In less than two years, the once-hot community group buying track, hailed as a 'once-in-a-decade opportunity' and 'set to reshape China's internet landscape,' has turned from fierce competition to collective retreat. No one has won. The only two players left on the national front—Meituan and Pinduoduo—haven't won either; they just haven't given up yet. It's like a long-distance race: the gun fires, and after just ten meters, the crowd drops their armor and flees in disarray. JD.com and Didi directly abandoned this business, startups went bankrupt one after another, and Xingsheng Youxuan, which hasn't withdrawn yet, had to shelve its illusions and retreat to Hunan. The audience turned away. Several secondary market investors told LatePost that they currently value Meituan Select at zero, because 'it's uncertain when it will become profitable, or whether it will be profitable at all.' As for Meituan Select and Duoduo Maicai, the phase of nationwide expansion chasing scale and high growth quickly ended. Starting late last year, both companies collectively slowed down to focus on turning losses around. But after half a year of effort, they are still far from full profitability. Multiple industry insiders estimate that, excluding headquarters amortization, Duoduo Maicai's national operating margin is about -7%, while Meituan Select's is about -12%. The difficulty of this battle is evident from the scale of spending. Meituan Waimai vs. Ele.me burned at most 4.5 billion yuan a year, with a monthly peak of 400-500 million yuan. During the most intense competition between Didi and Uber, they spent over 2 billion yuan a month, but a few months later, the two merged. In contrast, Meituan Select's single-quarter loss once exceeded 3 billion yuan. Community group buying primarily deals in fresh produce and daily necessities, using a model of ordering the same day and picking up the next day to reduce costs. Because of China's vast territory, non-standardized supply, and highly fragmented fulfillment systems, the centralized platform logic of big companies no longer works, and the value-growth method of racing to acquire territory under long-term losses has been abandoned. The light of the internet struggles to reach China's 38,000 townships. This isn't the first time internet companies have hit obstacles entering the offline retail market. Alibaba and Tencent both coveted this huge market—the former through acquisitions and transformation, the latter through investment—but they quickly found these approaches simply didn't work. The harsh reality shows that merely extending capabilities isn't enough; they need to build a whole new set of capabilities. Being strong themselves isn't enough; they must make the supply chain strong. Besides making money for themselves, they need to help millions of community small shops make money too. Meituan hopes to use offline community group buying as a springboard to grow into China's largest retail company. But first, it must become a true retail company—and all of this starts with letting go of its ego as an internet transformer. 01 Prequel: The Largest and Fastest Retail Exploration Before launching its community group buying business, Meituan had been exploring the fresh produce sector for five years, trying various models and constantly seeking opportunities. Community group buying is the biggest battle Meituan has fought in retail so far. Previously, Meituan's retail projects had at most 4,000 people, but Meituan Select assembled over 10,000 people within a year. From 2018 to 2021, the core figure in Meituan's fresh retail business was Chen Liang, a former member of Meituan's S-team (top decision-making layer) and senior vice president. From Xiaoxiang Fresh, Meituan Maicai's C1 and C2 models, to today's Meituan Select, Chen Liang was the number one in charge through multiple retail model rotations. Kuaitu, launched in February 2016, was Meituan's earliest exploration of the fresh supply chain. At the time, Meituan was competing with Ele.me; supplying ingredients to food delivery merchants could increase merchant stickiness, but the fresh wholesale business was hard to scale and progressed slowly. In 2018, Chen Liang took over the Xiaoxiang Fresh business, which benchmarked Hema, but two years later, it closed due to lower-than-expected return on investment. The following year, Chen Liang shifted focus to the front-warehouse model—Meituan Maicai—and set two directions: C1 and C2. In the C1 model, users receive delivery within 30 minutes of ordering, but gross margin barely covers delivery costs. A few months later, Chen Liang decided to try a new model: cut delivery, mimic the startup Dailuobo, and have users order a day in advance and pick up at the store the next day—the C2 model. But after half a year of operation, it was lukewarm. Internal research found that people in second- and third-tier cities trusted goods recommended by community acquaintances more than centralized platforms. At that stage, Chen Liang pondered how to return to an entrepreneurial state. After Meituan's IPO in 2019, Chen Liang felt the company lacked an internal entrepreneurial atmosphere. He planned to spin off a few hundred people from the Meituan Maicai team to do front-warehouse business independently, had secured over $100 million in financing from investors, but was ultimately stopped by Wang Xing. A person familiar with Meituan said the reason for the halt was that fresh produce is a market Meituan must do, and it couldn't be split off. Retail is a big track, but there are too many forks on the road to the podium. In early 2020, a startup called Xingsheng Youxuan came into Meituan's view. At that time, Xingsheng Youxuan had been refining its model in Hunan for two years, with 13,000 convenience stores and 280,000 loyal group leaders. Founder Yue Lihua created a three-tier fulfillment model of central warehouse-grid warehouse-group leader. Compared to supermarkets, Xingsheng saved 22%-25% of store management costs per item, making some products cheaper. At the same time, using group leaders as nodes precisely matched the psychology of lower-tier market users—trusting neighbors' recommendations. Users order in advance and pick up the next day, allowing the platform to forecast order volumes, purchase accordingly, and achieve zero inventory and low wastage. In 2020, Xingsheng Youxuan achieved an average order value of 30 yuan, an average item price of 13 yuan, and a gross margin of 22%—higher than Yonghui Superstores. Yonghui is China's largest domestic supermarket chain, with a market cap of 30.7 billion yuan and nearly 20 years of history. Visibility rose along with ambition. At the end of 2019, Xingsheng Youxuan expected to reach 40 billion yuan in transaction volume in 2020, four times its 2019 volume. This target matched the 2021 GMV goal of Hema, which had been striving for six years. Using this as a reference, Wang Xing judged at a discussion meeting around April 2020 that community group buying was a market worth hundreds of billions. Around April 2020, multiple executives from Meituan Select and Duoduo Maicai flew to Hunan for research. The Gaoxin Logistics Park in Changsha, where Xingsheng Youxuan's central warehouse was located, was bustling. Late at night, during the busiest time at the central warehouse, visitors with backpacks took photos with their phones, and they were willing to pay tens of thousands of yuan for an hour-long chat with Xingsheng management. Community group buying developed from multiple evolutions of fresh e-commerce. The supermarket-plus-delivery and front-warehouse models greatly raised service standards—30-minute delivery to home. But the cost was heavy models, high logistics costs, and the need to bear large inventory. Hema's expansion was also constrained by site selection, making it slower; after six years, its 2021 GMV was around 34 billion yuan. Dingdong Maicai, after five years, had 2021 GMV of 22.1 billion yuan, covering only 28 cities, and had teetered on the brink of life and death several times. Community group buying, in contrast, lowers service standards, thereby reducing logistics costs and inventory risks, ultimately making product prices lower. China's vast lower-tier market is not covered by supermarket chains. Community group buying effectively created a no-inventory, large-scale, low-price chain in lower-tier cities. Without spatial restrictions on site selection, every small shop on the street can become a pickup point, making its expansion faster than other fresh retail formats. Meituan Select achieved 120 billion yuan in GMV in just a year and a half. What they aim to transform is the industry with the lowest online penetration in China. According to Euromonitor data, of China's over 1.1 billion tons of fresh agricultural products annually, only 9% are sold online. What excited practitioners even more was that community group buying would gradually dismantle the multi-level wholesale distribution system and build a new retail system. At the same time, commerce drives logistics, making it possible to form a nationwide fulfillment network, including a cold chain network reaching down to counties and townships—something never achieved before, reaching places even JD Logistics couldn't cover. Dreams are always necessary. 02 The Regular Army Enters, Covering the Nation in a Year 'It's like you're in a small wooden boat, and the enemy charges at you in a luxury warship,' said an employee of a fresh produce startup. A Xingsheng Youxuan insider said with regret, 'If these giants had come half a year later, we might have grown up, like Pinduoduo.' Supporting their view is the fact that Xingsheng Youxuan entered 161 cities after two years of operation, while the giants spread their business to over 300 prefecture-level cities in six months. Two months after Meituan Select and Duoduo Maicai entered Changsha, Xingsheng Youxuan's market share in Hunan dropped by 10%. The first major internet company to enter community group buying was Didi. In February 2020, Didi began researching community group buying; in April, it established Chengxin Youxuan, and the team entered Chengdu. By the end of September, Chengxin Youxuan internally announced it had invested 100 million yuan in the two cities of Sichuan and Chongqing. Meituan followed closely. In April 2020, Meituan piloted in Jinan, with over 200 C2 project employees heading to Shandong. At the time, at weekly S-team meetings, Wang Xing and Chen Liang discussed how big the community group buying market was, whether it was worth it, who should do it, and how. In July, Meituan established an independent business unit—Meituan Select—reflecting its strategic determination. Chen Liang took just 18 days to build a team from scratch. He selected people like ordering dishes, circling names on the Meituan Maicai employee list, instantly taking over 3,900 people. At that time, a business line head from Meituan Maicai walked into Chen Liang's office in frustration and said, 'If you take all the people, how am I supposed to work?' But this didn't shake Chen Liang's decision. 'The office building emptied in an instant,' said a Meituan employee who witnessed the whole process. Pinduoduo's core management had hesitated about whether to go all in. At that time, Pinduoduo was already China's largest agricultural e-commerce platform, selling fruits and vegetables nationwide at low prices, with agricultural and sideline products accounting for 16% of Pinduoduo's total transaction volume. But founder Huang Zheng insisted on entering community group buying. According to LatePost, during a business review, Pinduoduo found that sales in Hunan, a top-performing region, were declining sharply because some growth was being taken by Xingsheng Youxuan. If Pinduoduo didn't do community group buying, fresh orders would be directly snatched by competitors, and if competitors expanded into daily necessities, it would be a fatal blow to Pinduoduo—just as Pinduoduo had once leveraged the e-commerce market under Taobao's shadow. Pinduoduo didn't do research; it directly mobilized 1,000 people to prepare Duoduo Maicai, accounting for one-sixth of its total employees. On the afternoon of the decision to open cities, two first-level executives from Pinduoduo directly bought tickets and flew to Nanchang and Wuhan—two cities with strong purchasing power on Pinduoduo's platform. Huang Zheng announced his resignation as CEO in July, but he personally went to Nanchang and other places for research. In mid-2020, the three companies entered Wuhan simultaneously. A Chengxin Youxuan Wuhan field promotion manager said that at the time, hundreds of people came for interviews every day in the office and started work the next day. The Chengxin Youxuan team hung a banner in the Chengdu office reading 'No Choice but Victory.' At the time, Didi executives said at an internal meeting that the Chengxin Youxuan team had expanded to 16,000 people in half a year, which was too large. If it failed, the original business wouldn't be able to absorb these people. At Meituan Select's Wuhan office, employees wore headbands with the word 'Victory.' A field promotion employee still recalls the delicious cake that was cut on site. 'Even a lick feels different,' he said. In September 2020, Meituan set the Thousand Cities Plan. Within three months, Meituan Select planned to expand to 20 provinces and 1,000 cities and towns. The office area hung a banner reading 'Thousand Cities Battle, Traversing the Land; Select Iron Army, King's Division.' The war reached its first turning point—the paths of Meituan Select, Duoduo Maicai, and Chengxin Youxuan began to diverge. Meituan and Pinduoduo shared a consensus: community group buying lacked a national company, and whether they could quickly open cities nationwide was the most critical action in the first phase. Chengxin Youxuan, however, didn't pursue the number of cities; its goal was to reach 10 million orders per province—a judgment that left Chengxin Youxuan behind after others completed national coverage. Pinduoduo, which entered later, led in the city-opening phase. By the end of October 2020, it had opened 120 cities, twice as many as Meituan Select and ten times as many as Chengxin Youxuan. This achievement stemmed from the company's absolute focus on a single goal. Duoduo Maicai skipped some steps, such as mobilization rallies and preliminary research; lowered the threshold for reviewing group leaders; and often omitted the business licenses explicitly required by the platform. Incentives were direct: internal daily competitions on order volume and city openings, with provincial heads' bonuses ranging from one million to ten million yuan. Working hours were extremely long, with employees working up to 400 hours per month. Young, aggressive local managers were fully empowered, promised that once they built up a city, they could absorb more cities and receive extra rewards. Duoduo Maicai cooperated with third-party field promotion companies of varying quality, not specifying action details, only giving numerical targets. Pinduoduo is goal-oriented, allowing 'as long as you don't do things too badly.' Meituan is different; they believe in 'must do things right.' Meituan Select initially established a 'Flying Tiger Team' with combat experience. The 'Flying Tiger Team' would go to local areas to set examples, sort out distribution and warehousing systems, and then the main force would enter. In specific execution, they referenced Xingsheng Youxuan's mature model in Hunan, such as grid warehouse franchisees needing to pay a 100,000 yuan deposit, and a grid warehouse handling over 10,000 orders needing at least 800 square meters of warehouse space and 10 vehicles. Duoduo Maicai's grid warehouse franchisees only needed to pay a 10,000 yuan deposit, with the only requirement being on-time delivery. In September 2020, Meituan disbanded the 'Flying Tiger Team' and began recruiting part-time field promotion staff, incentivizing group openings with higher commissions than peers to catch up. A Meituan Select insider said Meituan's early city-opening speed lost to Duoduo Maicai, giving Duoduo Maicai a chance to catch up—a strategic mistake for Meituan. But these didn't stop people from favoring Meituan. A senior industry insider said Meituan Select is the regular army, steady from the start, while Duoduo Maicai is the wild path. He believed the regular army had a better chance of winning. Meituan also became the top competitor for many participants, with over 200 local community startups even forming an alliance called 'United Against Meituan.' After the 'Thousand Cities Plan' was implemented, Wang Xing adjusted his judgment: the community group buying market was not just hundreds of billions, but trillions. He believed community group buying could penetrate even more down-market areas. The original target of 100 billion yuan in transaction volume for 2021 was doubled to 200 billion yuan. After the back-and-forth, by February 2021, the three companies had little difference in city coverage and order volume. Meituan Select and Chengxin Youxuan both exceeded 20 million daily orders, while Duoduo Maicai was slightly smaller at 15 million. More aggressive targets were set. Meituan Select locked its 2021 annual GMV at 200 billion yuan (average daily GMV of 5.5 billion), Duoduo Maicai targeted 150 billion (average daily GMV of 4.1 billion), Chengxin Youxuan targeted 100 billion, and Xingsheng Youxuan targeted 80 billion. From 2020 to now, Xingsheng Youxuan raised $4.8 billion. Pinduoduo raised $7.7 billion through bond issuance and additional offerings. Meituan issued $2 billion in preferred bonds in October 2020 and then raised nearly $10 billion six months later, setting a record for Hong Kong stock fundraising. Ample money, aggressive growth targets, the desire for victory, and cramped competitive space—the game began. 03 The GMV Curse Entering the first half of 2021, multiple giants investing in community group buying were losing nearly 2 billion yuan per month in this business. The battlefield was already very crowded. Besides Meituan, Pinduoduo, and Didi, Alibaba and JD.com also flooded in. Many startups received their largest financing since inception in 2020, unaware it would be the last money they could spend. In the first month Meituan and Pinduoduo entered Guangdong, Tongcheng Life responded with nearly 100 million yuan in subsidies. A few months later, in July 2021, Tongcheng Life, once valued at $1 billion, went bankrupt overnight. Orderly competition became difficult. When there are multiple players of similar strength in the market, someone always tries to break the rules and compete with lower standards. Other players have no choice but to follow until the next turning point arrives. In 2021, Wang Xing attended Meituan Select's analysis meetings every two weeks. A person who attended recalled that the meetings often discussed: 'How to defend against the opponent's attacks? How to widen the gap with the opponent? Is every link more efficient than the opponent?' In China's internet competition, Didi was the first company to crush opponents in a short time through massive subsidies to gain market share. This tactic was continued in community group buying, with Chengxin Youxuan becoming the first to offer large subsidies and free orders. Early on, new users on Chengxin Youxuan could buy goods worth 40-50 yuan for a few cents. Chengxin Youxuan's commission subsidy to group leaders was 15%-20%, far higher than Meituan Select's 10% and Duoduo Maicai's 6%. When others opened cities, they started with dozens of field promotion staff; Chengxin Youxuan entered Wuhan with 300 field promotion staff to compete for 10,000 group leaders. From consumers, group leaders, and logistics drivers, Chengxin Youxuan subsidized every link, and heavily. Until the second half of 2021, everything became unsustainable, and it began to shrink directly. Another behavior that disrupted market rules was ultra-low pricing and 'cross-regional supply.' Duoduo Maicai's management judged from the start that low prices were crucial in this battle. With cheapness as the principle, Duoduo Maicai listed a large number of white-label products and some near-expiry items, and even sourced from dealers across regions—'cross-regional supply.' Duoduo Maicai pioneered the 'bidding' model, where multiple merchants bid for the same display slot daily, with the lowest price winning, and the process restarting the next day. It also used the main site's 'explosive product' method, funneling more concentrated traffic into fewer display slots. Meituan Select initially used a buyer model, with fixed suppliers for each category and display slots for suppliers lasting over 7 consecutive days (Duoduo Maicai only gives 1 day). But from the second half of 2021, Meituan Select began requiring merchants to bid on daily necessities like instant noodles and condiments, with prices 1%-2% lower than competitors or at least consistent. To grab users, multiple platforms listed products priced at 0.01 yuan, called 'hook products,' such as ten small bags of Mimi shrimp crackers for one cent. Brands resented these behaviors that disrupted pricing systems. In December 2020, multiple brands including Coca-Cola, Jinlongyu, Xiangpiaopiao, and Weilong prohibited dealers from supplying community group buying platforms at prices below terminal retail prices. Meituan's city-opening speed was slower than Pinduoduo's early on, but it accelerated later. It mobilized agents who had worked on food delivery and power bank businesses to recruit grid station franchisees and group leaders. On some streets in Nanchang, Jiangxi, almost all shops except pesticide stores became Meituan Select pickup points. Each pickup point had low transaction volume, increasing logistics pressure, and group leaders couldn't make money. After a while, Meituan Select began batch-closing township warehouses with low order volumes. Suppliers and group leaders are important links in the chain, and these behaviors harmed them to some extent. The government began to intervene. From December 2020 to June 2021, the State Administration for Market Regulation issued regulatory opinions five times, from the initial 'Nine No's' code of conduct to explicitly prohibiting platforms from dumping below cost. After that, various companies removed their traffic-driving explosive products. With no clear turning point in sight, capital began to retreat. In July 2021, Tongcheng Life went bankrupt, and Shixianghui stopped services; in August, Shihuituan and Taocaicai merged in some regions. Because subsidies were not allowed, Chengxin Youxuan's orders dropped directly from a peak of 20 million to 6 million. In September, its staff shrank from 16,000 to 5,000. Internally, the reasons for failure were summarized as 'growth overly dependent on subsidies, insufficient basic skills, and serious misjudgment of retail difficulty.' JD.com, unable to bear losses, also began to exit quickly. JD.com valued product quality, with logistics relying on Jingxida; 95% of goods in main urban areas of first-tier cities could be delivered to pickup points before noon. But four months after launch, it began closing six provinces with poor performance. In the third and fourth quarters of 2021, Jingxi Pinpin and Jingxi lost over 3.5 billion yuan in total, and internal focus shifted to cost control. In March 2022, the team was gradually disbanded, with its Jiangsu-Zhejiang head saying the war had entered deep waters, 'We can't compete.' Alibaba had four teams—Ele.me, Lingshoutong, Cainiao, and Hema—exploring community group buying, only integrating into Taocaicai in September 2021. With different upper-level cognitions, Hema CEO Hou Yi publicly stated that this model would be unmentioned after half a year. Some summarized Alibaba's problem in community group buying as 'upper-level struggles, middle-level alignment, lower-level no decision-making power.' Taocaicai's 2021 target was 120 billion GMV, but by year-end it only achieved 20 billion. Two years ago, Xingsheng Youxuan was an ideal model; participants aimed at it, trying to replicate its success. After a year of exploration, people realized that many places nationwide couldn't achieve Xingsheng's level in Hunan, and even Xingsheng Youxuan itself couldn't replicate its Hunan performance, closing multiple cities in the northeast and south in the second half of last year. Only then did many realize that the centralized platform playbook of fighting for traffic, subsidies to attract new users, and grabbing market share no longer worked. Community group buying isn't a battle that can be ended with a few central campaigns; it can't fill the anxiety of e-commerce giants quickly building a second growth curve. The departure of many was inevitable, but like the end of a music festival, they left a mess behind. By the end of 2021, no one had met their original performance expectations. Those involved had already felt the exhaustion firsthand. 04 The General Leaves, the Organization Shifts Gears In January 2022, 43-year-old Chen Liang officially announced he would no longer manage Meituan Select and other businesses, instead becoming a strategic advisor to Meituan. At the same time Chen Liang stepped down, Wang Xing also stopped attending Meituan Select's biweekly business meetings. Earlier that year, Huang Zheng resigned as chairman and CEO of Pinduoduo. Founders no longer deeply involved in the business signaled that the business had entered the next phase. Chen Liang's successor, Guo Wanhuai, stated internally upon taking over that they couldn't just charge ahead; they needed a balance between attack and defense, while deepening supply chain and refined operations. Guo Wanhuai is Meituan's fifth employee, initially managing finance and HR, later becoming the business head of Kuaitu. As a founding team member, Guo Wanhuai may be the most suitable leader for this long campaign at this stage. People who have dealt with Guo Wanhuai describe her as meticulous and strong-willed. In meetings, she would repeatedly question employees who didn't explain issues clearly, often creating tension. Chen Liang focused on costs, but at most asked about personnel, materials, systems, and equipment amortization. Guo Wanhuai went further, asking what equipment there was and how amortization was calculated for each. Previously, Meituan Select's business analysis team focused more on growth-related research; this year, research shifted to optimizing the UE cost model and increasing average item price. Meituan Select's losses have always been higher than Duoduo Maicai's. Low traffic is a reality. According to Quest Mobile data, in August 2022, Meituan's DAU just exceeded 100 million, while Pinduoduo had 400 million daily active users, and 45% of Duoduo Maicai's orders came from the main site. Organizational redundancy and sluggish pace also led to waste. Meituan Select's staff once exceeded 15,000, now around 12,000. Pinduoduo's entire company has fewer than 8,000 people. Even in the smallest provinces, Meituan Select's basic configuration includes: business analysis, PMO, 5-6 operators per category, and dozens of warehouse administrators. Duoduo Maicai's warehouses hire lower-paid outsourced personnel, with 1-2 field promotion staff in third- and fourth-tier cities, with main traffic coming from the main site. Meituan retains 10-15 field promotion staff in third- and fourth-tier cities. Meituan is accustomed to breaking down every link to the finest detail for scientific management. For example, a warehouse sorter's daily pay is subject to 18 standard assessments; competitors' sorters have only one assessment criterion: how much they sort within a fixed time. Meituan Select's organizational management of 'headquarters unified management + regional partial autonomy + vertical line management' compared to Duoduo's 'provincial autonomy' allows for easier advance planning and concentrating forces for major tasks, but lacks early flexibility. A Meituan Select employee said that to study where Guangzhou's central warehouse should be relocated for optimal cost, business analysts from the supplier, logistics, and user teams studied for over half a year without a decision, and the relocation was shelved. It's understood that over 400 business analysts serve Meituan Select alone. After Guo Wanhuai took over, she improved organizational management to increase efficiency. Headquarters gradually delegated power to local levels. Headquarters procurement now only handles important standard products; other specialty standard products and fresh produce are left to local procurement. Headquarters handles core warehouse planning and marketing activities for large cities, leaving the rest to local decision-making. Earlier this year, Meituan Select's transaction volume in a northwestern province was already 7:3 compared to Duoduo Maicai, which seemed like a small victory at the time. But in fact, some townships only had a thousand orders per day, and the province's total transaction volume was only a few thousandths of the national total, yet it had a central warehouse of several thousand square meters. Duoduo Maicai saved on central warehouse costs by directly using neighboring provinces' central warehouses for delivery. 'Why, after more than half a year of cost reduction and efficiency improvement, is the loss still around -40% after deducting fulfillment costs? What's the point of maintaining so many valueless pickup points?' At a Meituan Select meeting in a northwestern city in March this year, someone raised these questions. But after much discussion, no conclusion was reached. It wasn't until the end of April that employees were notified of the closure of four northwestern provinces, making everyone realize headquarters' determination to control costs. At Meituan's Q1 earnings call this year, Wang Xing said Meituan Select's 'overall growth rate was below expectations' and that 'investment in new businesses will be more cautious.' By Q2, new businesses including Meituan Select had reduced losses by 2.3 billion yuan compared to Q1. 05 Meituan Select and Duoduo Maicai Take the Same Path This is no longer a story of new forces challenging old forces, but of two head players from different tracks squeezing into a new track together. There are no proxies; they start from zero, personally engage, and both believe the outcome of this battle will determine their future. Currently, the outcome is undecided, but what's certain is that both Meituan and Pinduoduo will continue investing and won't give up. They both plan to complete at least 250 billion yuan in GMV this year, more than double what they actually completed last year. Currently, Duoduo Maicai's daily order volume reaches 35 million items (about 4.2 billion GMV), while Meituan Select is slightly lower at 32 million items (about 3.2 billion GMV). Alibaba's Taocaicai is at 12 million items. Pinduoduo's advantage is traffic and supplier resources. It uses big data to capture suppliers with good traffic on Duoduo Mall to provide products for the community group buying business and has suppliers bid daily. Meituan Select's product richness and quality are better than Duoduo Maicai's, with almost no white-label products, while Duoduo Maicai's white-label products account for 10% in some regions. Meituan Select users purchase 3.6 times per month, while Duoduo Maicai is 2.4 times. Meituan doesn't strongly push supplier bidding and has begun cultivating a group of core suppliers. Profitability remains the common theme for both this year, but there's still a gap. Orient Securities analyzed in April 2021 what indicators they need to achieve profitability:
In the mature stage, with an average item price of 10 yuan or above, 3-4 items per order, an average order value of around 40 yuan, a gross margin of 20%-25%, group leader commission of 5%, fulfillment rate of 7%, platform subsidy of 2% (including product and user subsidies), the final operating margin (excluding headquarters allocation) is 11%, and operating margin (including headquarters allocation) is 5%. Both companies' average item prices have risen from 7-8 yuan last year to around 10 yuan, the only indicator that meets the standard. The average order value for both is 35 yuan. Duoduo Maicai's average product gross margin is 14%-16%, while Meituan Select's is 11%-12%. A Meituan Select supplier said that the selling price of categories like personal care and beverages is 20% higher than the purchase price, double last year's level. Fulfillment costs have improved significantly. Last year, both had fulfillment costs of 15%; now Duoduo Maicai has dropped to 10%, and Meituan to about 11.7%, achieved by closing inefficient grid warehouses, merging large warehouses, and reducing SKU numbers. Group leader commissions and incentives have dropped to 8%, and platform subsidies (including product and user subsidies) have dropped to 2.5%. Every improvement in the chain starts from the decimal point, and only when all links improve can real change occur. 'It's already hard to push the average item price higher,' said a Meituan Select insider, because the ultra-low-price competition attracted users extremely sensitive to price. At the end of 2021, in Wuhan, products under 9 yuan accounted for over half of Duoduo Maicai's sales, and nearly 45% at Meituan Select. Between branded laundry detergent and unknown brands, consumers always prefer the cheaper one; a 3-5 yuan price difference can lead to a two-to-three-fold difference in sales. An investor who closely tracked community group buying said that real change will only happen when these companies first cut off junk users, find what the good users really want, and satisfy them. There's also unstable delivery capability, a major factor affecting repurchase, especially for frozen products. Meituan Select currently uses refrigerated trucks from provincial central warehouses to regional warehouses, but from regional warehouses to grid stations and then to pickup points, it often takes over ten hours. Drivers put frozen products in insulated boxes with ice packs, which can only maintain no thawing for four hours. To achieve upstream centralized procurement, integration, and standardization, community group buying's scale is still too small. Only with sufficient scale of people flow and commerce flow can logistics (including cold chain) be integrated. By the end of 2021, the combined transaction volume of Meituan Select, Duoduo Maicai, and Taocaicai was less than 220 billion yuan, accounting for less than 0.5% of total retail sales of consumer goods. That's equivalent to the agricultural product transaction volume of two Beijing Xinfadi markets in 2020. Meituan's next move is to merge the supply chains of Kuaitu, Maicai, and Meituan Select. In cities where all three businesses exist, it will find logistics parks of around 100,000 square meters, first merging delivery vehicles, warehouse labor, and turnover boxes. Future plans include centralized procurement of common categories across the three businesses, making origin exclusive sales possible—the best specifications go to Meituan Maicai, and the remaining to Kuaitu and Select. The industrial park may include a central kitchen to provide processed food for the three channels, expanding product categories and improving gross margins. Pinduoduo is accelerating the integration of Duoduo Maicai and Duoduo Post Station. In February, Duoduo Maicai transferred over 3,000 field promotion staff to promote the parcel collection business, starting with group leaders. By June, Duoduo Post Station had over 10,000 stations, with daily parcel collection volume reaching 30 million, close to leading express company Shentong. For Pinduoduo, community group buying means it now has an offline team, greatly reducing the risk exposure caused by insufficient depth. Both companies have plenty of money on their books. Meituan currently has at least 122.8 billion yuan in cash or equivalent assets, while Pinduoduo has 119.3 billion yuan. But Duoduo Maicai may no longer be Pinduoduo's most important strategic project. It's understood that Pinduoduo's next focus is: going overseas, 'Super Star' (attracting brand merchants), and Duoduo Maicai (including Duoduo Post Station). In September, Pinduoduo launched cross-border e-commerce platform Temu and transferred multiple first-level executives from Duoduo Maicai to Temu. A person familiar with Huang Zheng said he always invests his time and energy in the highest-return things. 06 A Battle That Cannot Be Lost Meituan is becoming a retail company with selling goods as its main business. In 2021, Meituan's goods sales exceeded 230 billion yuan, with about half from community group buying and 84.2 billion yuan from flash purchases (including Meituan Medicine). Multiple industry insiders analyze that Meituan Select will show improvement in 1-2 years and can achieve several hundred billion GMV in five years, potentially becoming Meituan's second-largest business by transaction volume. Meituan Waimai, which has been running for 9 years, had GMV of 702 billion yuan last year. According to third-party estimates, Meituan's in-store, hotel, and travel business GMV was around 300 billion yuan in the same period. Wang Xing said at Meituan's Q2 earnings call this year that the fresh food and daily necessities market won't have a single business model. Flash purchases, Meituan Select, and Meituan Maicai are all important ways for Meituan to extend into fresh and daily necessities. At an internal meeting at the end of 2021, a Meituan executive proposed a vision: rely on offline business to accumulate population heat maps based on business districts and residential areas, divide grids by a radius of 1-1.5 kilometers, see the consumption power of each grid, and decide whether to promote flash purchases, community group buying, or Maicai—currently no company has such data and capabilities. Community group buying may be Meituan's best opportunity to do retail well. True retail isn't rent collection or hypermarkets; retail's essence is reverse-driven by the supply chain to gain vitality. Among various retail format explorations, community group buying isn't just superior in scale and growth rate to other models; it's also Meituan's deepest business into the supply chain, with the first nationwide large warehouses and distributed fulfillment system. Alibaba, JD.com, and Pinduoduo occupy about 30% of Chinese consumption, but the remaining market, especially the fresh and daily necessities retail that every family needs daily, is fragmented across China. China's largest supermarkets, Yonghui and Gaoxin Retail (RT-Mart), have annual sales of only around 100 billion yuan, equivalent to 1/29 of Walmart's U.S. annual sales—yet the total consumption power of China and the U.S. differs by only a few percentage points. Walmart gets over half its revenue from fresh and daily necessities. When consumers develop a habit of buying fresh produce in one place, it drives consumption in other categories. If Meituan can do well in fresh and daily necessities, it has the same opportunity. The market is vast, the goal is clear, and the motivation is sufficient, but Meituan's path ahead remains bumpy. Even Amazon, which leads global retail in warehousing, logistics, and AI technology, has repeatedly hit walls in the grocery business. Amazon Fresh has been running for 15 years, trying various delivery methods: next-day delivery, postal truck off-peak transport, pop-up stores, store-in-store, self-operated convenience stores... with slow growth and continuous losses. In 2017, Amazon bought the organic supermarket chain Whole Foods for $13.7 billion, entering the heavy offline market, opening new stores and using technology to transform the supply chain. Five years later, Amazon's total physical store revenue was only $9.3 billion, just 6% of its North American retail sales. At Meituan's internal meetings, century-old retail companies like Sears are often benchmarked. Sears transformed retail with railways and mail-order technology, maintaining growth for 90 years before going bankrupt and restructuring a few years ago. Two years ago, a host of internet companies flooded into the community group buying market, most failing. Compared to Pinduoduo and Alibaba, the two competitors still investing, Meituan needs to break through in community group buying to squeeze into the retail business. 'Retail + Technology' reflects Meituan's dream and ambition. Retail builds scale, and technology makes retail more efficient—this is Meituan's opportunity for continued high-speed growth after food delivery peaks. But first, it must win. (Contributions to this article by Shen Fangwei, Zhang Qin, and Gong Fangyi) Source: LatePost (ID: postlate) Author: Chen Jing