The community group buying sector is heating up again. As the battlefield has largely been harvested by two national players, Duoduo Maicai and Meituan Youxuan, Alibaba and JD.com are returning to the fray. Recently, information on third-party recruitment platforms showed that Taobao Grocery is recruiting ground promotion (BD) staff in Shanghai, located in Jiading District, with responsibilities for the development and promotion of Taocaicai, and completing GMV/user targets as planned. Looking closely at Alibaba's moves, whether it's merging the two heavyweight businesses Taocaicai and Taoxianda into "Taobao Grocery," or this push into Shanghai to continue deepening its presence in East China, or the rapid expansion of Taobao Grocery since the beginning of this year—all indicate Alibaba's determination to once again challenge the community group buying market. At the same time, the Jingxi Pinpin WeChat mini-program issued an announcement that Jingxi Pinpin would be renamed "JD Pinpin," and that the mini-program icon, name, logo, etc., would be gradually updated and replaced for a comprehensive brand upgrade.
Three years ago, community group buying used the "pre-sale + self-pickup" model, relying on community-based regional and localized group buying formats to solve users' immediate needs, and also kicked off a key battle that influenced China's internet landscape. The highly imaginative community group buying became a must-fight battleground for all players, with the core logic being that low-priced, high-frequency grocery shopping not only helps giants acquire more users and explore lower-tier markets, but also helps build a larger user moat for their main businesses, driving more business growth. Community group buying is also a difficult track, known as "the hardest project in internet history." After several rounds of cash-burning wars, many startups faded away. Community group buying went from a "hundred-regiment war" to reshuffling and consolidation, until only Meituan and Pinduoduo remained as national players. Despite such difficulties, Alibaba and JD are re-expanding, continuing to burn cash and fight to the death. How important is community group buying that giants can't let it go? Why is Taobao Grocery re-energizing its city expansion?
Since the beginning of this year, Taobao Grocery has been making frequent moves in East China. On February 10, Taobao Grocery expanded into more than 20 districts and counties in Wenzhou and Taizhou; a month later, it continued to open services in Hangzhou's main urban area, providing consumers with next-day delivery services for fresh fruits and vegetables, meat, poultry, eggs, alcoholic beverages, snacks, etc.; in the same period, it also opened a new city in Bozhou, Anhui, accelerating its layout in the more densely populated East China region. Currently, Taobao Grocery has widely expanded to 18 provinces nationwide and continues to expand. This time, Taobao Grocery's preparation to open in Shanghai is a strategic continuation of "deepening East China" and a strong testament to Taobao Grocery's renewed push into community group buying. After three years of bloody battles in community group buying, Duoduo Maicai and Meituan Youxuan have locked in the top positions. Alibaba's return this time will not make for an easy fight. Alibaba's obsession with community group buying has shifted from "a second curve worth fighting for" three years ago to "a lower-tier market that must be fought for" today. Since its inception, community group buying has been a must-fight battleground. When traffic peaks, it is not only a considerable second growth curve but also encompasses the broader lower-tier market. In September 2020, Alibaba followed Meituan and Pinduoduo into the community group buying market. At that time, Alibaba's community group buying was led by Hema Marketplace. Meanwhile, internally, Ele.me, Lingshoutong, and Cainiao were all exploring community group buying. Until March 2021, Alibaba established the MMC division, integrating Lingshoutong's community group buying business and Hema Marketplace into "Taocaicai," mainly targeting users in rising markets who lean toward lower-tier segments; starting in September, it did community group buying without limits—that year, Alibaba set a GMV target of 120 billion yuan, but by year-end only completed one-sixth of it. Alibaba's intention in doing community group buying, on the one hand, was to explore lower-tier markets, especially to defend against Pinduoduo, which broke through with "low prices"; on the other hand, it was an important part of Alibaba's layout for next-day delivery e-commerce. At that time, Alibaba broadly deployed "far, medium, and near e-commerce" through Tmall, Taoxianda, Taocaicai, and B2C fresh food, hoping to meet consumers' different timeliness needs through 1-hour delivery, half-day delivery, and next-day delivery, fully consolidating its business foundation. But unfortunately, no winner has emerged in community group buying; everyone is losing money for applause, and Taocaicai has long been in third place in the industry. The reasons Taocaicai lags behind the other two are multifaceted, such as early internal "chaos" that missed opportunities; targeting users in rising markets who lean toward lower-tier segments, which contradicts the "high-frequency, low-price" nature of community group buying and is not conducive to quickly seizing market share in the early stages of industry development; and an organizational structure similar to Meituan's "big central, small local" model, which affected efficiency in the early stages of city expansion, not as flexible as Duoduo Maicai. Until this year, Alibaba underwent major organizational changes, with each group facing the survival line of self-financing. Taotian Group, as Alibaba's core foundation, also faces difficulties. In a single mobile app, brand merchants need to place more ads to maintain profits; but at the same time, it needs to introduce more cheaper merchants and goods to compete with Pinduoduo and Douyin. This is a natural contradiction. Community group buying happens to be the third best path for Taotian that does not harm brand merchants and small and medium merchants. Therefore, one of Taotian's major moves after independence was to divide its business into three industry development departments based on richness, brand, and high-frequency drivers. Among them, Department 3, driven by high-frequency business, includes Tmall Supermarket, Taocaicai, Taoxianda, fresh food, etc. Simply put, Alibaba and Taotian need community group buying. Moreover, Alibaba's deep e-commerce heritage gives it the capability to re-energize. Now, let's look at what community group buying has brought to the top two players, Pinduoduo and Meituan. According to HAYDEN CAPITAL estimates, by 2025, this business will contribute at least approximately 14 billion yuan in EBIT to Pinduoduo, and may achieve overall profitability starting in 2023. Meituan has also gained significant benefits. Data shows that in 2022, Meituan completed 1.1 trillion GMV, of which Meituan Youxuan contributed 13%. According to Q2 2023 financial report data, as of the end of June this year, Meituan Youxuan's platform transaction users reached 470 million. This re-expansion, Taobao Grocery's determination and actions are both significant. First, the two major businesses, Taocaicai (next-day community group buying) and Taoxianda (hourly delivery instant retail), merged to create "Taobao Grocery." After integrating local retail-related businesses, it can effectively avoid traffic dispersion and reduce product distribution costs and procurement costs. As the head of Taobao Grocery business said, "Cheaper, fresher, more worry-free." Second, strategically, starting from East China aligns with the approach of first running through some cities and then promoting it. Shanghai is a hub for fresh food e-commerce and community group buying (currently, Duoduo Maicai, Meituan Youxuan, JD Daojia, Dingdong Maicai, etc., are widely gathered in Shanghai). As community group buying has progressed to now, industry growth has slowed, so core regions must be fought for. East China has a large population density and strong consumption power. In the early stages of community group buying development, low-price-led efficiency and scale came first, but after three years of bloody battles, low price is no longer the only pursuit of consumers. Taobao Grocery's re-expansion this time carries the heavy responsibility of solving internal and external difficulties for the group, but competition has also become more intense.
JD Re-enters,
Meituan and Pinduoduo Competition Heats Up,
Industry Competition Enters a New Phase
After a year, JD has also returned to community group buying. In addition to renaming "Jingxi Pinpin" to "JD Pinpin," JD has also made efforts in organizational structure and team building, first dividing JD Pinpin into the newly established Innovation Retail Department, then recruiting talent, hiring BD, product managers, etc., in relevant cities, responsible for group leader product work, improving community group buying business processes based on user needs, and integrating brand merchants and B-end and C-end resources. As the e-commerce market hits a bottleneck, JD's restart of community group buying at this time is about regaining low-price advantages and finding new development opportunities.
At the end of last year, JD was already pushing its "low-price" strategy. JD was the last to enter the community group buying business, and its past input-output was not high. Under the new economic environment and consumer demand, JD also faces adjustments and challenges. In early 2023, JD Retail CEO Xin Lijun proposed one of the four "must-win battles" as the lower-tier market. As veteran e-commerce giants, both JD and Alibaba have supply chain advantages in community group buying. In addition to its self-operated supply chain, JD has also begun to focus on third-party merchant services this year; Alibaba's e-commerce "infrastructure" provides Taobao Grocery with various resources such as goods, warehouse networks, ground promotion, and traffic. For example, Taobao Grocery has been deeply integrated with Alibaba Digital Agriculture. A large number of direct-from-origin agricultural products on the platform are purchased at the front end by Alibaba Digital Agriculture, then transported to Taocaicai's factories for pre-packaging, pre-cleaning, and other processing. Both Alibaba and JD are determined, but facing the fresh food track that requires continuous cash burning, they also need to deal with the two market leaders, Meituan and Duoduo Maicai. There are still many difficulties to overcome, especially since Meituan and Pinduoduo are continuously making efforts toward higher profitability goals. Since the second half of last year, Meituan and Duoduo Maicai have changed their past growth-seeking goals to pursue gross margin turning positive. Duoduo Maicai, with a more flexible organization, gained an advantage in this stage. In the early stage of business, during the city-conquering phase, Duoduo Maicai insisted on efficiency first. Facing consumer doubts about quality, Duoduo Maicai began to emphasize quality orientation last year, strengthen quality control, and carry out refined operations. Meituan Youxuan, as the current second place, is closely following Pinduoduo, continuously improving commercialization and user experience. Compared with Duoduo Maicai, which follows the "extreme cost-performance goods" route, Meituan Youxuan insists on "higher quality fresh groceries," but this also leads to greater supply chain investment by Meituan, such as warehouse construction, cold chain investment, and quality control at all links. In terms of commercialization goals, Meituan is also making efforts. **In June this year, Meituan Youxuan announced a three-month "Summer Campaign" aimed at achieving profitability in each city one by one, and made many adjustments for this, such as transferring the more combat-effective Kuailv team to Meituan Youxuan, borrowing from Duoduo Maicai's organizational structure to increase business flexibility, etc.—This also indicates that the entire community group buying competition has entered the next stage—pursuing profitability. To achieve this goal, Meituan Youxuan has promoted two service upgrades from October last year to now, focusing on "faster delivery, more products, lower prices" to comprehensively enhance user experience. In terms of delivery time, first in October last year, it upgraded its brand positioning to "Tomorrow Arrival Supermarket," and then in August this year, it launched a "delivered by morning" delivery service, accelerating from self-pickup at 4 pm to 11 am, catering to consumers' lunch preparation needs. At the same time, since this year, Meituan Youxuan has increased procurement efforts nationwide to enrich daily consumer choices for community residents, such as flowers and small fans. As of mid-year, the platform had more than 900 types of fresh and daily grocery products, a year-on-year increase of over 40%, committed to building a "next-day noon arrival supermarket" and shaping user mindset. In terms of price, Meituan Youxuan has increased price advantages by strengthening cold chain logistics layout, increasing grid station density in consumer demand areas, and localizing collective procurement and distribution to reduce fresh product procurement and fulfillment costs. Meituan stated, "We will continue to rely on the logistics network covering more than 2,000 cities, counties, and districts nationwide, connect local high-quality supply, and meet urban and rural users' needs for savings and convenience." When community group buying only has two national players, Meituan Youxuan and Duoduo Maicai, the re-entry of JD and Alibaba also signals that the industry competition has escalated again. While ensuring profitability goals at this stage and competing for market share, the battle among giants will inevitably require more capital investment, which also means this can only be a game among giants.
Community Group Buying Still Burns Cash
Only Giants Can Continue
Since 2020, this community group buying battle has experienced countless bloody battles. First, there was a round of "subsidy wars," burning cash to exchange for market share; then came "model wars" such as O2O and front warehouses... In the fresh food track, where models have not been proven and cash burning is needed to exchange for market, many companies once in the spotlight faded away. Meituan and Pinduoduo became the hope of the industry. In the second half of last year, the two began to emphasize gross margin turning positive, and Pinduoduo took the lead in winning at this stage. According to LatePost reports, from Q2 2022, Duoduo Maicai surpassed Meituan to become the leader in the track; since this year, except for Sichuan, Chongqing, Guangdong, Xiangbei, and Hangzhou, Duoduo Maicai has achieved positive gross margin in other regions nationwide—this is extremely positive news for the entire industry. According to data released by Kantar Worldpanel, community group buying sales continued double-digit growth in Q2 2023, with 26% of urban households purchasing FMCG through community group buying that quarter. The community group buying market is still growing, which also means this battle will continue. In May and June this year, Duoduo Maicai also splurged 60 million grocery-specific consumption vouchers at Shanghai's "May 5 Shopping Festival," covering nearly 13,000 residential communities in 16 districts, and also piloted "grocery into communities," providing door-to-door delivery services to further enhance user experience and cultivate consumption mindset. Tapping into this trillion-yuan track of community group buying has entered a new competition stage, namely the "supply chain war." For example, Meituan has improved delivery efficiency. Although the pickup time was only advanced by half a day, behind this is a "race against time," requiring Meituan to continuously optimize procurement scope and standards, strictly control fulfillment and logistics capabilities, to ensure supply chain stability. Meituan stated that to shorten the delivery time by 5 hours, Meituan has increased investment in drivers and warehouse operations personnel on the one hand, and optimized upstream and downstream transportation routes and warehouse capacity allocation on the other, even breaking down the entire transportation process into 100 process indicators for monitoring to ensure on-time delivery. The market's demand for both low prices and quality has also made the supply chain war an inevitable trend in industry development. The early-stage approach of efficiency first and ignoring quality to seize market share is no longer viable. At this stage, refined operations are needed, returning to supply chain construction and optimization. Optimizing the supply chain is also necessary and key for community group buying platforms to become profitable. As community group buying enters its third year, the battle is getting harder. Platforms must strengthen supply chain management, reduce costs while improving quality, and only then can they continue to attract users and build user mindset. However, building and optimizing the supply chain requires continued cash burning, with increased investment needed from the source to every link. From the first round of burning cash to grab market share, now to the second round of burning cash to optimize the supply chain, community group buying remains a bottomless pit of cash burning. With such cash burning, only giants like Alibaba and JD can re-challenge. But burning cash for market share is also useful; "Duoduo Maicai" is the best example. Besides achieving positive gross margin in most regions nationwide, some institutions estimate that Duoduo Maicai will achieve overall profitability in 2023. It's not hard to understand that in community group buying, through a larger market scale and broader consumer base, various costs can be effectively diluted, and more bargaining power can be gained in the supply chain—spending less, earning more, and the platform can gradually become profitable. But whether Pinduoduo's scale effect can be replicated, and whether players re-entering the battlefield can survive to this stage, are still unknown. Players' exploration of this model is still ongoing, and this will be a long battle.