Scan the QR code in the image to register According to the latest information from New Distribution, Hema's community group buying division, Hema Marketplace, will officially merge with Retail Link's community group buying business, and the new leader is likely to be appointed from one of Alibaba's 'Eighteen Arhats'. Coincidentally, a few months ago, JD.com underwent a major restructuring of its community group buying business, integrating all its business units such as Xintongdao, Youjia Puzi, JD Ququgou, and Ququ Gou into Jingxi Pinpin, and upgrading Jingxi from a business unit to a business group. Before people could react, JD.com invested $700 million in Xingsheng and HK$800 million in China Dili, with explosive news coming one after another. Alibaba's internal heavy-handed move, coupled with its recent continuous investment and support for external players, feels like 'the same taste, the same recipe.' With internal integration and external reinforcement, industry insiders and outsiders alike are marveling that when the elephant moves, the track is bound to change. This also means that in the community group buying war, the two commercial giants that have been treading water have now fully sprung into action. -01- Hema in the Making In mid-September 2020, at a group president's meeting, Alibaba Group Chairman and CEO Daniel Zhang announced that the Hema business group would establish the Hema Youxuan business unit, directly led by Hema CEO Hou Yi, reporting to Dai Shan, president of Alibaba's B2B business group. This move was seen as Hema's formal entry into the community group buying track. This was not Hema's first exploration of community group buying. As early as February last year, during the pandemic, Hema attempted community group buying. On February 15, Hema President Hou Yi mentioned on his Moments: 'Due to snow in Beijing and the lockdown in Wuhan, delivery faced huge challenges. Hema insisted on innovation, breaking the original model and switching to community group buying, still providing consumers with quality service.' This shifted from the original home-delivery model of 1-to-1 delivery to the 1-to-n model of community group buying, solving the problems of labor shortage and low transport capacity during the pandemic. This was Hema's first public attempt at community group buying. Subsequently, after Hema officially announced its entry into the community group buying track, in early November last year, Alibaba's community group buying business 'Hema Youxuan' was officially launched in Wuhan, claiming to open 10,000 groups in its first battle. Industry sources also reported that Alibaba would invest $4 billion to strongly support Hema's community group buying business. -02- Strong Alliance? Brothers in Adversity? Before Hema entered community group buying, in mid-July last year, Alibaba's Retail Link announced its entry into community group buying, preparing to set up a new community group buying department, with Zou Zhijun, former founder and CEO of Miaoshenghuo, as the head, at grade P10, reporting directly to Lin Xiaohai, general manager of the Retail Link business unit. As the other protagonist in this merger, Retail Link has been the flag-bearer of Alibaba's B2B business. When the rise of the 'new three groups'—Duoduo Maicai, Meituan Youxuan, and Chengxin Youxuan—used beverages and alcohol as tools to boost orders, the B2B channel suffered a huge impact. The three group buying giants used Retail Link's core categories as freebies to drive orders, and new logistics distribution models like grid warehouses overturned the original logistics channels. Therefore, Retail Link's move into community group buying was not about counterattacking but more out of necessity. Fortunately, Retail Link has inherent advantages in community group buying, as its business covers more than one million mom-and-pop stores nationwide, where store owners become group leaders. By using B2B to undertake community group buying and deeply empowering stores, once these one million small stores are linked and scaled up, the supply chain benefits would be immense. Therefore, when Hema Youxuan appeared later, industry insiders commented that it was born with a 'golden key,' because besides Alibaba's previous penetration into the fresh food sector through Hema Fresh and Hema Mini stores, Hema Youxuan could directly leverage the empowerment of 1.5 million community stores from Alibaba's Retail Link. However, things did not go as planned. On one hand, Retail Link's community group buying business was almost 'snowed under,' and on the other hand, Hema Youxuan's start was not smooth. After opening in Wuhan, it was flanked by Duoduo Maicai and Meituan Youxuan, with order volumes lingering at the bottom. When Meituan and Duoduo's daily orders in Wuhan exceeded 700,000 and 800,000 respectively, Hema struggled to break through the 100,000 daily order mark. As for this 'deep binding' of Hema Youxuan and Retail Link, the merger and adjustment of the two direct departments shows Alibaba's emphasis on the community group buying track. Perhaps with Retail Link handling front-end store operations and Hema Youxuan handling back-end logistics and supply chain integration, the two working in tandem could produce a surprise effect. -03- Alibaba's Layout As early as 2013, Alibaba invested tens of millions of dollars in the fresh food e-commerce platform Yiguo. However, as Alibaba's internal support for various players increased, especially with the emergence of Hema Fresh, business overlaps grew, and Yiguo was eventually abandoned and went through bankruptcy restructuring. Then in early 2019, relying on 'Cainiao Post + Taobao,' Alibaba launched the 'Post Station Group Buying' business on the mobile Taobao app, using Cainiao Post stations to enter community group buying, channeling Taobao traffic to its controlled company RT-Mart, and relying on its Cainiao Post stations to complete the last 500 meters for self-pickup. In the same year, Alibaba also invested in the community group buying platform Shihuituan, officially joining the community group buying war, and increased its investment in January 2020. Alibaba has always had the ability to dominate the retail sector, with capital, technology, traffic, and data. But the reality is that even with six internal forces—Hema, Retail Link, Cainiao, Ele.me, RT-Mart, and Shihuituan—all simultaneously pushing in the community group buying track, so far, the so-called horse-racing mechanism has not gained much say in this rapidly rising new track. So why is Alibaba persistently laying out its community group buying strategy, both making tough internal decisions and playing its trump cards externally? Looking back, it is even more 'coincidental' that, apart from traditional e-commerce represented by Duobaodong, the emergence of supermarket stores, traditional e-commerce, B2B, O2O, and other formats has each been seen as the beginning of a 'new retail' revolution. However, these 'new retail' formats are now all deeply embroiled in the community group buying vortex. In the view of New Distribution, now looking at community group buying, it can no longer be viewed merely as a business model, but rather represents the future upgrade direction of the entire retail industry. In this light, the endgame of community group buying that we have been discussing—whether it will be monopoly by giants or regional fragmentation—becomes meaningless. -04- The Logic Behind Community Group Buying 1. The Third Type of Retail Current retail scenarios can be summarized into three types: 'pyramid, star, and topology.' The pyramid model represents traditional new retail, relying on product-driven movement where people don't move but goods do; the star model represents internet platform retail, relying on central traffic distribution where goods don't move but people do; and the topology network model represents social network platforms, relying on people, intercepting traffic early in the social interaction stage. Community group buying is the third retail scenario—topology retail—and the first retail model to explode in the social network era. It can serve both B2B and B2C, both wholesale and retail, both early traffic interception and time-limited transactions. So, with their rear paths cut off, these giants, big and small, must enter the game and cannot easily leave, because there is no retreat. 2. Low Entry Barrier Community group buying is first about community, then group buying, which is inherently a business based on semi-acquaintance relationships. Even if a platform grows large, it is difficult to replace the group leader's position as an acquaintance in the community. Even if the group leader is removed, they will directly defect to another group or even start their own group. So, even if you don't have an app or a mini-program, as long as you have goods and can create a group chat, you can sell. In the end, although community group buying skirts the edge of the internet, it is essentially a wholesale business with an extremely low entry barrier. 3. Difficulty in Building Barriers Besides the low entry barrier, it is also very difficult to build high competitive barriers in community group buying. On one hand, community group buying is inherently distributed e-commerce, with supply chains and resources not concentrated, multi-city warehousing cannot be shared, and logistics cannot achieve economies of scale. On the other hand, the model of low-priced bestsellers to drive volume means many platforms are even used by distributors as a 'sewer' to dispose of excess inventory. The ultra-low prices of branded products can cause a huge impact on the brand's existing value network. Until the channel is truly stabilized, manufacturers will not embrace it but will instead resist it. 4. WeChat Ecosystem Returning to the WeChat ecosystem on which community group buying relies, WeChat itself is a topology network that does not allow centralized commercial entities. WeChat's decentralized business logic determines that the entry barrier for this model is extremely low, but to scale up, it is constrained by the efficiency bottleneck of physical delivery supply chains. Final Thoughts: A great start to 2021: Xingsheng completed the largest financing in the track, with $3 billion not yet in its pocket, but the investment institutions have clearly surfaced. At the same time, Shihuituan, another veteran in the track, is reportedly arranging its next round of financing plans in full swing. Among the 'new three groups,' the rich kid Didi, known for being willful with money, also understands the principle of striking first, with industry reports that it is raising $4 billion for its Chengxin Youxuan business. Community group buying remains hot, and the burning of capital makes it seem like an insatiable abyss. In the past, many thought the future would be dominated by giants like Meituan, Pinduoduo, or Xingsheng Youxuan, similar to the pattern of JD.com or Tmall having one or multiple strong players, and that small players would have no chance. But now, looking at it, community group buying is just a stage in business progress, even a premature and semi-mature entity that appeared in a hurry. The so-called endgame is most likely to be no endgame. In this process, there may be multiple strong players coexisting and small platforms constantly emerging, but every enterprise can definitely find its own position. Just like the restaurant industry, no matter how strong KFC is, it doesn't affect the popularity of Laoxiangji, nor does it hinder the iteration of individual snack vendors. Add the author's WeChat to communicate, note: NameCompanyPosition