New consumer brands building a new supply system anchored on community group buying is the process of embedding the brand into users' minds through community paths. Building a new supply system addresses the supply side, solving the problem of users being able to buy; building new consumer brands addresses the demand side, solving the problem of users being willing to buy.
New Assets and Changes Brought by Community Group Buying to the Retail Industry
We generally consider 2015 as the first year of community group buying. To date, community group buying has brought considerable data assets to the new retail model.
From the user side, group leader side, and upstream supporting systems, community group buying has accumulated 400 million users who regularly or habitually participate in group buying, 2 million group leaders, 20,000 supporting warehouse and distribution grid warehouses, and hundreds of thousands of supporting supply chain service providers. This is the result of players including internet giants and capital groups spending hundreds of billions of yuan, and also the result of acceleration and incubation during the COVID-19 pandemic over the past three years.
The 2 million group leaders and 6.8 million mom-and-pop community stores show an overlap rate of over 80%. This is two sides of the same coin: in the pre-sale scenario, they are group leaders; in the immediate sale scenario, they are store managers. Group leaders, physical stores, and in-station (express delivery e-commerce platforms) constitute the three major infrastructures of retail.
In the next 5-10 years, four major user shopping scenarios will emerge: visiting supermarkets, shopping on Taobao, playing on Douyin, and participating in group buying. See the figure below.
1. Visiting supermarkets. Physical stores are always worth visiting; this is where user experience value is maximized. Currently, physical retail accounts for 70% of total social retail sales.
2. Shopping on Taobao. Here, Taobao refers to all express delivery-based drop-shipping platform e-commerce. Shopping on Taobao maximizes user search value. Search e-commerce accounts for about 15% of total social retail sales.
3. Playing on Douyin. Here, Douyin refers to platform live streaming, including Kuaishou, WeChat short videos, etc. Douyin's greatest value is its fun, representing the maximization of user interest value. Interest e-commerce accounts for about 5% of total social retail sales.
4. Participating in group buying. The greatest contribution of community group buying is the stickiness and warmth between group leaders and users. This retail model, based on trust, with sharing as its core, and actively recommending products, maximizes user trust value. Trust e-commerce accounts for about 1% of total social retail sales.
Therefore, we define supermarkets as traditional physical retail, search e-commerce (Pinduoduo, Taobao, JD.com, etc.) as traditional e-commerce, and live streaming and group buying as new retail in the post-pandemic era. Live streaming and group buying have become basic configurations of the retail industry. In the future, all retailers will hold live streaming in one hand and group buying in the other, grasping both firmly.
Brand owners are creators of the value chain, while platform operators and group leaders are implementers. Brand owners' awareness of the community group buying business model has been continuously changing and improving. Compared with 2020, voices of doubt, denial, and denigration of community group buying among brand owners have almost disappeared. The question is no longer whether to do group buying, but how to do it.
Of course, this awareness is far from sufficient. For brand owners, community group buying is not just a supplementary sales channel, but an engine and lever for launching new brands and new products.
New Consumer Brands: Why Choose Community Group Buying as a Lever?
Every sale is an opportunity for brand communication, and every brand communication is an opportunity for sales. The theory of "integration of communication and sales" (品效合一) has been widely praised since its inception, and the community group buying model is the epitome and practitioner of this theory. Community group buying exhibits the significant characteristic of integrating communication and sales in its business model, which traditional physical retail and search express e-commerce do not possess. However, live streaming e-commerce does have this characteristic. Therefore, many new brands launching and old brands promoting new products will use group buying or live streaming as a market entry point to lay out their channel paths.
Compared with live streaming, choosing community group buying for new product launches has three major advantages: low threshold, wide coverage, and rapid penetration. Let's analyze the reasons.
First, return to product orientation and stop believing in brands blindly. Discarding all unnecessary packaging, rejecting all flashy actions, and transferring benefits and value to consumers is not just a slogan in community group buying; it is a fact.
Second, from the perspective of channel attributes, compared with high-cost channels such as supermarkets and first-class e-commerce, community group buying platforms have neither complicated entry procedures nor various fees, so users naturally enjoy discounts.
Third, from the characteristics of the group leader side, 2 million group leaders serve 400 million people. Theoretically, products can spread across the country within a week from farm to table, and market penetration is faster than imagined. Group buying products are low-priced, but overall they tend to be profitable, based on improved circulation efficiency rather than compromising on quality.
When building a new supply system anchored on community group buying, new consumer brands can anchor a listed price on Tmall or JD.com, or at worst, set an anchor price on Taobao. On one hand, this highlights the ultimate cost-effectiveness of community group buying to improve product notes; on the other hand, it addresses inquiries from meticulous customers who search online. Start community group buying to acquire the first batch of seed users, while testing the product fundamentals and price structure. After local testing, review and refine, then lay out channels "up to the sky and down to the ground," meaning going online to do community group buying on Kuai Tuantuan, and offline to start physical stores in the industry.
In short, wherever user scenarios are, products appear there. Community group buying serves as a lever and engine for new product market entry, allowing low-cost testing to obtain first-hand operational data, quickly igniting initial brand awareness, and then implementing omni-channel layout.
Three Paths for Brand Owners to Enter Community Group Buying
In the current community group buying track, according to operational characteristics, it has actually differentiated into three sub-models: the mall platform model, the supply chain model, and the chain store model. The representative of the mall platform model is Changsha Zhihuazhiguo, the supply chain model is represented by Chengdu Xiamang, and the chain store model is represented by Xiaoxu Daojia.
In brand owners' perception, they tend to divide community group buying platforms into capital group platforms (Meituan, Pinduoduo, Taocaicai) and non-capital group platforms (including regional local groups such as community e-commerce, community group wholesale, and community group stores). In actual operation, brand owners have three feasible paths.
First, operate capital group platforms through professional supply chain service providers.
After internet giants entered in 2020, they truly drove the rapid development of community group buying. Over the past three years, a commodity supplier system of hundreds of thousands has been accumulated, with professional division of labor across categories. Except for a very few brand manufacturers with wide product lines and numerous SKUs, 99% of brand owners are suitable for recruiting professional suppliers to operate community group buying capital groups. Of course, how brand owners operate capital groups has formed a standardized action system.
Second, establish a new retail organization to directly operate local group platforms.
From Shentu in Shenzhen in the south to Jiu Bai Jie in Daqing in the north, almost every prefecture-level market has group buying or group wholesale organizations of varying sizes and numbers. Because community group buying inherently has a pre-sale nature, it has become common for brand owners to cooperate directly with local community group buying organizations.
Third, lay out local warehousing and distribution service providers to reach independent group leaders.
We score and evaluate group leaders from two dimensions: community operation and product delivery. Community group buying group leaders are divided into three levels: below 60 points, above 80 points, and 60-80 points. Group leaders at the 60-point level serve as group leaders for capital groups, because traffic belongs entirely to the platform, and group leaders only earn the hard-earned money for product delivery, truly "porters"; group leaders at the 60-80 point level also participate in some community operations in addition to product delivery; group leaders above 80 points are independent group leaders, who do not belong to any platform and control their own territory, but they do not exclude cooperating with capital groups and local groups as pickup points. These independent group leaders are actually mini ultra-micro platforms. According to Wang Wei, founder of Fresh Legend, the independent groups in Hefei market (called "wild groups" in East China) generate 10 million yuan in daily revenue, which even exceeds the turnover of some local supermarket chains.
How to reach the independent group leader camp? Brand manufacturers such as Yisai Beef, Jianai Yogurt, and Jishi Rice have adopted methods of identifying local logistics providers to coordinate warehousing and distribution, and developing corporate teams.
Conclusion
There is a widely circulated saying online: The best way out for future business is not to make money from tangible products, but to make money from intangible services behind them. In the future, the profit of tangible products will approach zero, while the profit of intangible products will rise sharply. Don't be obsessed with the product itself; we have long entered an era of overcapacity, and society no longer lacks products. What do we lack in the future? It is spiritual guidance, help, learning, companionship, comfort, entertainment, and identity attributes—these intangible contents.
Behind community group buying is community, and behind community is social interaction. This is the charm of community group buying's warmth. So, let's play together!