1. Why is Alibaba Retail Link entering community group buying? 2. What role does community group buying play in Alibaba's business modules? 3. Will Alibaba Retail Link's entry into community group buying affect the existing industry landscape?
The community group buying track has added another heavyweight player. Following the successive moves by internet giants such as Meituan, Didi, and Cainiao into community group buying, Alibaba Retail Link has also officially entered the arena and begun building its team. What unique advantages does Alibaba Retail Link bring to its trial in community group buying? Can Retail Link chew on this "hard bone" of community group buying?
-01- Alibaba Retail Link Enters Community Group Buying According to related media reports, Alibaba Retail Link is currently preparing to establish a community group buying department. The person in charge, Zou Zhijun, has already reported for duty, holding a P10 level position within Alibaba, directly reporting to Lin Xiaohai, Alibaba Vice President and General Manager of the Retail Link Business Unit.
It is worth noting that Zou Zhijun, the head of Retail Link's community group buying business, previously served as CEO of the community e-commerce platform Miaoshenghuo. Public information shows that Miaoshenghuo was founded in 2015, an O2O e-commerce platform focusing on fresh produce such as fruits. It promoted fresh sales through online reservations and offline physical stores, supporting both in-store purchases and delivery within a three-kilometer radius. Due to high costs and financing difficulties, Miaoshenghuo ceased operations at the end of 2019. The three co-founders—Chairman Lin Min, CEO Zou Zhijun, and CTO Chen Yong—had previously been responsible for supply chain, operations, and technology respectively at Yixun.com (Tencent's e-commerce site, later merged into JD.com).
This is not Alibaba's first attempt at community group buying. In January 2019, Alibaba officially invested in Shihuituan, and followed up with additional investment in January 2020, widely interpreted as a landmark event of Alibaba's entry into community group buying. In June 2019, Shihuituan officially integrated with Alibaba's B2B businesses 1688 (Caiyuanbao) and Retail Link, and established a laboratory in Chengdu. The specific form of cooperation between Alibaba and Shihuituan is that Alibaba selects quality merchants and connects factory merchant resources to Shihuituan. Suppliers distribute goods in bulk to regional warehouses, from which Shihuituan picks up and delivers to communities. The cooperation between Shihuituan and Retail Link directly converts small stores that stock from Retail Link into pickup points for the former, while also driving traffic to these stores and helping increase their revenue.
Additionally, in early 2019, Alibaba launched the "Yizhan Tuangou" (Station Group Buying) business, entering community group buying through Cainiao Stations. Users could search "Yizhan Tuangou" in the Taobao app, select a nearby Cainiao Station, and see a list of group-buyable items. After successful group purchase, they could pick up goods at the station using a pickup code.
In June 2020, at Alibaba's Global Smart Logistics Summit, Cainiao announced upgrading Cainiao Stations into social life service stations, moving beyond single courier services to expand into community group buying, laundry, recycling, and other services. This undoubtedly sounded the clarion call for Alibaba's advance into community group buying.
-02- Why is Alibaba Retail Link Doing Community Group Buying? When it comes to Alibaba Retail Link, friends who frequently follow New Distribution are certainly familiar with it.
As the largest FMCG B2B platform in China, Alibaba Retail Link currently covers over 1.3 million retail stores nationwide, with GMV approaching 30 billion yuan in 2019. It has become an indispensable part of omnichannel distribution for all FMCG brands.
So why has Alibaba taken a fancy to this seemingly "insignificant" business of community group buying?
The outbreak of the pandemic is undoubtedly a catalyst. During the pandemic, community group buying became a vital support for residents, and major platforms experienced explosive growth in both GMV and penetration. Take Shihuituan as an example: its order volume doubled during the pandemic, with a 500% increase in Wuhan. In March, Shihuituan announced GMV surpassing 500 million yuan, and by April, GMV exceeded 650 million yuan. This undoubtedly made more "outsiders" see market opportunities.
Thus, we see Didi, Cainiao, Meituan, and Meicai all beginning to lay out community group buying. For giants facing traffic bottlenecks, this is clearly a "windfall" not to be missed.
New Distribution believes that the match between market and users is also a significant reason prompting Retail Link to enter community group buying. At a press conference, Lin Xiaohai, Alibaba Group Vice President and General Manager of the Retail Link Business Unit, shared several data points with media including New Distribution: as of April 2020, Retail Link had over 10,000 partners (including city partners and individual partners) nationwide, mainly covering markets from tier 2 to tier 6 cities, with county-level markets accounting for about 30% of business, growing much faster than tier 1 and tier 2 markets. The large number of partner teams can quickly convert the stores they serve into group leaders for Retail Link's community group buying business. Moreover, it is not hard to see that Retail Link's target market groups highly overlap with community group buying.
According to New Distribution's "2019-2020 China FMCG Community Group Buying Industry Report," community group buying has a massive presence in tier 2 and below cities, accounting for as high as 85% of the platforms counted in New Distribution's current platform directory. As community group buying develops and penetrates faster, for Retail Link, which focuses on FMCG through B2B, the "everything can be grouped" community group buying undoubtedly becomes one of the strongest competitors in lower-tier markets.
Imagine if consumers purchased all their consumer goods in community groups—what would be left for community stores? This would be like cutting the ground from under Retail Link's B2B business, which primarily supplies retail stores.
Furthermore, another important reason for Alibaba Retail Link's entry into community group buying is to drive foot traffic to stores and create greater incremental growth for them. This is also why New Distribution believes all B2B platforms must develop community group buying businesses. The essence of all business is cost reduction and efficiency improvement, especially for stores. Purchasing goods at lower prices, selling more products in the same time and space, and obtaining more profit—this is the core demand of millions of traditional retail stores. To a certain extent, it can even be said that whoever can most effectively meet this demand of small stores will control the traffic entrance to hundreds of thousands or even millions of offline communities.
Undoubtedly, community group buying, by developing store owners into platform group leaders, can help increase store foot traffic and thus improve operational efficiency. This has become the greatest empowerment B2B platforms offer to stores beyond providing competitive supply chain services.
There are many ways to encourage consumers to enter stores, such as helping stores develop courier services, phone and electricity bill recharge, etc., but compared to daily, high-frequency fresh vegetables and other categories, these products and services are clearly less attractive.
-03- Can Retail Link Really Do Well in Community Group Buying? Even though Alibaba Retail Link has become the industry's leading B2B platform, can it really do well in community group buying? New Distribution believes there are three difficulties:
1. Fresh Supply Chain According to New Distribution's "2019-2020 China FMCG Community Group Buying Industry Report," vegetables and fresh produce are the most frequently purchased categories on community group buying platforms, accounting for as high as 34.3%. In some platforms' category structures, this figure even reaches 50% or higher. It is no exaggeration to say that "those who win fresh produce win the world" in community group buying.
As is well known, Alibaba Retail Link's advantage lies in standard products such as alcoholic beverages, daily chemicals, and leisure snacks. The scale effect on the channel side helps Retail Link gain significant bargaining power in cooperation with brands, securing price advantages and market policy advantages.
However, this approach may not work for fresh produce. The fragmentation of production areas and the multi-tiered distribution channels established over the years make supply chain integration extremely difficult. Clearly, this integration is far more challenging than Retail Link's integration of traditional distributors.
2. Team DNA Team DNA determines the way problems are handled, attitudes, and the speed of achieving goals. Looking across the community group buying track, the platforms that perform well fall into three categories: fresh produce backgrounds like Shixianghui and Shandong's Xiaoxiongle, WeChat business backgrounds, and retail backgrounds like Xiaoai Youxuan. According to a brand that has cooperated with Retail Link for many years, internally, Retail Link has formed two major factions: the FMCG faction represented by P&G and the internet faction represented by the Zhonggong Iron Army. Clearly, this is insufficient to support doing community group buying well. Although Zou Zhijun has joined Retail Link, without enough people in the national business team who understand the fresh produce category, achieving profitability remains a distant prospect.
3. The Window Period for Community Group Buying Has Passed If the first two points are internal factors that can be quickly addressed through mergers and acquisitions, then changes in the objective environment have become a fact that Alibaba Retail Link must face.
With the entry of giants like Didi and Meituan, the community group buying industry has officially become a battlefield dominated by new and old giants. From the community group buying 1.0 version led by Xingsheng Youxuan, Shihuituan, Shixianghui, and Tongcheng Life, it has now entered an infinite war with internet giants like Meituan, Didi, Meicai, and Cainiao. At this point, who will ultimately prevail is no longer determined by a single platform but by the enterprise's strategy, determination, and the costs and sacrifices it is willing to pay to achieve its goals.
Especially with the entry of Meituan, which advocates "striking after the enemy," the community group buying industry has been brought more uncertainty. For Meituan, community group buying is a crucial part of perfecting its fresh produce layout and expanding into lower-tier markets, as well as a necessary measure to acquire more traffic and expand into larger markets.
As Alibaba upgraded the Tmall business group to the Same-City Retail business group, the war between Alibaba and Meituan has been blatantly brought to the table. From the very beginning, this war was not one that Retail Link could win. Retail Link seems to have realized this, which is why it has stated externally that "community group buying is only a part of Retail Link's business."
It's not that they didn't work hard enough; it's just that the track is already too crowded!