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What's been the hottest topic in the past month? It's none other than community group buying! Even during the 11.11 shopping festival, I don't think it was as lively as community group buying. Mainstream media have been reporting on it, as internet giants move offline, launching a hundred-billion community group buying war, with predictions about life, death, and the final outcome. Every day is filled with socializing and excitement.
While outsiders enjoy the spectacle, insiders—FMCG practitioners—are suffering. Because behind the hundred-billion subsidies, FMCG manufacturers and distributors everywhere are being undermined.
-01- A chorus of lamentation! A case of 1x24 Red Bull: the distributor's landed cost is 115 yuan/case, and the supply price to stores is 120 yuan/case. After Duoduo Maicai (Pinduoduo's community group buying) launched, it directly priced at 99 yuan/case. A 1.128kg bottle of White Cat dishwashing liquid: the distributor's landed cost is 6.4 yuan/bottle, and the supply price to stores is 7.2 yuan/bottle. Duoduo Maicai launched at 4.6 yuan/bottle, now it's 6.6 yuan/bottle, and the group leader also gets a 10% commission.
A Mr. Li Hua (pseudonym) from Shijiazhuang, who runs a local community group buying platform, sighed, "The price is so cheap that even I want to buy it!"
A few days ago, Meituan Youxuan (Meituan's community group buying) competed with Duoduo Maicai. The day before, Meituan Youxuan announced eggs at 1.79 yuan/6 eggs, while Duoduo Maicai announced 1.59 yuan/6 eggs. The next day, on the official sales day, Meituan followed with 1.58 yuan/6 eggs, and Duoduo Maicai at 1.48 yuan/egg...
This community group buying war has driven prices so low that it makes you question life.
Mr. Li Hua told New Distribution that Mengniu Telunsu is generally priced at 48 yuan/carton for community group buying platforms, while the manufacturer requires platforms to sell at 52.9 yuan/carton, and local KA supermarkets can sell at 49.9 yuan/carton. In the past, before Duoduo Maicai entered Shijiazhuang, we kept prices similar to Xingsheng and Meituan, not daring to undercut, because we had to consider long-term cooperation with the brand.
But with Duoduo's launch, the direct selling price is 44.8 yuan/carton, driving both consumers and store owners crazy. Distributors and local supermarkets are stunned!
A popular bottled liquor in the local area: the distributor's cost is 11 yuan/bottle, the store price is 12-13 yuan/bottle, and the store sells it at 15-16 yuan/bottle. Community group buying platforms subsidize it down to 9.9 yuan/bottle. Even store owners dare not sell it; consumers know about the 9.9 yuan price, so who would buy from the store?
-02- Who benefits, and who suffers? If onlookers watch this war, they might be happy—after all, prices are low, and at least consumers benefit. If you're not in marketing, you might also be happy: more goods are moving, and there's an additional incremental channel.
But is that really the case?
Li Hua told New Distribution that this war is much more brutal than the FMCG B2B platform competition of two years ago. All three internet giants have entered, but they have no retail genes, have never been distributors, and have no idea what price control means! Suppliers go to Duoduo Maicai to list products, and Duoduo Maicai has only two principles:
First, the price must not be higher than on the main site (Pinduoduo); Second, the price must not be higher than Xingsheng Youxuan. Whatever Xingsheng sells, Duoduo Maicai will undercut!
In this giant war, the first to suffer are local chain supermarkets, with predicted sales declines of 10%-30%. As supermarket sales decline, distributors fail to meet targets, the channel price system is disrupted, profits are blocked, and it's highly likely that a batch of distributors will go bankrupt.
Although community group buying emphasizes local supply chains, this creates huge conflicts and contradictions with brand manufacturers' regional management and regional distribution strategies. Some distributors immediately jumped on the community group buying "bandwagon" and gained short-term incremental sales, but community group buying doesn't just sell in their own region; it radiates to the entire city and county. Cross-regional selling, price undercutting, and territorial violations mean no distributor in the surrounding areas has an easy time.
According to New Distribution's current research, the FMCG standard products most impacted are mainly the following categories:
1. Beverages; 2. Milk; 3. Baijiu (liquor); 4. Snacks; 5. Daily chemicals.
Within these categories, the focus is mainly on first-tier brands such as Mengniu, Yili, Wrigley's, Daliyuan, Red Bull, etc. When community group buying starts a war, to gain traffic and win consumers, they often target first-tier standard products.
With brand recognition and price awareness, only by offering low prices can they break through consumers' psychological defenses and create a preference for the platform.
Frankly, for distributors, first-tier brands already offer little profit. Some distributors initially thought the platforms would limit purchases. To move goods and meet targets to get factory rebates, they secretly supplied the platforms, but as they continued, they were shocked to find there was no purchase limit, and offline stores stopped restocking... They picked up sesame seeds but lost the watermelon!
-03- The counterattack is about to begin If brand manufacturers do not intervene on pricing soon, the offline price system will be severely impacted. According to Li Hua, local branches of Yili and Mengniu have already started to resist, mobilizing employees to place orders and collect goods at stores, but unfortunately, this is only a short-term stopgap measure.
In the current context where so-called "new retail" is prevalent, it's right to advocate embracing new retail, but the posture of embracing it needs careful thought, after all, offline business still accounts for the majority of sales.
What exactly should be done?
First: At the front line, establish a frontline sentinel mechanism as soon as possible.
The new retail department or local sales units should deploy new retail sentinels in their respective locations. They should collect information on local community group buying and O2O companies, understand the product listing and price control on platforms, coordinate the supply system, designate distributors for supply, and work with distributors to monitor platforms and maintain price stability.
Second: At headquarters, quickly open a dialogue mechanism with platforms.
The new retail department should proactively communicate with platforms like Xingsheng Youxuan, Meituan Youxuan, Duoduo Maicai, and Chengxin Youxuan. Establish an immediate communication window: products can be adjusted, fees can be invested, but prices must not be chaotic, regions must be unified, and promotions should follow a rhythm.
Third: At headquarters, the consumer insights department should conduct in-depth analysis of shoppers behind new retail.
Clearly understand who the consumers are on new retail platforms, what the shopper profiles are, how they differ from consumers in the main offline channels, and whether differentiated flavors, specifications, or packaging are needed.
Fourth: At headquarters, the marketing department should carry out JBP (Joint Business Plan) with new retail platforms.
Whether it's existing business or incremental business, the huge traffic behind new retail platforms itself has brand communication value. Even if there's no direct sales, as a marketing battlefield, the cost is still relatively low at this stage.
The subsidy war in community group buying has already begun. Overall, it won't end in the short term. Brand manufacturers need to quickly understand and grasp local market conditions, with one policy per region. First, protect the interests of local chain supermarkets and distributors, stabilize the market, and then plan cooperation with community group buying platforms.
What are your thoughts on the hundred-billion subsidy war in community group buying? Feel free to share and discuss with us in the comments section!