Source: Finance World Weekly (ID: cjtxzk) Author: Yang Qiao
The "debt collection" life of Tongcheng Life, a community group buying platform that has already declared bankruptcy, continues. According to Finance World Weekly, not long ago, suppliers who had not yet received payment once again gathered at the headquarters of Tongcheng Life to collectively demand payment.
Another veteran player in community group buying, Shixianghui, did not attract as much attention as Tongcheng Life when it "retreated"; the company had quietly transformed into a community snack convenience store some time ago.
Anxiety is spreading in the community group buying industry. Tongcheng Life became the first of the "Old Three Groups" to fall, making the other two feel the crisis.
Shihuituan, one of the "Old Three Groups," recently announced that its daily order volume on Alipay mini-programs exceeded 2 million orders, with daily new users surging up to 70 times. However, it has also begun adjustments and contractions.
On August 21, Chen Ying, founder of Shihuituan, released an internal letter reviewing the business development and competitive landscape from the same period last year, and based on that, announced a comprehensive business upgrade for the second half of the game; Shihuituan will integrate regionally with Alibaba's MMC (Community E-commerce Business Group) in some areas and reform regions with lower efficiency.
Currently, among the "Old Three Groups," only Xingsheng Youxuan has not yet reported new developments.
It was the "Old Three Groups" that first explored a viable business model in the community group buying industry and became the leaders, experiencing rapid development around the second half of 2020. Among them, Tongcheng Life even proposed an IPO plan at one point. But after the giants entered the fray, the fate of the old players diverged.
Some are out, and those remaining must fight. What is the future of community group buying? The "Old Three Groups" have already seen laggards; will there still be a dominant head enterprise in this field?
Disappointed Suppliers
On the day Tongcheng Life declared bankruptcy, nearly 6,000 suppliers came to demand payment. Now, more than a month after the bankruptcy, many suppliers have still not fully received payment, so suppliers occasionally gather at the headquarters of Tongcheng Life to demand payment.
Suppliers have become the "most injured" group in this wave of community group buying industry reshuffle.
"I've hit several community group buying platforms in a row; the risk is too high," multiple suppliers told Finance World Weekly.
Wang Xizhi, a supplier of health and wellness products to community group buying platforms, said he has experienced the collapse of both Tongcheng Life and Shixianghui. He said he had thought that "after the big players entered and divided the market, things would be fine," but did not expect the dominoes to keep falling in the community group buying industry.
In April this year, Wang Xizhi briefly joined Shihuituan's supplier team, supplying goods in a city in Shandong, but he found Shihuituan's "mechanism troublesome" and withdrew after less than a month of cooperation.
Wang Xizhi said he also knew that Shihuituan's business adjustments had begun. Shihuituan indicated that it is strategically contracting in the domestic market, retaining only major markets and some central cities.
According to Finance World Weekly, signs of Shihuituan's adjustment appeared from August 15. Some suppliers said that in Yunnan Province, group buying had stopped, and the network warehouse issued a notice of termination of cooperation.
In addition, some regions such as Guangdong, Fujian, Zhejiang, Shanghai, and Northeast China have been shut down one after another, and the Shandong area will also be merged and optimized.
A Shihuituan employee also told Finance World Weekly that the company is currently in a business adjustment period, and he has been transferred to more than one area recently.
Wang Xizhi now only cooperates with Meituan Youxuan, Pinduoduo's Kuaituantuan, and Xingsheng Youxuan. He sighed, "I'd rather earn less than lose money."
Another supplier of all-category products, Zhang Ke, has been joining various community group buying platforms since 2019, making him one of the first suppliers to "try the crab" in the industry, mainly connecting goods from Jiangsu, Wuhan, Zhejiang, and other regions for the platforms he serves.
However, he also inevitably hit the "mine" of Tongcheng Life and Shixianghui.
He said that the biggest risk in community group buying is capital. "I'm afraid that the payment will go out and not come back. The risk is too high; we have already lost nearly 3 million yuan." Zhang Ke continues to be a supplier for platforms like Meituan, Pinduoduo, and Xingsheng Youxuan.
He said that at least "the big capitals have the ability to transfuse blood, unlike platforms like Tongcheng Life, which can only rely on financing."
However, he still feels that "business is hard." Due to the high fulfillment costs of community group buying platforms, he could get 7 points in 2020, "but now only 2 points."
Suppliers also feel a change in their status. Since big companies and brand manufacturers entered community group buying, suppliers have found it difficult to maintain "initiative."
A supplier once told Finance World Weekly that community group buying has become one of the channels for many brand owners to lay out the market, and suppliers who want to enter the platform need to maintain good relationships with platform procurement staff.
The "Old Three Groups" Forced to Fall Behind
Community group buying, an emerging business model that takes communities as the entry point and targets household daily consumption scenarios, began to attract capital around 2018.
QuestMobile data shows that in the second half of 2018, financing in the community group buying field reached 4 billion yuan, with Niwoni, Xingsheng Youxuan, and Shihuituan each receiving investments of over 100 million yuan.
In August 2019, Shihuituan merged with Niwoni, focusing on second- and third-tier cities, and entered the top three in the community group buying track.
The other two were Xingsheng Youxuan and Tongcheng Life, which "entered with capital." Xingsheng Youxuan is backed by Furong Xingsheng, a veteran chain convenience store in Hunan Province, while Tongcheng Life is a project incubated by Tongcheng Travel Group. They are also collectively known as the "Old Three Groups" in the industry.
In 2020, the sudden outbreak of the pandemic made the community group buying industry a target for internet giants. According to Finance World Weekly statistics, in 2020 alone, Shihuituan received nearly $450 million in financing.
Xingsheng Youxuan also received a total of $1.5 billion in financing from JD.com and Tencent; Tongcheng Life also received over $200 million in financing. Behind the Old Three Groups, there was also support from internet giants.
With the power of capital, Tongcheng Life successively cooperated with regional brands such as Qianxianhui, Linlinyi, and Kaola Life, expanding nationwide in East China and South China.
In 2020, Tongcheng Life's GMV approached 10 billion yuan, second only to Xingsheng Youxuan in industry status. In addition, before September 2020, the platform's monthly sales were between 800 million and 1.2 billion yuan, with a gross margin of about 20%.
Shihuituan's GMV exceeded 650 million in April 2020, with daily order peaks exceeding 1.6 million. Xingsheng Youxuan's national daily order peak also exceeded 12 million in 2020.
While the Old Three Groups were developing steadily and rapidly, the "New Three Groups," led by Meituan, Pinduoduo, and Didi, quickly entered the scene, becoming a new force sweeping the battlefield. With advantages in capital and traffic, they aggressively seized market share through subsidies and price wars.
He Pengyu, founder and CEO of Tongcheng Life, once said that starting from September 2020, the community group buying industry shifted from an era of "competing on innovation and execution" to an era of "competing on capital and subsidies."
The Old Three Groups were instantly placed in a dangerous position.
Changsha, where Xingsheng Youxuan started, became the main battlefield for giants entering community group buying. As of December 2020, Meituan recruited nearly 300 BD in Changsha, and Duoduo Maicai "requested personnel" from Nanchang to open a city in Changsha.
Under the continuous erosion of giants, Xingsheng Youxuan was forced to accelerate and expand into new cities. In November 2020, apart from its stronghold in Hunan, Xingsheng Youxuan's GMV in other regions fell by 20%.
After accepting $800 million in financing from JD.com and Tencent, Xingsheng Youxuan accelerated city expansion, entering Jiangsu, Zhejiang, and other regions, and then expanded north to Shandong, Henan, Hebei, etc.
However, Zhuang Shuai, an expert in the retail e-commerce industry and founder of Bailian Consulting, believes that Xingsheng Youxuan's position is relatively stable because it relies on offline franchise convenience stores, forming a complete ecosystem.
Tongcheng Life had already entered a benign development stage in mid-2020, but in the subsequent battle for group leaders, the platform's monthly revenue continued to decline, with the largest drop reaching over 80%, and gross margin turned negative. From April to June, Tongcheng Life's order volume fell by more than 60% compared to its peak.
The giants strengthened their penetration of the Old Three Groups. In March 2021, Shihuituan again received $750 million in financing from Alibaba, GGV Capital, and others; Xingsheng Youxuan also raised over $3.3 billion in 2021.
Tongcheng Life, however, exited gloomily. After the "Old Three Groups" lost one member, the former veteran player Shixianghui also announced its transformation.
Community Group Buying Moves Toward Maturity
With the disruption of giants, community group buying is also considered by the market to be a war of money, traffic, and scale. At the same time, with increased regulation, the price war waged by giants has basically ended. After a period of barbaric growth, community group buying is ushering in a new round of competition.
Orange Heart Youxuan, after entering with capital, has now adjusted its organizational structure, moved its headquarters, returned to the essence of "retail," and begun to emphasize profitability.
While Shihuituan is in the process of business adjustment, Zhuang Shuai believes that Alibaba's investment in Shihuituan is also to integrate community group buying business into its local life ecosystem through Shihuituan's team, group leaders, and operational experience.
After the subsidy war receded, group leaders in various regions also faced a decline in commissions, leading to a wave of "retreats." Previously, group leaders from different platforms told Finance World Weekly that they decided to stop being group leaders and focus on their original stores.
Many group leaders, after gaining platform traffic, started their own private domain traffic operations, becoming "micro" competitors to the big platforms, guarding their "territory" in local communities and not wanting platforms to get involved.
But a practitioner in the community group buying industry told Finance World Weekly that group leaders are still the key between platforms and users. They are also focusing on improving product quality and after-sales service.
Therefore, their important task now is to maintain good relationships with group leaders, because he believes "users trust the group leader personally and the trust relationship established with them."
Suppliers also said that the role of group leaders is crucial; the items they choose to recommend determine the amount of goods suppliers stock. Both giants and small platforms still need to find ways to "grab" the continuously losing group leaders.
Zhuang Shuai believes that community group buying itself is an ecosystem-based business model, not an independent one. It needs to integrate with other businesses under a mature and independently developing ecosystem, which is also the advantage of giants like Pinduoduo, JD.com, and Meituan in doing community group buying.
At the same time, in his view, community group buying platforms without offline physical stores need to continuously strengthen brand trust building and standardized fresh food supply chain systems, quickly acquire group leaders, increase group leader stickiness through comprehensive services such as benefits and skills, and quickly form a moat.
But he also said that the business model of community group buying determines that it is difficult for oligarchs to emerge in this field, but in the future, there will be a pattern of multiple players coexisting in different consumption circles with regional, demographic, and industrial stratification:
First, e-commerce giants dominate, with their respective supported community group buying platforms forming a confrontation; Second, regional enterprises strategically invested by regional physical chain giants, property giants, etc., or leaders with independent resources in the community; Third, a standard service system for community group buying formed by national chain physical retail enterprises.
This also means that community group buying is gradually moving toward maturity. And in this field, there may not be a "monopolistic" unicorn.
Are you "watching" me?