Click the image for details. Today we discuss three questions:
Among the many new retail concepts in recent years, why has only community group buying gained a foothold?
Will community group buying allow manufacturers to transact directly with retailers, squeezing distributors' living space?
Should distributors operate their own community group buying businesses? In recent years, new retail has been hot, with many new scenarios emerging, such as online distribution and unmanned shelves. A friend of mine who works in wholesale told me that these concepts came and went without affecting him, but community group buying made him feel a change. With the official entry of offline supermarket giants, the trend and model of community group buying can be said to be established. If a year ago, most people were considering whether this model would work, today most people are considering how to do it. The community group buying model mainly consists of three key points:
Retail scenario: The community WeChat group is the main retail window, which determines that community group buying retailers must be proficient in operating WeChat groups.
Delivery scenario: The community pickup point is the main delivery scenario, which determines that players must have community pickup points and manage them well.
Product organization: Planned household consumer goods are the main circulating products, and buyers prefer one-stop shopping. This determines that the merchant's product line must cover the daily consumption needs of the community residents, with SKU numbers reaching approximately 3,000. Different communities have different SKU pools. Only by achieving the above three points can community group buying be done well. In essence, community group buying neither produces nor consumes. It plays a circulation role, or rather, community group buying is a circulation channel. Under the influence of the market's "invisible hand," goods will choose channels with lower costs for circulation. Let's analyze existing circulation channels from the cost side. The main cost of offline stores is product display, while logistics costs are relatively low. Physical display requires physical space, manual management, etc., so display costs are inevitably high. In terms of logistics, centralized delivery to stores, with customers picking up after payment, keeps costs low.
The main cost of e-commerce is logistics, while display costs are low. E-commerce uses electronic images to display products, with costs close to zero. However, delivery requires individual packages and courier delivery, making logistics costs high. Community group buying is a perfect combination of the above two forms. Product display in community group buying is through electronic images in WeChat groups, with costs close to zero like e-commerce. Delivery uses centralized distribution to the community plus customer self-pickup, with costs as low as offline stores. Therefore, the circulation cost of community group buying is significantly lower than traditional channels. E-commerce and offline stores each have their strengths and weaknesses, but overall costs are similar, reflected in the fact that retail prices online and offline are basically the same. The price of community group buying is significantly lower than supermarkets and e-commerce, and the key lies in cost. We often say that a low-cost circulation channel attracts products and customers just as a low-lying riverbed attracts rainwater. There will definitely be more and more products and customers flooding in. This is the fundamental reason for the rapid expansion of the community group buying market in the past two years. Let me add one more point: the residence time of goods in the channel. This indicator represents the circulation speed of a channel and determines the capital cost of that channel. Supermarkets have serious payment arrears, essentially because goods stay in the channel for too long. In contrast, e-commerce and community group buying, which mainly use customer prepayment and delayed delivery, have short goods residence times and low capital costs. Looking at other new retail scenarios that emerged during the same period: Fresh vertical e-commerce: Cost structure is consistent with comprehensive e-commerce platforms, but SKU numbers are reduced, causing a decline in user efficiency.
Distribution e-commerce: Cost structure is consistent with e-commerce, but adds a rent-seeking class, harming user value.
Unmanned shelves: Costs are higher than convenience stores, and SKU numbers are fewer than convenience stores. None of these so-called new retail models have achieved a reduction in circulation costs. This is also the reason why community group buying is the only survivor. From the above analysis, we can know that community group buying is an effective technology for reducing circulation costs. But at the same time, community group buying is a very simple retail technology; you can sell goods by just creating a group. Since everyone can use it, it will not lead to significant changes in power dynamics. In the long run, simple technology will not lead to changes in the competitive landscape. Just like restaurants on a street, originally using charcoal, later switching to gas stoves, business won't change much. So in a few years, we will find that merchants doing community group buying retail will be almost the same as those doing traditional retail now. Therefore, for distributors, the key issue to consider is: How to adapt to and help retailers carry out community group buying businesses. Next, let's analyze the advantages and disadvantages of five main types of retailers in carrying out community group buying, and how the supply chain should cooperate. Supermarkets (KA stores) The biggest advantage of supermarkets is their huge SKU pool. A typical supermarket has over 10,000 SKUs, basically covering all the daily needs of surrounding residents. The weakness of supermarkets is their lack of delivery capability in communities. We see supermarkets making up for this shortcoming by cooperating with community express stations and real estate agencies. In terms of group operation, since general supermarkets have their own e-commerce departments, building this capability is not difficult. For distributors, whether supermarkets carry out community group buying or not has little impact. After supermarkets carry out community group buying, the number of SKUs won't change much. The main addition is the delivery capability to communities. It can be understood as adding a "to community" business on the basis of in-store and home delivery businesses. Chain convenience stores (CVS channel) Chain convenience stores mainly sell immediate consumption goods for eating and using on the spot. To carry out community group buying, they must supplement planned household consumption SKUs. So they will expand their product range, which provides opportunities for distributors. Convenience stores are naturally located near communities, so they inherently have community delivery capability. Since the headquarters of chain convenience stores generally have e-commerce departments, they can quickly develop the capability to operate WeChat groups. The distribution from warehouse to community is generally completed by the headquarters, without requiring distributor participation. After fully carrying out community group buying, the total SKU count of a single convenience store will reach about 3,000, with less than 1,000 offline SKUs and over 2,000 online SKUs. Traditional mom-and-pop stores (TT channel) Mom-and-pop stores have slightly more SKUs than chain convenience stores, but they are still mainly immediate consumption goods. To carry out community group buying, they must expand their product range. Mom-and-pop stores are generally located near communities, so they inherently have community delivery capability. Regarding WeChat group operation, we believe that in the short term, only a very small number of mom-and-pop store owners can have the ability to actively operate (including product selection, organizing promotional activities, etc.). In the long run, their business model has been very passive. Distributors must do community distribution and even help mom-and-pop stores with 2C sorting. After fully carrying out community group buying, the total SKU count of mom-and-pop stores will reach about 3,000, with about 1,000 offline SKUs and about 2,000 online SKUs. Community group buying companies (group companies) The comprehensive strength of group companies is far inferior to the above three types of merchants, but they are in a stage of rapid evolution. They are highly likely to evolve into supply chains, chain stores, or specialized WeChat group operation companies (the biggest advantage of group companies is group operation). Since group companies generally have their own community distribution and delivery capabilities, distributors supplying goods to group companies generally only need simple warehouse delivery. E-commerce platforms (B2C e-commerce) The main capability of e-commerce platforms is online, and it is difficult to establish specific community competitive advantages in the short term. Moreover, e-commerce platforms carrying out community group buying has little to do with distributors, so we won't focus on analyzing it here. Based on the above analysis: The main opportunities that community group buying brings to distributors in the short term are mainly supplying goods to group companies, and in the medium term mainly supplying goods to chain convenience stores and mom-and-pop stores. The challenge, or what distributors need to improve themselves, is distribution and sorting. The destination of distribution will gradually focus on communities, and distributors may even need to complete sorting according to customer orders. There is also the issue of response speed. The need to deliver to communities by the next day must be met. Many distributors worry that community group buying will shorten the transaction chain, with manufacturers directly contacting retailers and bypassing distributors. The author believes this worry is unnecessary. When retailers do community group buying, the number of SKUs they need to handle increases. The more SKUs retailers need to manage, the greater their dependence on the supply chain. Localized community distribution and sorting capabilities can only be completed at the place of sale. Therefore, we believe that community group buying can only be done well through close cooperation between distributors and retailers. The role of distributors is stronger, not weaker. Finally, let's discuss whether distributors should operate their own community group buying businesses. Distributors of single-category products are weak in the three major capabilities required for community group buying (group retail, community 2C delivery, and multi-SKU). Building these three capabilities requires competing for territory externally and restructuring the team internally. The difficulty is extremely high, and the probability of ultimately winning is not high. If distributors go into community group buying, it means becoming competitors with their own customers, which will definitely affect existing business. So our suggestion is that distributors should first solve the problem of their supply capability for community group buying. If they insist on doing retail, we suggest doing it in rural markets, because the rural snack market is growing fast, competition is not fierce, and for new players, the probability of success will be greater.