This is the third in a series of analytical articles on community group buying that I've written at the end of this cold 2018, and it also serves as a small testament to the heated attention this model has garnered despite the capital winter:
The third article (this one) is written at the request of friends from Brand New Marketing to introduce the value of community group buying to brand owners. Over the past two months, I have conducted in-depth interviews with many investors and entrepreneurs in this track. To avoid all talk and no action, I have also been closely following the progress and data of a friend's community group buying startup. Today, let's look at the currently red-hot community group buying from the perspectives of "New Retail, New Marketing, New Distribution": what it is, what value it holds, and what opportunities and pitfalls lie hidden within. Today's analysis focuses on three main aspects:
Analysis of the community group buying business model and key operational points
Discussion of value across the industry chain
Some judgments on the endgame When facing a new marketing and sales model, we often try to analyze and consider the following questions. Let me state the conclusion first: This is a typical O2O model of 2C e-commerce; the banner once held by Aixianfeng has now been raised in a different pose! 1 Analysis of the Community Group Buying Business Model Current mainstream representative model: Based on LBS WeChat communities as the core, focusing on fresh produce bestsellers, operating within WeChat through mini-programs, using group leaders for customer acquisition and marketing services, generating orders through group-buying pre-sales, and conducting offline self-pickup. Expansion is achieved by recruiting group leaders to replicate groups. System operations are managed by headquarters. Diagram⬇ Now let's look at several core key points: Core Key Point One: "My Group Leader, My Group" — The platform incentivizes group leaders with around 10% sales commission to move forward and get closer to money, thereby achieving:
1, Expanding users (i.e., pulling community consumers into groups).
2, Operating the community (promoting products within the group, handling communication and after-sales).
3, Assisting delivery (self-pickup points at store owners and mothers). Group leaders are mainly chosen from two major groups: community small store owners and stay-at-home mothers: Each has its pros and cons: Mothers have high operational enthusiasm and invest more time, but they lack standard self-pickup points and service stability; they are suitable for user acquisition and operations. Small store owners have physical stores, giving them absolute advantages in customer acquisition and front-warehouse capabilities, but they often don't invest enough energy in community operations. Based on data observations over a period, group leaders play a crucial role in the average order value and sales of each group. With the same group, different group leaders can result in a 100% difference in sales! It's evident that a group's operations are highly dependent on the group leader's abilities. To improve group leader performance, platforms attempt to strengthen training, establish standard scripts, use in-group bots, enhance incentive policies, increase penalties and elimination, and even make group leaders direct employees—quite an ambitious attempt to create a "Haidilao you can't learn" level of store manager management. Of course, there is also a viewpoint that the value of group leaders is prominent in the early stage. Once users form habits, with the accumulation of big data, a group's product selection will closely match the consumer profile of that community, naturally relying on dynamic category recommendations to retain users. Management models that align with and activate human nature, combined with big data user demand analysis—both are the future and both are core! Regarding the group leader model, there are also two policy risks to note: 1, In what form do group leaders receive commissions? Does platform cashiering and then distributing commissions involve second-clearing risks?
2, If group leaders are individuals rather than individual industrial and commercial households, how to quickly comply once e-commerce tax policies are implemented? Core Key Point Two: Self-Pickup Points 1, Small stores outside and inside the community
2, Temporary storage points for mothers, such as cooperation with express stations or property management
3, Smart cabinet self-pickup points In practice, self-pickup points are most suitable for community convenience stores, as they are open year-round and provide stable service. This conclusion seems unproblematic, but it sparked a small but intense discussion in a community group buying industry group: Is the unmanned self-pickup point the mainstream model of the future? Proponents believe in the power of technology, while opponents think it's just a supplement. I believe that self-pickup points will gradually expose many issues: In the future, larger order volumes and food safety management requirements will only lead to higher demands on self-pickup points. In the future, good locations, even for self-pickup, will become increasingly valuable. Of course, there is a fourth viewpoint: direct delivery, no need for user self-pickup, delivered straight to home. But this requires stores to keep inventory on hand and requires a sufficiently high average order value to cover the cost. It also overlaps with food delivery and errand services. The cost risk of 30-minute delivery is still high, and it's hard to replicate quickly. Core Key Point Three: Categories—What to Eat Tomorrow?! Initially, fresh produce bestsellers are used for traffic generation, and the pre-sale self-pickup model ensures minimal loss and delivery costs. Building a full-category (300-500 SKU) supply chain around basic community dining scenarios is very challenging. Later, high-margin, low-frequency products are introduced, using fresh produce to cultivate user habits and achieve high-frequency driving low-frequency. These viewpoints are common in community group buying business plans, and I agree. But the current problem is, product selection needs to change daily; if there's no change, sales immediately halve the next day! This number is terrifying, and one of the reasons is the incomplete product library. Second, "What to eat tomorrow" is the number one problem troubling humanity, and fresh ingredients are precisely within the range of this problem. Recommending high-quality, differentiated, and continuously innovative products to your community users every day has long existed in traditional retail store management concepts, known as "thousand stores, thousand faces." Supply chain: Because platforms are still in the early development stage of grabbing group leaders and users, most use same-city supply chain procurement. The theoretical model of buyer-style plus nationwide direct sourcing remains a beautiful future; it might be better to try cooperating with professional supply chain companies. Fruit chain stores with inherent supply chain advantages have a clear edge, but unfortunately, they have too few categories with strong supply chain advantages to solve the world's problem of what to eat tomorrow for community users. Core Key Point Four: Operations The difficulty in operations management lies in group leader management and peer competition. How many community group buying groups exist in a single residential area? Currently, in more competitive areas, there can be more than three, but since each platform's average order value is not too high, they operate independently without affecting each other. That is, in the future, a residential area will mainly be managed by one platform overseeing multiple group leaders and groups. Warehousing and distribution cost control: Given that fresh produce warehouses need to operate 24 hours, and with the trend of rising warehousing and logistics labor costs, it might be better to try cooperating with professional supply chain companies. After all, the situation where larger sales lead to larger losses is something all investors who see the core value of community group buying don't want to see: "Didn't they say delivery costs are low?" At this stage, mainstream VCs have begun to lay out in this track. The initial round of investment is not large in scale. Top platforms have monthly transaction volumes exceeding 40 million yuan, growing rapidly, replicating the model city by city. The overall industry is in the early stage of rapid development. Cities like Changsha have relatively high penetration rates, with over a hundred platforms already operating there, making competition extremely fierce. Some small players have chosen to be acquired or have voluntarily exited. 2 Value to the Industry Chain First are the FMCG B2B platforms that have collectively transformed and local distributors considering transformation. Those that have already attempted this include Changsha Furong Xingsheng and Xingaoqiao. Thanks to their solid small-store user base and supply chain advantages, they have become the fastest-growing community group buying platforms in China and have received backing from top VCs. At the same time, traditional large distributors with internet thinking across the country have also actively tried and tasted the benefits. We see that in this community group buying model, the most suitable group leaders are community small store owners, because they gain not only increased income but also comprehensive O2O empowerment. The community users covered by the 6 million small stores nationwide are super big data without blind spots. Of course, mothers are also a good choice, with a larger base and stronger community operation capabilities. In the future, group leaders and self-pickup points will continue to develop new models. The self-reform of retail channels has never stopped, but it truly heated up after Ma Yun proposed the concept of New Retail. However, two years have passed, with capital frenzy on one side and continuous trial and error with less-than-ideal data on the other. The combination of online and offline, especially user management and service in chain retail stores, has found a feasible and practical solution in the community group buying model, giving an actionable plan to the early O2O concept: Baiguoyuan and Qiandama have actively started trying. More and more retail chain enterprises are following suit. For brand owners, this can be understood as a new retail channel. The feature of directly reaching users allows for full grasp of consumer data profiles. Is there greater imagination when combined with traditional distributor channels? Few enterprises have yet to engage in deep cooperation and experimentation in this area. But brand owners with new marketing and new retail thinking are already observing this model closely and actively preparing to explore. Supply chain owners will respond faster and faster. 3 Judgments on the Endgame of Community Group Buying Finally, let's talk about judgments on the so-called endgame from several dimensions. These are just personal views, offered to spark discussion: Written at the end: Community group buying, as a WeChat traffic monetization model suitable for fresh produce e-commerce, is undoubtedly sexy, allowing many practitioners in traditional retail and supply chain to feel the unique charm of 2C e-commerce. The extremely low barrier also gives everyone a low-cost opportunity to try and error. As for the future endgame, I lean towards stores: empowering physical stores, turning virtual stores into physical ones, combining virtual and physical, virtual and real intertwined. For brand owners, this is a brand-new channel, and its greatest charm lies in super user experience! Users can comment on your products and services in the group in real time, and once a negative review is posted, it cannot be deleted! This is the best stage for confident, high-quality, and affordable products! Wang Jun: Famous New Retail expert. Special columnist for New Distribution. Previously worked at: Radio and Television Group, Quanshi Convenience Group, HNA Zhanghe Cloud Warehouse. Rich practical experience in FMCG supply chain and new retail channels. Chief retail analysis expert at New Distribution, special industry expert for FMCG Association, Huatai Securities, etc. In-depth research in innovative fields such as community group buying, unmanned retail, and IP commercialization. Click here to register in one click