team only treats community group buying as a supplement to their 2C business. Some may establish a 2B team within the e-commerce team to find corresponding operators, while the brand does not prevent or oppose, and even encourages distributors to also engage in community group buying. This is actually the situation for most.

Another method is to hand it over to the regional sales team, where each sales team is supplied by its corresponding regional distributor, with the headquarters providing some guidance. I believe this method is familiar to all bosses. The advantage is that it leverages the initiative of distributors—those who work more get more, and the better they are, the more they gain. But problems also follow. Distributors undercut each other's prices, leading to the inability to develop community channels. I have encountered this frequently in my career. Moreover, without data feedback, the brand cannot understand the full picture, and operational motives vary greatly. Some distributors resist promoting products that are not selling well in existing channels due to high inventory, near-expiry stock, capital turnover, or high targets, which is detrimental to the discovery of potential SKUs. For distributors designated nationwide, the capital pressure is enormous, and operational complexity increases rapidly because inventory may be imbalanced, making it difficult to control and allocate nationwide. Distributors lack the capability to handle platform procurement operations and supply chain operations, and there may even be conflicts in stocking logic and logistics capabilities.

It can be seen that whether the e-commerce team or the regional sales team handles it, they cannot avoid the issues of how to manage inventory and how to drive sales. There is also unified pricing, but it is difficult to implement in practice; it is only a verbal agreement. Each merchant operates independently. It sounds plausible that the brand has a designated operator, but it is impossible to do nationwide because there is no coordination within the internal system. Although there are some internal guidelines, each merchant is an independent legal entity, and independent merchants submit their own product quotes on the platform, which poses significant risks.

Whether it is the operator found by the headquarters or local distributors, they are in a competitive relationship. The platform itself has multiple merchants for one product. The same warehouse may face several merchants; a city may have two or three distributors for related products, including their e-commerce department distributors. They all execute relevant quotes, and procurement has control. The motives for distributors to engage in community group buying also differ: some are to clear inventory, some because of high stock, some because of high local targets, so each distributor's execution and motivation are completely different. From the distributor's perspective, without a long-term orientation, they will not consider the brand's long-term development, and the business will lack vitality.

I believe there is a model that can solve this problem.

**How to Have Both Fish and Bear's Paw**

The optimal operational model I recommend is: the e-commerce department develops an independent community group buying operator responsible for unified platform coordination, while offline distributors are responsible for platform fulfillment and supply assurance. This division of labor allows each to perform their own duties. The advantage of a unified operator is that it can efficiently clarify responsibilities: product selection, pricing, setting pit production targets, scheduling goals, timely discovery and feedback of challenges encountered during brand and platform operations, and formulating solutions. Local distributors are responsible for delivering to the relevant collaborative warehouse according to the operator's requirements based on platform needs, or completing daily distribution fulfillment themselves. In other words, the e-commerce department still develops an independent community group buying operator to coordinate with the platform, while offline distributors handle platform fulfillment and supply assurance. The e-commerce department and distributors who handle online e-commerce business know how to judge operational capability; they do one thing: identify whether the operator can actually do it.

I believe that in community group buying operations, professional operators must be involved. Why? Many 2C operators lack the corresponding capabilities when doing community group buying; B2B and C-end businesses are vastly different. First, there are differences in logistics supply chain capabilities, and second, differences in long-term product development strategies for the B-end. The capabilities originally for 2C are limited when transferred to 2B group buying platforms. It is necessary to find a relatively professional group buying operator to cooperate with offline distributors. The advantage of a unified operator is that it can efficiently clarify responsibilities, assist brand owners in product selection and pricing, agree on pit production and scheduling goals, and discover and feedback challenges encountered during brand and platform operations, and formulate solutions.

The operator specifically coordinates with the platform, clarifying responsibilities with the brand. Local distributors are responsible for delivering to the platform's collaborative warehouse based on the operator's agreements with the platform, or completing daily distribution fulfillment themselves, i.e., the distributor direct-to-central warehouse model. In fact, it is also important for distributors to stock up well. How to stock? Based on the guidance and suggestions given by the operator. The advantage here is that the platform only faces one operator. When seeking various quotes, it is not one product with multiple merchants; instead, the operator agrees with local distributors that they do not quote but only deliver, and the operator handles all quoting and negotiations with local procurement.

**Head Brands: Four-Party Perspective on Joint Fulfillment**

When distributors, operators, platforms, and brand owners coordinate from different perspectives, this business will be fully integrated. What is the platform's responsibility? It is responsible for page exposure, traffic acquisition, and picking, packing, and logistics from the central warehouse to users. Distributors should follow the operator's guidance based on the platform's daily fulfillment and future scheduling needs.

Distributors are responsible for stocking, operators for product listing and scheduling submissions, including pricing, promotion confirmation, and platform collaborative warehouse logistics cost advances, promotion advances, etc. Brand owners are responsible for product selection, pricing, marketing activity plans, and channel value chain management. For the parties in the value chain—platform, distributors, and operators—what profits should they earn based on their actual value contribution? The brand owner should clearly define the value chain, and operators, distributors, and platforms each receive the relevant value.

I believe the advantages of the four-party coordination model are as follows:

**First,** designating one operator to uniformly list products and set supply prices is conducive to the implementation of standard prices. Regardless of the city, whether local or headquarters procurement, the operator handles all coordination and quoting. Although it cannot completely eliminate speculators, it can minimize price undercutting among distributors.

**Second,** it forms a price sentinel mechanism. The benefit is that once the operator detects low-price speculators, they can immediately identify the city because the price difference is noticeable. If there is interference from speculators in a certain city, problems can be quickly identified and solved.

**Third,** a clear value chain gives all parties a clear return on investment, which I need not elaborate on.

**Fourth,** distributors avoid price undercutting caused by competitive bidding, which plays a positive role in maintaining the local market price system and stabilizing price control. Even if you sell cheaper, it is within the agreed range, so there won't be many surprises.

**Fifth,** for the platform, it can obtain an effective supply guarantee for hot products. Under this system, brand owners are willing to supply the platform, and distributors are also more willing because the ROI is guaranteed.

**Sixth,** brand owners can obtain a complete and authentic data chain feedback. Because of unified standards, data matching becomes a reality, making it clear who sells more and who sells less.

**Seventh,** brand owners have the opportunity to discover potential SKUs. Under this system, with the operator's operational guarantee, distributors will have more confidence in stocking products that are not selling well offline.

Of course, I am talking about the operational methods for head brands here. Next, I will share the operational methods for waist brands.

**How Waist Brands Operate**

For waist brands operating community group buying platforms, I recommend first using the direct supply platform model to focus on operating local markets with key promotion, then seeking professional community group buying distributors in other regions to gradually promote, ultimately forming a brand direct supply that leads platform pricing and marketing investment. Distributors stay in sync, and the brand plays a dual role as part operator. Community group buying distributors strictly follow the brand's direct operation standards for product reporting, quoting, scheduling, and fulfillment. In other words, waist brands should learn to leverage external forces. When they lack sufficient self-developed capabilities, they should learn to use external resources. With limited funds, building the entire operational model themselves is unrealistic. I will divide the practical operation into two parts: **direct operation and expansion.**

**Step One:** In the local direct operation phase, test product pit production and product value chain. The goal is to find hot SKUs and test the costs and corresponding gross margins for future distributor operations, preparing for expansion. Because you will have accurate data on products and their gross margins.

**Step Two:** Develop community group buying distributors for expansion. Maintain close communication with relevant distributors in various regions, regularly provide clear guidance and feedback to community group buying distributors, and ensure they execute standards consistent with direct operation standards. If the brand is weak in channels and lacks a good nationwide distribution network, it can first use the direct supply platform model to focus on operating local markets with key promotion. If possible, they can also set up a team to do it themselves. Then, in other regions, find professional community group buying distributors to gradually promote the brand, ultimately forming a brand direct supply that leads platform pricing and marketing investment. Distributors stay in sync with the brand, and the brand plays a dual role as part operator. Community group buying distributors strictly follow the brand's direct operation standards for product reporting, quoting, scheduling, and fulfillment.

I believe that with this combination of strategies, the operational difficulties of community group buying for distributors and brand owners will be resolved. (If you need to communicate with the author, you can search and add WeChat: taoguangya)


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