Fresh grocery shopping is just the first step. Meituan founder Wang Xing posted on his Moments on April 3, 2019, saying that it would be fascinating to watch the battle between two very smart people, Pinduoduo's Huang Zheng and Taobao/Tmall's Jiang Fan, in the coming years. A year and a half later, Wang Xing's somewhat amused remark still rings true, but Pinduoduo's target is no longer just Taobao/Tmall; it is now attacking Meituan's heartland. In late August 2020, the 'Duoduo Maicai' (Duoduo Grocery) section appeared for the first time in the Pinduoduo app in Wuhan and Nanchang, even placed above the 'Billion Subsidy' section. Additionally, Huang Zheng personally visited Nanchang in early September 2020 to inspect the grocery business's progress. Meituan, meanwhile, is doubling down on community group buying. After establishing the Youxuan business unit focused on community group buying in July 2020, Meituan Youxuan launched its 'Thousand Cities Plan' in early September, aiming to cover 20 provinces in the next three months. Under the impact of the pandemic, the stay-at-home economy has boomed, and community group buying, which had died out in 2019, has revived. The internet grocery business, previously ignored by giants, has become a hotly contested arena. Leading players like Shihuituan have completed three rounds of financing since January 2020, each around $80 million, while Tongcheng Life has received two consecutive investments since June. Xingsheng Youxuan and Yipin Fresh have also recently reported investment news. Industry capitalization is accelerating. For Pinduoduo, this battle is crucial, and it marks its first offline foray, potentially facing greater challenges in supply chain, warehousing, and logistics compared to Meituan. -01- After 'So Fragrant' Pinduoduo, which has been sprinting for over two years, is now seen as decelerating. After releasing its Q2 2020 earnings on August 21, Pinduoduo's stock price fell significantly, closing down 13.52% that day. The industry generally attributes this to slowing revenue and GMV growth. The financial report shows that in Q2 2020, Pinduoduo's revenue was 12.193 billion yuan, a year-on-year increase of 67.26%, compared to 169.1% in the same period of 2019. For the 12 months ending June 30, 2020, Pinduoduo's GMV was 1.2687 trillion yuan, up 79% year-on-year, versus 171% in the same period of 2019. Pinduoduo's VP of Finance, Ma Jing, stated in the earnings call that due to aggressive subsidy strategies by other companies in electronics, and Pinduoduo's discovery that daily necessities are excellent for enhancing user stickiness, they shifted strategy and increased marketing spending in this area. He also noted that consumer spending amounts have indeed decreased, with more purchases of essential items on Pinduoduo. In short, in Q2, Pinduoduo redirected its Billion Subsidy program more toward lower-priced daily necessities rather than focusing on 3C products as before, leading to slower revenue and GMV growth. Ma Jing also mentioned Pinduoduo's planned acceleration methods: increasing user mindshare, increasing user spending on the platform, and making more efforts in user stickiness. In the disclosed meeting minutes, the term 'user stickiness' appears 12 times, making it one of the high-frequency words in Pinduoduo executives' responses. It's clear that Pinduoduo, having established its 'so fragrant' reputation through the Billion Subsidy program, is trying to get its nearly 700 million users to use the platform more frequently across a wider range of categories. To this end, it has taken specific measures, including: adjusting the Billion Subsidy strategy to favor daily necessities and consumer goods; attracting high-quality merchants; promoting the money-saving monthly card more frequently to encourage daily check-ins; and increasing efforts on high-repurchase agricultural products. Currently, continuing to focus on agricultural products is one of Pinduoduo's key strategic directions. In April 2020, Pinduoduo released its '2019 Agricultural Products Uplink Development Report.' According to the report, in 2019, Pinduoduo achieved agricultural and sideline product transaction volume of 136.4 billion yuan, with 240 million annual active buyers of agricultural products and a repurchase rate exceeding 70%. On one hand, user demand is strong; on the other, Pinduoduo is continuously transforming the agricultural supply chain. According to Pinduoduo, its 'Agricultural Goods Intelligent Processing System' (the 'Sky Net') and the 'Platform + New Farmers' system (the 'Ground Net') are basically formed. The 'Sky Net' system covers 100% of county-level administrative regions in China, and Pinduoduo continues to increase support for agriculture and agricultural products in logistics, technology, and data, helping upgrade the industry chain. Having started with fresh fruit group buying, deeply cultivating the supply chain, and against the backdrop of the dual circulation economy, Pinduoduo's shift of some development focus to the agricultural industry and poverty alleviation is a natural move. It reflects management's forecast of the future economic situation and is an important means to achieve the goal of enhancing user stickiness. Agricultural products are seen as a key growth point, but the inherent delay in the fresh produce online group-buying model hinders further transaction growth. Moving the group-buying model offline and shortening delivery times to increase order frequency is one viable solution. Recent industry changes have given Pinduoduo a further opportunity. The COVID-19 pandemic in 2020 accelerated community group buying, especially the grocery business. Through market education, users have gradually formed the habit of buying groceries online, and industry awareness has strengthened. When Didi and Meituan began entering this business, Pinduoduo no longer needed to wait. Thus, Duoduo Maicai was born. -02- Duoduo Does More Than Groceries Currently, Duoduo Maicai's model is similar to many community group-buying platforms: orders must be placed before 11 PM the previous night, and goods can be picked up at nearby self-pickup points by 4 PM the next day. Group leaders pull ordering users into WeChat groups, where they remind users and update new products. About a month after Duoduo Maicai's launch, Haike Finance randomly interviewed several users and group leaders in Wuhan and Nanchang to hear their experiences. Zhang Li, an office worker living in Hongshan District, Wuhan, discovered Duoduo Maicai on the Pinduoduo homepage and immediately used it, mainly because the pickup point was at a bakery downstairs from her home. Zhang Li had known about some community group-buying apps before but never used them because pickup points weren't close enough. Although Duoduo Maicai's SKU selection isn't extensive, since it offers common fruits and vegetables at low prices, she orders frequently. Occasionally, some vegetables aren't very fresh, but Zhang Li doesn't mind much, saying, 'It's convenient; I can pick them up after work.' After three to five days, Zhang Li noticed a problem: orders placed the previous night sometimes had partial refunds the next day. When she asked the group leader, she was told it was due to stock shortages. In Zhang Li's view, Duoduo Maicai's product supply capability needs strengthening. Li Qi, living in Wuchang, has a lower tolerance for fresh produce issues. As a mother, she uses Duoduo Maicai more frequently because delivery times are getting earlier, sometimes arriving by noon. A couple of days ago, she found some rotten leaves on her lettuce and cabbage. She immediately took photos and sent them to the group leader, requesting a refund. She was satisfied with the group leader's prompt response. 'One or two issues are okay, but if I frequently find stale leaves, I might choose to walk farther to the market,' Li Qi told Haike Finance. Duoduo Maicai recently added some household daily necessities, which makes Li Qi think she might give it another chance. The day after the lettuce refund, she ordered more household items like disinfectant wipes, rags, and plants. 'It's troublesome to buy things for a few yuan, but if they arrive the next day, I'm quite willing to buy,' Li Qi said. Compared to the 'pleasure' of cheap and convenient purchases, Wang Ran, a group leader in Nanchang expanding his business, expressed frustration with too few users. Wang Ran runs a small convenience store near a residential area and just became a Duoduo Maicai group leader. Since his store faces the street and is some distance from nearby communities, he currently has few orders. He once advertised in his 300-plus member owner group but was warned by the group owner. Later, he learned that there were already two such shopping groups in the group, both developed during the pandemic. 'It's a small business with fierce competition; one group's pickup point is at a resident's home in that community,' Wang Ran said. Haike Finance's interviews found that in the pilot cities of Wuhan and Nanchang, Duoduo Maicai's listed daily necessities are mostly low-priced bestsellers from the platform. For example, on September 15, a kitchen scissors was listed in Wuhan, with the same product selling over 100,000 units on Pinduoduo—the maximum displayed—and plant items like mint also sold over 100,000 units. It's evident that Duoduo Maicai is trying to leverage its big data and algorithm advantages to support offline product selection. Taking plants as an example, Pinduoduo's agricultural uplink report shows that in 2019, non-food agricultural product consumption rose significantly. Among them, plant product orders increased by over 260% year-on-year. In Wuhan, Pinduoduo listed mint, aloe, and other plants, while Shihuituan and Meituan Youxuan mini-programs currently don't have this category. Xingsheng Youxuan's 'Household Goods' category shows a few plant products. Compared to market leaders, Duoduo Maicai's product categories are not yet extensive. Products are mainly displayed via information feed, with most being common fresh produce. It has taken a cautious approach to new products, introducing a small number of non-food items every other day, and pickup times are continuously adjusted and moved earlier. According to Li Qi, last weekend, goods could be picked up before noon, with Saturday's arrival around 10:30 AM. It can be said that Duoduo Maicai's exploration of community group buying is still in a careful trial stage, and household daily necessities and plants may become key categories for expansion next. -03- Capillary War Duoduo Maicai chose Wuhan and Nanchang as its first pilot cities, Didi's Orange Heart Youxuan launched in Chengdu in June, and Meituan Youxuan's first launch points were Jinan, Wuhan, Guangzhou, and Foshan. It's clear that, except for Meituan Youxuan's Guangzhou launch, the small giants' community group-buying layouts are currently targeting non-first-tier cities. For existing non-platform players, this is an attack. On July 29, Shihuituan announced the completion of a C+ round of $80 million investment, led by CDH Investments. Recent data from Shihuituan shows that after more than two years, its business has entered about 100,000 communities, with over 100,000 group leaders, each with specific assessment indicators. There are several other community group-buying platforms of similar scale, generally characterized by strong regional advantages, slower capitalization previously, but rapid development and a burst of investment in the first half of 2020. Yipin Fresh, founded in Hefei in 2013 and receiving investments led by Tencent and Capital Today in August 2020, previously focused on the central region, especially Anhui, and entered Beijing only in July 2019. It has now formed a development path combining fresh stores and online group buying. According to founder Jiang Jianfei, the latest goal this year is to significantly expand store openings. Xingsheng Youxuan, which announced a C+ round of $800 million from KKR and Tencent in July 2020, also has strong regional advantages. Xingsheng Youxuan's model is based on existing store resources, opening online group-buying business, with stores serving as pickup points, representing a transformation of retail players. Its business has expanded to 13 provinces and cities, but its strongest presence is in Hunan, with 80,000 stores there. After years of development, many players have developed methodologies and accumulated experience in group leader training, supply chain management, warehousing, and distribution, which are their advantages and barriers. However, compared to traffic platforms like Meituan and Pinduoduo, they often face high brand marketing costs, small scale, slow growth, and profitability challenges. Compared to these retail-oriented players, Meituan's determination and goals in the grocery business may be what Duoduo Maicai should pay more attention to. Meituan entered the fresh business early, first testing fresh stores with the opening of its first store, Zhangyu Fresh Supermarket, in Beijing in July 2017. In March 2019, Meituan began testing grocery delivery in Beijing and Shanghai, and later, Xiaoxiang Fresh cooled off, with five stores closing. By the end of 2019, Meituan's model for this business was: first-tier cities use the front-warehouse + delivery-to-home model, while second-tier cities like Wuhan develop pickup points. Financial reports show that by the end of 2019, Meituan had set up 96 warehouses in Beijing, Shanghai, and Shenzhen, and over 30 pickup points in Wuhan. In early 2020, Meituan accelerated its grocery business, launching a 'Caid aquan' project to renovate wet markets, aiming to enhance the digital operation capability of local wet markets. After exploring various models including stores, delivery-to-home, pickup points, and wet market renovation, Meituan recently officially entered community group buying. Unlike Duoduo Maicai's cautious trial approach, Meituan Youxuan has adopted a high-profile promotion strategy since its launch. According to data, after the 'Thousand Cities Plan' announcement, Youxuan quickly expanded across regions, launching in six cities in Hubei Province on September 26. As of September 28, in addition to the first four cities, Youxuan also launched in Zibo, Tai'an, Nanchang, and others. It was previously an industry consensus that fresh e-commerce is hard to profit. When platform players with user scale and data capabilities enter, especially fierce players like Meituan and Pinduoduo, it's foreseeable that industry competition will become extremely intense. Meituan's entry is mainly related to its long-term goals in the fresh business. Meituan's Q2 2020 financial report shows that among its three major businesses, hotel and travel revenue was 4.54 billion yuan, down 13.4% year-on-year, indicating it hasn't recovered to 2019 levels. Meituan stated that due to pandemic uncertainty, this business will face challenges. In contrast, the stay-at-home economy-related grocery business performed well, achieving nearly 4x revenue growth. Meituan said it will continue to expand in the grocery sector. For Pinduoduo, fresh group buying is its foundation, and investment in agricultural products will continue to grow. Exploring community group buying is an important measure to increase user stickiness and raise the GMV ceiling. From these perspectives, Pinduoduo's goal of achieving internet + grocery offline may also be long-term. At the same time, this battle is very different from previous platform-style approaches. Although it has certain advantages in brand promotion and supply chain costs, as Wuhan resident Zhang Li mentioned, group-buying users may care most about the distance to pickup points and the platform's comprehensive operational capability. The competitors in community group buying may not be peers but nearby supermarkets and wet markets. Additionally, factors determining whether users will order long-term include whether fresh products consistently offer high quality and low prices, and whether the platform provides differentiated categories that meet their needs. When these needs are met, whether the WeChat group leader is enthusiastic and friendly, and the after-sales service capability, are also within their consideration. This is a battle that goes deep into the capillaries, testing the platform's refined operational capability. For now, the industry has not yet reached a decisive moment. The biggest challenge they currently face may still be how to make more users aware of community group buying and change their purchasing habits for fresh products. (Zhang Li, Li Qi, and Wang Ran are pseudonyms.) Source: Haike Finance (ID: haikecaijing) Tips will be paid 400-2000 yuan upon adoption.