Click the image above for details Sometimes, a seemingly hot and intensive financing boom does not necessarily mark the beginning of a new track; it may also signal an early endgame. In the past two months, the community group buying track has seen nearly 10 billion yuan in financing and mergers. But this does not mean the track is about to explode; rather, it may be heading for an early conclusion. In early June, community group buying e-commerce platform Tongcheng Life completed a $200 million financing round, and later strategically merged with another leading company in the track, Linlinyi. Shihuituan completed an $81.4 million Series C1 round in May, followed by an $80 million Series C2 round in July. Also in July, Xingsheng Youxuan completed a $800 million Series C round, valuing the company at $4 billion. Fresh produce and other goods purchased through community group buying are often much cheaper and more cost-effective than those in supermarkets. These startups share common features: their product form is a WeChat mini-program; their users are mainly in lower-tier cities; and their playbook looks almost identical: pre-order + self-pickup. Typically, a "group leader" creates a WeChat group for the community, residents purchase fresh produce or daily necessities through the mini-program, pay, and the next day the goods are delivered to the group leader, where users pick them up. There are also differences among these startups: the core regions they cover vary. Xingsheng Youxuan started in Changsha, Hunan, and expanded to surrounding areas; Tongcheng Life and Linlinyi are both headquartered in Suzhou, expanding outward from there; Shihuituan is a Beijing-based company, but according to a previous report by New Economy 100, their business initially took root in Nanjing and Tianjin, then expanded to surrounding third- and fourth-tier cities. The mini-program interfaces of "Xingsheng Youxuan" and "Tongcheng Life" Another important feature: among the shareholders of these companies are internet giants Alibaba or Tencent, who have been continuously injecting capital. Community group buying is actually one form of retail, and it can be considered a sub-track of same-city retail. For example, competition in same-city retail is like a marathon where the finish line is hard to see in a short time, with participants like Alibaba, Meituan, supermarkets, and various grocery stores. The community group buying track, however, is a 200-meter sprint where the finish line is visible around a corner, and Alibaba and Tencent may already be standing at the finish line. After startups have validated the profitability of their business models, Alibaba and Meituan have begun to form teams, integrate resources, and enter the field themselves. This also means that the aforementioned startups are unlikely to truly "develop independently" in the future. In the modern social system, the limitations of commercial companies do not come from themselves, but from everything around them. Sometimes, a hot financing boom does not necessarily represent the start of a new track; it may also signal the arrival of an endgame. -01-

Why Now?

A closer look at the backgrounds of these startup team members reveals that a large proportion of them have experienced the "thousand-group war" and the subsidy-burning "sharing economy" trends. The promotion of community group buying still relies mainly on ground promotion, and members of the former ground promotion army have once again found their stage. To some extent, the emergence of community group buying owes a great deal to WeChat mini-programs. Currently, the leading community group buying startups were almost all founded around 2018. They have no websites, no apps, only WeChat mini-programs. Before mini-programs, the demand for community group buying existed, but sending orders in community WeChat groups was prone to statistical errors, making it difficult to become a big business. It wasn't until the advent of mini-program technology that the technical barriers were completely removed. Fruits and vegetables cheaper than supermarkets are usually the core selling point of community group buying. Mini-programs allow users in WeChat groups to complete group buying, aggregating orders and collecting product orders. This is the foundation of the group buying model. Like Pinduoduo, this is a typical "goods find people" approach. Thus, community group buying with "pre-order + self-pickup" has become another new retail form and channel after membership stores, traditional e-commerce, and fresh produce delivery. A community group buying entrepreneur told GeekPark (ID: geekpark), "Taobao and JD.com solve low- and mid-frequency consumption, while community group buying focuses on high-frequency consumption. Some people value time, so they choose flash delivery or errand services. But most ordinary people don't value time as much. For the same cabbage, if you want it delivered in an hour or 30 minutes, it might cost 15 yuan. But if you're not in a hurry, you order today and get it tomorrow, it might only cost 7 or 8 yuan." In the "Shihuituan" mini-program, users can freely choose nearby group leaders (pickup points), showing the diversity of the "group leader" role. Community group buying can be said to have achieved a true "sharing economy model." What WeWork failed to do with space sharing, they have made workable, because "pickup points" have almost no requirements; as long as the "group leader" has stable empty space. Therefore, many mothers, community convenience store owners, and express station managers are doing it. There is a noteworthy phenomenon. Even Shihuituan, which Alibaba has invested in, is a mini-program that lives in WeChat, and payments must use WeChat Pay. Back then, Alibaba actively severed its connection with WeChat, but now it is investing in the WeChat ecosystem, indicating that Alibaba is not treating WeChat as an obstacle this time. It also indirectly reflects that WeChat's "open platform" worldview is being accepted by more people. -02-

Who Can Be Consistently Cheaper?

Compared to other e-commerce, fresh produce delivery, and supermarkets, community group buying is more attractive because it is "cheaper." This is its core appeal to users. Whoever can be cheaper, users will choose; in this regard, users have no loyalty. To achieve sustained lower prices, a stable supply chain is needed. The founder of Shihuituan stated in an internal open letter that what they aim to build is a "fresh produce logistics network," which confirms this point. This is also a common feature of the surviving head community group buying startups. For example, if there are only a few products repeatedly, it will reduce the opening rate of the community group buying mini-program over time; at the same time, a decrease in order volume makes it harder to improve bargaining power with upstream suppliers. Additionally, cold chain transportation is key to ensuring freshness. These factors affect whether users will return. Shihuituan was actually incubated by "Youhaodongxi," a community e-commerce company founded by Chen Ying. In 2016, Chen Ying started with fresh produce, creating a membership-based community e-commerce targeting middle-class family consumption in first- and second-tier cities. They sold high-quality, high-premium products selected from origin through WeChat groups. Buying from origin and selling through social e-commerce easily reminds one of Pinduoduo, except that Pinduoduo, which also started with agricultural products, targeted the lower-tier market. Later, everyone saw the power of the lower-tier market. It is reported that after running for a period, Youhaodongxi began to build its own supply chain: self-built warehouses and direct connections with orchards in Hunan, Sichuan, Yunnan, and other regions. The gradually improved supply chain laid the foundation for the later incubation of "Shihuituan." Relying on the supply chain accumulated by the "Furong Xingsheng" convenience store chain, the community group buying model has expanded customer sources for Xingsheng Youxuan's own convenience stores, while also reducing inventory of fresh produce in offline stores through pre-ordering. It can be said that Xingsheng Youxuan developed from the chain convenience store Furong Xingsheng. Liu Huiyu, co-founder of Xingsheng Youxuan, said in a speech that in Hunan, almost every township, village, and hamlet can buy through Xingsheng Youxuan, with orders placed before 11 PM and arriving by 11 AM the next day. "Logistics is the core capability of Xingsheng Youxuan. Suppliers only need to put their goods directly into our shared warehouse. Xingsheng Youxuan's strongest asset is its logistics system. Through shared warehouses, B2C warehouses, and service stations, we can match goods from factory to store within 12 hours. This is what we have always pursued." By relying on the "chain convenience store + community group buying" model, Furong Xingsheng completed its own internet upgrade, accumulating a large amount of user data, transforming from a traditional chain supermarket into the new retail unicorn "Xingsheng Youxuan." Now look at Tongcheng Life: its co-founder once established the Qianxianhui community chain store. Therefore, from the start, it also had a supply chain foundation. Tongcheng Life also uses a model of upstream large-scale direct sourcing and downstream community self-pickup to improve fresh produce circulation efficiency and reduce costs. From this perspective, compared to pure internet applications, community group buying is a heavy, slow business. The supply chain foundation is the confidence to maintain "cheaper" prices in the long run. -03-

Giants Enter: Who Else Will Be Impacted?

In the second half of 2018, community group buying was seen as a promising track with a large influx of hot money; by 2019, the situation took a sharp turn: it was viewed as a "fake trend." Like e-commerce live streaming and cross-border shopping, group buying will change the distribution channels of goods on a small scale. But Chen Ying also mentioned in his internal letter after receiving financing that community group buying is "a completion plan for the traditional e-commerce model." Some industry insiders say that, like the cross-border shopping startups of the past, people initially regarded it as a trend and an industry, but in the end, those startups either went bankrupt or were acquired, and the so-called trend became a game among internet giants. Community group buying is similar, and from current developments, this process has been accelerated. Alibaba and Tencent have already taken stakes in these startups early on, and even entered the field themselves. According to a previous report by 36Kr, after investing in Shihuituan in 2019, Alibaba's Cainiao Post stations cooperated with Shihuituan at the business level, allowing community post station managers in the express delivery business to become community partners of Shihuituan. Additionally, Alibaba's RT-Mart began supplying goods to Shihuituan. Cainiao Post stations can naturally serve as pickup points, and even take on more business, impacting surrounding business formats. Moreover, in June this year, Cainiao announced that "Cainiao Post" would offer group buying, laundry, recycling, and other services in addition to receiving and sending express packages. Express stations are natural pickup points, with almost no additional cost. Now look at the actions of other internet giants. During the pandemic, Pinduoduo launched the "Kuaituantuan" mini-program, supporting users in completing community group buying. It is reported that "Kuaituantuan" is only a tool-type product, but it has already covered more than 10,000 residential communities. In addition to its own social e-commerce platform, Jingxi, JD.com also established a community group buying alliance early on, and has successively launched multiple community group buying businesses such as Youjia Puzi, JD Ququgou, and Xiaoqipin. In early July, Meituan launched Meituan Youxuan, announcing its entry into the community group buying track, and began signing up group leaders in Jinan, Shandong, for testing. Choosing Jinan was also to avoid the main competitors in the head. This also reflects another important characteristic of community group buying: it has strong regional segmentation. Because residents in different places have different preferences, the supply chain also needs to have local characteristics, placing more emphasis on building and accumulating local supply chains. This is a slow process. With the full entry of giants, the previous agricultural product sales channels will be further diverted, and what they affect is actually the business of wholesale markets and supermarkets. As more and more supermarkets support self-pickup for community group buying, coupled with the internet giants' technical output such as SaaS, to think extremely, in the future, convenience stores, community supermarkets, and small shops may all be backed by Alibaba, Tencent, or Meituan. In the past, Alibaba has been expanding its offline convenience store network through various methods such as Lingshoutong and Tmall Xiaodian. Another important impact of the giants' entry is accelerating the "invasion" of the upstream. Directly controlling the source of production can more effectively manage the supply chain. In the past, agricultural products were often unstable, non-standardized, and not standardized, making true scale difficult. This also greatly impacts downstream retail enterprises in achieving commercialization, standardization, and quality control. This is why Pinduoduo, JD.com, Alibaba, and others have begun to enter rural areas, operating their own orchards, exporting digital agriculture technology, or signing contracts with industrial belts to control the overall output quality of fruits and vegetables from the source. Moreover, as the proportion of agricultural products in e-commerce sales increases, controlling the upstream is also something e-commerce platforms must do in future retail competition. It is foreseeable that various e-commerce platforms signing more standardized supply bases is a major trend. In the longer term, who can truly win community group buying, or even the same-city retail battle, may depend on who can secure more factories and agricultural product bases. Source: GeekPark (ID: geekpark); Author: Wei Wei