Click the image for details In the second half of 2018, a very hot new species appeared in the domestic e-commerce field: community group buying. Overnight, almost everyone had one or two friends or WeChat groups starting community group buying ventures. Many entrepreneurs said this might be the last ticket for mobile internet e-commerce. In such a hot environment, many distributor friends are restless. As distributors with capital, warehousing, distribution, products, and personnel networks, they seem to have unique advantages and want to try this track. The question is, is this an opportunity or a trap for distributors? Today, the author will systematically analyze this with all distributor friends. 1. What is community group buying? It is a shopping scenario that uses WeChat groups as the main retail window, local delivery as the main logistics method, and planned and high-frequency household consumer goods as the mainstream. It is an O2O model where consumers place orders on mini-programs through WeChat communities and pick up goods at fixed points led by group leaders offline. Differences from traditional retail: The core competitive advantage of community group buying lies in fast response speed. Because everyone is in one community, it is easy to form a bystander mechanism. According to Lian Jie, founder of Order Rabbit, users feel secure ordering in WeChat groups—after paying, they are still the client. Since everyone is in the same WeChat group, if the group leader provides poor service, a user can casually send a message in the group that threatens the group leader's reputation and reviews. Therefore, the after-sales service experience is superior to online retail platforms and offline retail stores. The second characteristic is wave purchasing and centralized delivery. Because group leaders actively push in the group, it is easy to form wave purchasing, and the entire backend supply chain can more easily achieve scale in product procurement and organization. At the same time, since users pick up goods at the group leader's location, logistics costs are lower than traditional e-commerce. The third characteristic is that products are richer in categories than traditional retail and lower in cost than offline convenience stores. Online display and display space have almost zero marginal cost, so display space can be expanded indefinitely. Moreover, most convenience stores do not have conditions for selling fresh produce, which creates space and opportunities for high-frequency fresh produce group buying to eat into the planned low-frequency categories of convenience stores. The fourth characteristic is semi-acquaintance relationships, which solves the embarrassment of unsuccessful transactions among acquaintances and reduces the transaction cost of building trust among strangers. 2. Why did community group buying emerge? After WeChat became widespread in 2011, the first social e-commerce species based on the WeChat ecosystem appeared: WeChat business (Weishang). In a very short time, this industry exploded with huge potential, reaching a market size of hundreds of billions. Later, with the penetration of smartphones into lower-tier markets and the second round of e-commerce boom brought by low prices and WeChat social relationships, Pinduoduo emerged. By 2017, with the gradual improvement of mini-programs, the CP combination of WeChat groups and mini-programs undoubtedly meant that community group buying would be the third round of social dividend release on WeChat. In fact, since 2015, many markets had already begun to see sporadic community group buying business models. Starting in 2016, developing through 2017, by 2018, according to incomplete statistics from New Distribution, there were already as many as 150 community group buying companies. As of now, capital entering this track has reached 3 billion RMB, including e-commerce giants such as Meicai, Pinduoduo, and JD.com. 3. Why did community group buying rise? First: Traffic interception at the front end Socializing is human nature. WeChat is the most frequently opened app, with an average of about 120 opens per day. Market competition is essentially traffic competition, and traffic competition is essentially a process of continuously intercepting at the front end. After the internet appeared, traffic evolved from traditional location-based point traffic to e-commerce platform traffic. When mobile internet became widespread and WeChat became infrastructure, competition further entered social traffic. Community group buying, like WeChat business, benefits from the social traffic dividend. Second: Group buying prices Consumers have changed from buying现货 with cash to buying futures with cash, sacrificing efficiency for savings. This business model is naturally suitable for price-sensitive, efficiency-insensitive, lower-income consumers with time in lower-tier markets. Third: Extremely low operating costs: a cheaper distribution method Compared to competitors in other formats, the killer feature is low prices. The reason for ultra-low prices is that the entire supply chain cost is lower than competitors:
Product display cost: Virtual display
Logistics cost: Local delivery + self-pickup
Low channel inventory: T+0 or RDC, direct sourcing from origin, centralized delivery
Capital cost: Payment before delivery, purchasing with cash, no capital tied up It avoids the heaviness of traditional business models while absorbing the advantages of e-commerce and offline retail.
- Current problems with community group buying Extremely low entry barrier: You can sell just by creating a group Extremely fierce competition: Various online and offline retail species, national and local retailers are all entering, making it a fully competitive market High supply chain management requirements: Fresh produce, high frequency, multi-SKU management Extremely high requirements for product selection ability: Regional, national, global product selection, resource integration capabilities Only effective for price-sensitive people, meaning long-term low profit margins.
- The future of community group buying New Distribution believes that community group buying will become one of the mainstream distribution channels for some household consumer goods in the future, and because it intercepts user traffic at the front end, the overall social transaction volume will exceed traditional platform e-commerce. It will not only intercept platform e-commerce traffic but also take away a large amount of traffic from offline stores. There are three more points: Because of information technology tools, community group buying will precisely match the personalized needs of boutique agriculture and consumption upgrading:
Products can be distributed quickly, in small batches, flexibly, and with infinite long tail;
It can solve the distribution problem of small-batch, non-standard boutique agricultural products; It will become an important position for brands to promote new products:
Some excellent group leaders evolve into KOLs in the community and can promote excellent new products at low cost. It will become an aggregated service channel:
Product retail: fresh produce, consumer goods.
Services: community housekeeping, in-store consumption.
- Summary Community group buying is likely to become one of the mainstream distribution channels for fresh produce and planned goods in the next three to five years. This track is very likely to produce unicorn companies with tens of billions in valuation. In 2019, the entire market will fully explode. Players will further increase, possibly exceeding the 5000+ of the thousand-group war back then.
- Can distributors do community group buying? Some distributors say, I have warehouses, vehicles, people, and cooperation with thousands of offline stores. And as traditional agency business becomes increasingly difficult, can I, as a distributor, do community group buying? Before analyzing this issue, we must clearly recognize several problems: In the face of high-intensity competition, what abilities do we have? What abilities do we have that others cannot replace? Based on this issue, we need to consider several questions:
Will community group buying be a winner-take-all market in the future?
In the face of high-intensity markets, what is our competitive barrier?
If we do it, is franchising or self-building more reliable? Unlike traditional in-store group buying, community group buying requires extremely strong operational capabilities, product selection capabilities, IT capabilities, and efficient supply chain organization and delivery capabilities. This is a very complex business system. Most of these capabilities require strong buyers, operations, and supply chain management teams to achieve standardized services. This means that community group buying needs a large backend to support front-end small community operations, and the initial marginal cost will be very high. If rapid scaling cannot be achieved, the profitability of community group buying will be poor. Currently, these capabilities are not the strengths of distributors. But scaling, the backend supply chain is okay, but the front end will encounter a new problem: standardized training and scaled management of group leaders. Most group leaders rely on strong backend supply chain support on one hand, and on the other hand, the personal energy and charm of the group leader are also indispensable. However, given the generally low personal quality and weak learning ability of small store owners, it is indeed difficult to manage small store owners on a large scale. This requires platforms to have a very strong training and guidance system for group leader management. In the current competitive stage, most platforms are frantically expanding their territory and cannot, nor have the energy to, carry out refined management and operation of group leaders, which means a large number of dead groups will appear. The author recently lurked in dozens of community group buying communities and found that most community group buying groups are basically inactive or even dead. If your operational capabilities and scaling bottlenecks are solved, you still need to face the third issue: competition. Your competitors are not only distributors who have also entered community group buying, but also various national giants and local chain institutions. Some have more money than distributors, some have stronger product selection capabilities, and IT and operational capabilities are even more so. Of course, this does not mean that distributors have no opportunity to do community group buying. Previously, New Distribution also published related articles guiding distributors on how to do community group buying well. The author suggests that before doing it, distributors must consider that having resources is not a reason for distributors to do community group buying. In a fully competitive market environment, it is about what only you can do that others cannot. This is the so-called competitive barrier. Community group buying is an industry with an extremely low entry barrier but extremely high competitive barriers. This industry is very similar to the catering industry. Many entrepreneurs think catering is easy to do—if you know food and have some capital, you can do it—but after entering, they realize the industry requires extremely high professionalism. An O2O platform once released a set of data that fully illustrates this problem: Beijing's annual catering exit rate was as high as 95%. (Annual refers to restaurants that closed within 12 months of opening.) What a terrifying number! Therefore, if distributors want to do community group buying, without sufficient capital, without experience in retail supply chain, without relevant talent and technology, they must be cautious about entering this track. Final Thoughts Undoubtedly, given such huge market potential and opportunities, community group buying will definitely become a standard configuration for major retail enterprises under the new retail system in the future. However, in the author's view, without a background in the retail industry, without strong financial support, and without extremely strong operational capabilities, most entrepreneurs will become cannon fodder in this century-long war. They may help big players educate the market and end up with a mess. For more questions on how to do community group buying, welcome to the "2019 (5th) FMCG + Internet Conference"—Community Group Buying Theme Summit Forum to discuss with industry leaders! New Distribution will grandly hold the Community Group Buying Theme Summit Forum on March 17 at Chengdu Longzhimeng Hotel. We will have in-depth communication with brand owners, entrepreneurial platforms, supply chain enterprises, and industry senior experts around the topic "Community Group Buying: The Third Pole of Chinese Retail." We hope that through high-quality sharing and discussion, brand owners, distributors, and retail enterprises can have a clearer understanding and deeper understanding of community group buying e-commerce. In addition, on the evening of March 17, we will also invite domestic first-line investment institutions, community group buying entrepreneurs, and supply chain service enterprises to hold a high-end matchmaking dinner. We hope that through our connection, we can help enterprises achieve new growth and bring more development possibilities to participants in all industries. ★Confirmed Speakers★ Li Botao Vice President of Niwonin Supply Chain In 2011, early Niwonin conducted group buying activities by residential community. In September 2016, the Niwonin platform was officially established, taking the lead in Changsha with the classic community WeChat group group buying approach. In March 2017, Niwonin's annual net profit reached 10 million RMB. In January 2018, Niwonin became the first community group buying platform to launch mini-program tools. The mini-program launch drove monthly sales growth of 40% year-on-year. In June 2018, Niwonin received tens of millions in investment from GGV Capital, becoming one of the earliest community group buying teams to receive venture capital. Lu Zhihan Co-founder of Shixianghui Shixianghui was founded in December 2017. Starting in 2016, it promoted the community group model at Benlai Life, experiencing several rounds of model iteration and exploration in fresh e-commerce B2C, O2O, and new retail. In May 2018, it received angel investment from Xinyuan Capital. In August 2018, it completed a 100 million RMB A-round financing led by Xianfeng Qiyun Fund with Xinyuan Capital following. In December, it completed a $30 million B-round financing. To date, Shixianghui has covered more than 50 cities, with dense coverage in provinces including Zhejiang, Jiangsu, and Jiangxi. Monthly sales exceed 100 million RMB, and the platform has nearly 20,000 group leaders. Lian Jie Founder of Order Rabbit Order Rabbit was established in 2016. It is a "group purchase" platform serving community group buying retailers, providing SaaS systems for small and medium-sized community group buying companies or traditional offline stores in third- and fourth-tier cities. Order Rabbit has spread to 1,200 counties, with nearly 10,000 active group leaders. In April 2017, it completed a 5 million RMB angel round financing. Tang Guangliang Founder of Koala Select Koala Select is a community group buying project incubated by the FMCG B2B platform "Xingaoqiao." It started in May and officially launched in Changsha in July. Koala Select's special feature is using convenience store owners as group buying leaders. Within 30 days of launch, it covered more than 3,000 group leaders, with daily sales reaching 1 million RMB. In September 2018, it completed a 20 million RMB angel round financing led by Galaxy Ventures. More guests are being invited... Registration Method [Community Group Buying Special Session] Special New Year discount price: 199 RMB! Learn more about the main venue information Click "Read the original text" to register now...