---
title: "Orange Heart Preferred: Retreat on the Eve of the Decisive Battle"
description: "Orange Heart Preferred, Didi's community group buying arm, is retreating from most cities just as the industry's major players prepare for a decisive autumn battle. After a period of heavy subsidies and rapid expansion, the company is now scaling back due to high losses and intense competition."
author: "王琳"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2021-09-10"
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# Orange Heart Preferred: Retreat on the Eve of the Decisive Battle

> Orange Heart Preferred, Didi's community group buying arm, is retreating from most cities just as the industry's major players prepare for a decisive autumn battle. After a period of heavy subsidies and rapid expansion, the company is now scaling back due to high losses and intense competition.

**Click to read the original article for details**
Source: Tech Planet (ID: tech618)
Grid warehouse owner Wu Xinyu hates summer. The humid, hot weather, high cold-chain costs and product damage, and a business hovering on the edge of break-even all make him feel extremely irritable.
Some grid warehouse owners choose to retreat because they can't bear the losses. Wu Xinyu once had the same thought but encouraged himself: autumn will be better. Autumn and winter are the seasons when Chinese people consume the most; a typical Chinese family spends most of its annual income before the Spring Festival. At the same time, lower temperatures bring a double decline in cold-chain costs and product damage. These signs all point to one word: profitability. This is the season that community group buying practitioners most look forward to.
With small players like Tongcheng Life, Shixianghui, and Shihuituan gradually declining, this autumn and winter can be said to be the decisive moment for Xingsheng Youxuan, Pinduoduo, Meituan, Alibaba, and Didi.
Duoduo Maicai, usually low-key, has already launched the first battle of the peak season in Guangdong. However, Orange Heart Preferred, the earliest among the big companies to enter the game, has started a major retreat. According to Caijing, mid-September will be a node; by then, Orange Heart Preferred will shrink in batches nationwide, with the first batch closing operations in 60% of existing cities.
But in fact, the contraction has already begun. September 8 was the last day of Orange Heart Preferred's operations in Jilin Province. On that day, business in Ningxia and Hainan had just withdrawn, and the withdrawal from Beijing-Tianjin-Hebei was also proceeding in an orderly manner. "Internal news now says only the Sichuan-Chongqing region will be retained," an Orange Heart Preferred employee told Tech Planet.
The shrinking of business had already shown signs. According to data obtained by Tech Planet, in June this year, Orange Heart Preferred's orders were only 1,400, half that of the leading players, and its average order value was the lowest among all players, around 5 yuan. Before the adjustment, its order volume was only 6 million, down more than half from its peak.
Now, employees are either leaving or preparing to leave. A major contraction is underway at Orange Heart Preferred.
**Crazy 200 Days, Spending Over 100 Million a Day**
Internet companies like to use phrases like "no upper limit" and "personally leading the team" to describe how much they value a business. In the fifth month after Orange Heart Preferred launched, Didi CEO Cheng Wei said, "Didi's investment in Orange Heart Preferred has no upper limit; we will strive to win the market's first place."
Orange Heart Preferred brought the craziest subsidies in the community group buying field. In the early stage, team leaders who completed 1,000 orders received a 1,000 yuan reward. Team leaders who brought in a new user received 8 yuan, without requiring the new user to place an order.
Orange Heart Preferred was generous. Its 0.99 yuan flash sale events were far more frequent than Meituan Youxuan's, and flash sales did not limit one per person.
This gave users real benefits. One user said that at that time, four eggs cost one cent, and she and her friends bought seventy or eighty copies together. The next morning, they set up a stall to sell free-range eggs at 10 yuan per jin.
Many Orange Heart Preferred employees came from Meicai.com, and Didi recruited them with double salaries. A mid-level Orange Heart Preferred employee said that the second half of last year was the craziest time for Orange Heart. At its peak, Orange Heart Preferred invested 150 million yuan per day.
After experimenting in the Sichuan-Chongqing region for three months, Orange Heart Preferred entered a phase of national expansion, with city openings happening at rocket speed. "From confirming the city manager to opening the city, it only took 10 days," said the mid-level employee.
The 10-day city opening speed was a huge test for any team. "In Hunan, we hit 1.9 million orders in ten days, but the supplier system wasn't set up, and the warehouse and distribution were just built and not mature. The result was various issues like goods not arriving on time and not being delivered," said an Orange Heart Preferred employee who participated in the early city-opening battles.
The results were not ideal, but the employees opening cities worked extremely hard. They slept on camp beds in warehouses, with piles of leftover takeout at the door. On the office desks were multiple phones (at least two per person) and a large number of wireless Bluetooth headsets, because they had no time to answer calls by hand.
An Orange Heart Preferred employee felt this approach was inappropriate. He commented on social media: I've never liked the strategy of spreading across the country. Better to break one finger than injure all ten. Focus on quality origin areas, radiate to surrounding provinces, figure out a profitable model, build a good community ecosystem, and then consider national expansion.
Now, with Meituan, Orange Heart can't go up or down. In the end, it's like the mantis stalking the cicada, unaware of the oriole behind. They've cultivated a large number of users for others.
But Orange Heart Preferred seemed not to have time to consider all this. The timing of the community group buying expansion was particularly critical for Didi. At the end of October 2020, Uber's market value, which had been sluggish, began a big rebound, staying between $90 billion and $110 billion.
According to LatePost, it was at this time that Didi established its listing plan.
But mobility is a slow industry and cannot create visible growth in the short term. The emergence of community group buying brought Didi the possibility of increasing traffic. To motivate employees, Orange Heart Preferred gave each employee an additional 20% of their monthly salary as a "wartime subsidy."
**Subsidies Gone, Orders Drop**
Orange Heart Preferred had no intention of shrinking, at least before May this year.
They set a target of 100 billion yuan in GMV at the beginning of the year. Despite a slight decline in orders during the Spring Festival, Orange Heart Preferred quickly recovered growth by increasing subsidies in key regions, with daily GMV approaching 100 million yuan and order volume close to Pinduoduo's Duoduo Maicai.
It was also considering raising $4 billion in financing for the Orange Heart Preferred business to drive rapid growth.
To secure financial support, Didi made a heavy bet: if Orange Heart Preferred failed to complete an IPO within five years after the end of its Series A financing, then these Series A investors' shares in Orange Heart Preferred could be converted into shares in Didi.
Everything was still proceeding as usual. A regional head was still boosting team morale in April, hanging a banner in a slightly shabby office that read, "There is no choice but victory."
The change happened in May. "At that time, the company stopped the full-reduction discounts. This was the company's core. With the one-cent subsidy for new users and large-scale subsidies halted, many BD relied on full-reduction discounts to drive orders," said an Orange Heart Preferred employee.
"Take mineral water as an example: the wholesale department sells two bottles for 1.5 yuan. The community group buying buys it in and sells it at 1.7 yuan, then uses full-reduction subsidies to bring it back to 0.5 yuan per bottle," the employee said. These standard products had huge shipment volumes, and many wholesalers placed bulk orders, generating tens of millions in GMV per day.
An employee described the result of stopping subsidies as a visible drop in order volume. According to data obtained by Tech Planet, in June this year, Orange Heart Preferred's orders were only half that of the leading players, and its average order value was the lowest among all players, around 5 yuan.
At the end of June, there were rumors that the 20% wartime subsidy would be canceled.
But grassroots employees and suppliers did not realize the situation was taking a sharp turn for the worse. A grid warehouse owner was still expanding his team in early June. Orange Heart Preferred's recruitment plan was also proceeding as scheduled.
But the contraction had already begun in full.
**Capital Is No Longer the Most Powerful Weapon**
Among all the giants, Didi was the first to enter community group buying. Its entry sounded the horn for national expansion in community group buying; before that, all community group buying players were regional.
Compared with Pinduoduo's supply chain reserves and Meituan's refined management capabilities, Didi had no advantage.
Over the past 10 years, Didi's most adept weapon has been capital. It is the unicorn with the most financing and the most complex shareholder structure. Didi's board has eight members, with Didi management holding three seats: Cheng Wei, Liu Qing, and Zhu Jingshi. Both Liu Qing and Zhu Jingshi have financial backgrounds.
Any company can easily fall into strategic inertia. In the ride-hailing war, Didi relied on capital to establish its industry position. In community group buying, Didi hoped to use capital to quickly establish a leading advantage.
Didi has only experienced one war. Unlike Meituan, which cultivated three leading figures—Gan Jiawei, Wang Huiwen, and Chen Liang—through three battles in group buying, food delivery, and hotel and travel.
Didi appointed Chen Ting as CEO of Orange Heart Preferred, who was considered someone who dared to burn money and knew how to burn money. He built Didi's express and premium car business lines from 0 to 1 and played a key role in the war with Uber. This was the best choice Didi could make at the time.
Didi hoped to win quickly with capital, but now the competitive landscape has changed. The past competitors were startups; now they are Pinduoduo, which is carving out a third pole in e-commerce from Alibaba and JD.com, and Meituan, which has repeatedly succeeded with its follow strategy.
Community group buying is not ride-hailing. "In ride-hailing, once the architecture is laid down, front-end burning money can make it work, but community group buying requires supply chain construction, and back-end development takes time," a mid-level Orange Heart Preferred employee lamented about the shortage.
"Orange Heart actually lacks an overall understanding of procurement, sales, warehousing, distribution, and transportation. The team is pieced together and can't form a cohesive force," said an employee who once worked at Meituan and later joined Orange Heart Preferred.
"Procurement-warehouse-distribution-network-team-C involves too many links. The supply chain process is too long, the business process hasn't been fully run through, and the loss rate for fresh produce is too high," a mid-level Orange Heart Preferred employee commented.
Compared with Meituan and Duoduo, Didi lacks a parent platform with a retail gene. This results in higher customer acquisition costs and unacceptable losses.
"For Meituan or Duoduo, it's acceptable for the group buying business to not lose money or have small losses. From a big-picture perspective, it's actually profitable because the main site's customer acquisition costs are lower.
But Didi's main site traffic diversion is not ideal, and there's no feedback reception point for reverse flow. For example, Meituan or Duoduo's reverse feedback to the main site in terms of traffic and GMV is quite good," the mid-level employee explained.
Big companies can bear losses, but grid warehouse owners don't have such strong hearts. Once losses occur, few are willing to improve fulfillment capabilities. By the time goods reach team leaders, quality further declines, and the business's competitiveness thus declines.
The disappearing subsidies and declining fulfillment capabilities made Orange Heart Preferred's retreat somewhat expected.
**Retreat on the Eve of the Decisive Battle**
At the end of August, Zhang Xu received news that his Guangdong theater would close on September 15. At the same time, rumors came that ByteDance or JD.com might acquire Orange Heart Preferred.
A mid-level Orange Heart Preferred employee said that the probability of Orange Heart Preferred being sold is high, but it probably won't be acquired by existing platforms with community group buying businesses.
In July, Orange Heart Preferred withdrew from its headquarters in Chengdu and moved to Beijing and Hangzhou. The original headquarters management system was adjusted to 9 major regions, then divided into 5 major regions, and now it's 3 major regions. An Orange Heart Preferred employee said it might change again in the future because many regions have been shut down.
"Internal news now says only the Sichuan-Chongqing region will be retained," an Orange Heart Preferred employee told Tech Planet. "But it's not finalized yet." A grid warehouse owner said that in the end, only cities with good order volume and where Didi Cargo has launched might remain.
The large-scale contraction of Orange Heart Preferred made many employees feel regret. "Some team leaders even refuse to leave the group chat, asking us to list products. They sell even without rewards," an Orange Heart Preferred employee said.
This large-scale withdrawal made Orange Heart Preferred's grid warehouse owners very uneasy. One grid warehouse owner said he was considering whether the deposit and last month's service fee could be settled normally.
With small players like Tongcheng Life, Shixianghui, and Shihuituan gradually declining, this autumn and winter can be said to be the decisive moment for Xingsheng Youxuan, Pinduoduo, Meituan, Alibaba, and Didi.
"Our community e-commerce business, Meituan Youxuan, remains our most important investment area this quarter," Meituan said in its Q2 2021 and semi-annual report released on August 30, reiterating its support for the business. Duoduo Maicai has already started a sprint in Guangdong.
At the decisive moment, more firepower and resource allocation are needed. But with its main business struggling, Didi seems unwilling to continue the fight. Duoduo Maicai, Meituan Youxuan, and Xingsheng Youxuan quickly occupied the market after Orange Heart's retreat.
Orange Heart Preferred gave generous compensation to laid-off employees; some who had worked for less than a year even received 3.5 months' compensation. The young community group buying company also gave each laid-off employee mooncakes, with free shipping to their homes.
In the past, Didi also explored food delivery, ticketing, and other businesses, but none could compare with Orange Heart Preferred. In the face of community group buying, known as a money shredder, and with its main business experiencing significant fluctuations, Didi chose to withdraw.
In the end, community group buying is a protracted war, and capital cannot win quickly.
**Are you "watching" me?**


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