---
title: "The Endgame of Community Group Buying"
description: "In December 2020, Ye Guofu, founder of Miniso, predicted that community group buying would spell the end for supermarkets over 500 square meters within a year or two. This model, pioneered by Xingsheng Youxuan, has sparked a fierce battle that threatens traditional wet markets and mom-and-pop stores, raising questions about the balance between efficiency and fairness in China's retail revolution."
author: "远川研究所"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-01-15"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/the-endgame-of-community-group-buying-477c9e3e/"
markdown: "https://xinjignxiao.com/en/articles/the-endgame-of-community-group-buying-477c9e3e.md"
original_source: "https://mp.weixin.qq.com/s/ZYHg4PiNrpfwaq_y8EvGcA"
translation: "https://xinjignxiao.com/zh/articles/%E7%A4%BE%E5%8C%BA%E5%8D%96%E8%8F%9C%E7%94%9F%E6%84%8F%E7%9A%84%E7%BB%88%E5%B1%80-477c9e3e.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/the-endgame-of-community-group-buying-477c9e3e/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# The Endgame of Community Group Buying

> In December 2020, Ye Guofu, founder of Miniso, predicted that community group buying would spell the end for supermarkets over 500 square meters within a year or two. This model, pioneered by Xingsheng Youxuan, has sparked a fierce battle that threatens traditional wet markets and mom-and-pop stores, raising questions about the balance between efficiency and fairness in China's retail revolution.

**Helping up those who have been knocked down.**

In early December 2020, Ye Guofu, founder of Miniso, made a startling statement at an entrepreneur forum: "If community group buying continues for another year or two, supermarkets over 500 square meters will basically have no future."

This statement sent shivers down the spines of some supermarket owners. As the biggest trend of 2020, community group buying has indeed had a huge impact on the retail industry. This model, which has prompted giants to copy it, originated from a company called Xingsheng Youxuan. Simply put, it involves recruiting grocery store owners around residential areas as "group leaders" who sell goods to residents via WeChat groups, with customers picking up their orders at the store the next day.

In August 2020, Pinduoduo quietly established "Duoduo Maicai" (Duoduo Grocery), choosing Wuhan as its first battleground. As a well-known "big spender" in the industry, Pinduoduo almost emptied Xingsheng Youxuan's central warehouse in Wuhan by offering salaries 2-3 times higher. In Huang Zheng's internal speech on Pinduoduo's fifth anniversary, a third of it was dedicated to emphasizing the importance of the grocery business.

Besides Pinduoduo, almost all internet companies with offline promotion capabilities have made community group buying their highest priority project, some even led personally by their founders. The poverty-alleviation price of 0.99 yuan for a box of eggs was particularly timely, so much so that it alarmed the People's Daily, which directly criticized giants for snatching vegetable vendors' business, warning them not to "only focus on the traffic of a few cabbages and fruits."

In today's context where employment preservation is especially important, "snatching others' business" is a sensitive topic. However, a look at the history of the retail industry reveals that every innovation means the elimination of a whole batch of jobs.

Take the United States as an example. The most primitive retail format was the mom-and-pop store. Then, with the improvement of railway infrastructure, new species like chain stores and department stores emerged, eliminating a large number of mom-and-pop grocery stores. After the war, with the high prosperity of the American economy and increased car ownership, supermarkets in the suburbs appeared, eliminating another batch of department stores.

Retail innovators like Walmart and Costco rose on the ruins of their competitors. For instance, Kmart, once the industry leader with 2,486 stores, filed for bankruptcy in 2002, leading to over 100,000 job losses. Macy's, a high-end retail company that preferred downtown locations, has been closing stores in recent years and struggled during the pandemic, hovering on the brink of bankruptcy.

Even in China, the retail industry has undergone multiple iterations in the 40-plus years since reform and opening up, with each innovation accompanied by intense industrial chain restructuring.

For example, Gome and Suning once used the "chain store" model to disrupt the home appliance departments of department stores, but after e-commerce emerged, they were in turn disrupted by companies like JD.com. While some jobs were created, more were eliminated.

China's social environment has historically encouraged innovation, even if some innovations are not technological but merely business model innovations, people have been willing to be tolerant.

However, after several years of trade friction and the 2020 pandemic shock, the public suddenly resumed scrutinizing innovation in 2020, especially those innovations that focus on improving "efficiency" but fail to balance "fairness."

Therefore, will the controversy surrounding community group buying give a new answer to the question "efficiency first or fairness first"? This is the first question we raise amidst the undercurrents of 2020.

**-01-**

**The Iron Torrent**

Before community group buying "broke out" in 2020, the brutal war in the fresh produce sector had already been raging for eight years.

This is a huge cake that has not yet been touched by the internet: China consumes 650 million tons of fresh produce annually, of which institutions (schools, enterprises, etc.) consume 120 million tons, restaurants consume 192 million tons, and the remaining 330 million tons belong to C-end consumers. This includes 120 million tons through supermarket channels, 150 million tons through wet market channels, and less than 10 million tons online. The market waiting to be disrupted seems enormous.

During these eight years, four main models have been tried:

> **The first is the "store-warehouse integration" model, represented by Hema and Yonghui.**
>
> **The second is the "front warehouse" model, represented by Dingdong Maicai and Miss Fresh.**
>
> **The third is the "instant delivery to home platform" model, represented by JD Daojia and Taoxianda.**
>
> **The fourth is the "community group buying" model, represented by Dailuobo, which went bankrupt at the end of 2019.**

Of course, the community group buying that Dailuobo previously ran was different from what Xingsheng Youxuan is doing now. Although both use the "pre-sale + self-pickup" model, the "Dailuobo version" involved running its own stores and logistics, which was extremely costly. Besides continuous financing, it relied on franchise fees (156,000 yuan per store) and stored-value cards to stay afloat. Once the capital chain broke, a bunch of creditors would come knocking.

The collapse of Dailuobo in November 2019 was a landmark event, marking the end of the first offensive by fresh produce e-commerce against the traditional agricultural trade chain.

Whether it was the store-warehouse integration model or the front warehouse model, struggling fresh produce e-commerce companies slowed their expansion. After 6-7 years of crazy cash burning, less than 5% of the traditional agricultural trade chain had been digitized.

In other words, thanks to the difficult industry attributes of fresh produce—high loss rates, low order values, and high immediacy requirements—vegetable and meat vendors managed to withstand the first wave of disruption.

But fate had other plans. The black swan of COVID-19 in 2020 became the savior and accelerator of the fresh produce e-commerce industry, with GMV figures soaring during the pandemic. More importantly, the pandemic was a large-scale education campaign for "buying groceries online," and finally catalyzed a model with significant advantages—the "Xingsheng version" of community group buying.

Compared to Dailuobo, Xingsheng Youxuan was already a local retail giant in Changsha before venturing into community group buying, with a network of convenience stores called Furong Xingsheng. Most of these stores were converted from mom-and-pop shops, ranging from 30 to 80 square meters, where owners worked from dawn to dusk to earn a modest living. By leveraging this existing network rather than opening new stores, Xingsheng kept costs extremely low.

A Furong Xingsheng store on a Changsha street (photo taken in 2019)

The first step in Xingsheng's community group buying was to turn these traditional retail store "managers" into "group leaders" in the community group buying scenario. They used their familiarity with the community to rally nearby residents to "group buy," selling products not available in the retail stores through the "pre-sale + self-pickup" model, while Xingsheng provided all the supply chain and technical infrastructure behind the scenes.

Due to low costs (no burden of self-built physical stores + reduced logistics costs from self-pickup), low loss rates (pre-sale model reduces inventory pressure), low traffic costs (customers recruited offline by group leaders), ease of use (WeChat mini-program), and good profit distribution (significantly increasing group leaders' income), the Xingsheng version of community group buying grew like wildfire and quickly attracted giants to copy it.

Once internet giants entered with large amounts of capital, the smell of gunpowder in this war suddenly intensified. The giants, following Xingsheng's model, scrambled to recruit group leaders while using "low-priced classic bestsellers" to attract traffic, such as Chinese cabbage at 0.01 yuan per jin, enoki mushrooms at 0.5 yuan per bunch, eggs at 0.99 yuan per box, and oranges at 3 yuan for 10 jin, quickly gaining a large user base.

Therefore, in the second half of 2020, vegetable and meat vendors, who had just endured half a year of pandemic hardship, immediately faced the second wave of impact from fresh produce e-commerce.

Of course, the ambition of community group buying goes far beyond selling vegetables; it aims to restructure the commodity circulation channel by bypassing intermediate links. Selling vegetables is just the traffic driver for community group buying: Xingsheng Youxuan initially used fresh produce bestsellers to attract traffic, and later gradually introduced beverages, alcohol, maternal and baby products, and general merchandise to boost profits. As product categories expand, the platform will also fully grasp the discourse power in the value chain.

If you think the giants will need to raise cabbage prices to recoup their investments in the future, you are clearly limited by your imagination. So now the question is: if community group buying succeeds, who will be disrupted? Whose jobs will be eliminated?

**-02-**

**Impact**

The core reason why the Xingsheng version of community group buying has triggered concerns about "giants snatching vegetable vendors' business" is that community group buying can achieve profitability even with low order values.

The previous three models—store-warehouse integration, front warehouse, and delivery-to-home platforms—were essentially high-cost, high-difficulty, high-order-value operations. For example, Hema's average order value is typically 60 to 120 yuan, making it a market with almost no overlap with vegetable vendors.

But when it comes to buying vegetables and daily necessities, community group buying often has an average order value of only 10 to 30 yuan, directly threatening the business of wet markets and other mom-and-pop stores.

Behind the wet market is a traditional fresh produce supply chain system that has been running for over 30 years. This system was once called the "Vegetable Basket Project," established in the late 1980s.

Under this system, agricultural products travel along the chain: "farmers - cooperatives/bases - first-level wholesalers - agricultural wholesale markets - second-level wholesalers - retail outlets - consumers," step by step into the kitchens of thousands of households.

A wet market in Shanghai in the late 1980s

The "Vegetable Basket Project," which has operated smoothly for over 30 years, has been a behind-the-scenes contributor to the steady expansion of China's urbanization. Its more significant importance lies in providing a large amount of employment—from vegetable and fruit farmers in the fields, to merchants of all sizes in wholesale markets, to countless small vendors, mom-and-pop stores, and self-employed individuals in cities. Countless ordinary Chinese people make a living along this chain.

Of course, from the perspective of retail innovation, this model does have shortcomings. For example, in the lengthy chain, fresh produce and vegetables have prices marked up six times at various stages.

Anxin Securities once conducted a survey: Shaanxi apples sold at 9.8 yuan per jin in the Shanghai market were only sold by local farmers in Shaanxi for 3.65 yuan per jin. The difference was pocketed by wholesalers and warehousing logistics.

In contrast, when the "pre-sale + self-pickup" model of community group buying enters the supply chain, its path becomes: supplier - city central warehouse - grid warehouse - group leader - user.

In this process, only three links—supplier, grid warehouse, and group leader—add costs. The group leader, acting as a "human express locker," further eliminates the high instant delivery costs in the Hema model.

From the Hema and Dingdong models to the community group buying model, this is actually the development pattern of the e-commerce industry. The development of Chinese e-commerce over the past 20 years can be summarized in two points:

First, products must be closer and closer to users, with delivery logistics transitioning from traditional postal services to self-operated front warehouses.

Second, as products get closer to users, the average order value decreases, but purchase frequency increases.

Therefore, in the past few years, large shopping malls have often complained, while wet markets, mom-and-pop stores, and fruit vendors around residential areas have survived, until community group buying, with its familiar subsidy war, arrived at the doorstep of residential communities.

Community group buying does improve efficiency and allows consumers to enjoy lower prices, but unlike when internet companies entered e-commerce, ride-hailing, food delivery, and other platforms, this time community group buying has sparked intense public debate. An important reason is that this time the war is aimed at farmers, vegetable vendors, and mom-and-pop store owners, who are scattered in the hustle and bustle of streets and alleys, sharing a common title: self-employed individuals.

In the 1980s, 8 million educated youth returned to cities. In an era of job assignment, cities could not provide enough positions to absorb such a large labor force, so self-employment emerged. By 1987, the number of self-employed individuals exceeded 10 million, becoming an important part of the large employment scale. During the subsequent wave of layoffs in state-owned enterprises, self-employment also became a haven for absorbing employment.

As depicted in the film "The Piano in a Factory," skilled workers who once took pride in their skills faced the dilemma of layoffs, and selling vegetables, setting up street stalls, and key-making in corners were choices made when there were no other options.

After the millennium, with the rapid growth of foreign and private enterprises, the voice of self-employed individuals seemed to grow quieter.

But that is not the case. At the end of 2018, China had 20.8 million retail business units, of which only 3.97 million were corporate enterprises, accounting for just 19.1%. Individual retail was still the backbone of China's retail industry. By 2019, out of 123 million market entities, self-employed individuals reached 82.61 million.

The low-end service industry around residential areas, represented by wet markets, mom-and-pop supermarkets, and fruit stores, is actually an important sector for employment. As "capillaries" in the entire system, they are unable to influence economic policy-making or resist fluctuations in the industrial landscape, but they are often the first to bear the pain of macroeconomic fluctuations.

There is a concept in economics called "Pareto efficiency": when there is no way to make anyone better off without making someone else worse off, Pareto efficiency is achieved. In short, once Pareto efficiency is reached, for anyone to gain, others must lose.

Community group buying is clearly a battle in a zero-sum market. In the process of improving business efficiency, platforms create some jobs, but they may also eliminate more jobs.

If community group buying giants keep offering 1 yuan for 10 eggs and 0.5 yuan for a bunch of enoki mushrooms for a year, how long can vegetable and meat vendors hold out, even if they still have elderly customers?

This phenomenon has occurred in previous retail innovations, but the reason community group buying has sparked such controversy this time is that it is attacking a barrier that ordinary people rely on for their livelihood—behind the noise of the wet market lies the hopes and sustenance of countless families. They form the resilience at the bottom of China's economy, yet they are a group that is silenced in the mainstream internet.

A vegetable vendor setting up a stall at 3 a.m.

They are often older, less educated, and lack specialized skills. There is no place for them in public institutions, and large shopping malls have somewhat demanding requirements.

In county towns lacking large industries, a few large and medium-sized supermarkets monopolize retail, while KTVs and chain restaurants thrive. For them, self-employed businesses like restaurants, daily necessities, and fresh produce are often among the few industries where they can still earn money.

Small vendors in third-, fourth-, and fifth-tier cities are generally over 40 years old. They cannot all become "group leaders," which require high emotional intelligence and ability, nor can they be retrained to work in community group buying warehouses.

On the other hand, community group buying may create more programmer positions with million-yuan annual salaries and continue to drive up housing prices near internet giants' headquarters in first-tier cities.

These "efficiency improvements" are undoubtedly exacerbating division. So, if a 996 programmer in Beijing, Shanghai, Guangzhou, or Shenzhen receives a call from their parents who run a street stall saying they are closing down, it would be an inexplicable irony.

**-03-**

**Countermeasures**

The issue of efficiency and fairness has also been encountered in the United States, the heartland of capitalism, and they have attempted countermeasures, albeit with unsatisfactory results.

Let me share a small story: In 2000, Jeff Bezos felt Amazon needed a new logo and made a demanding request: "Change everything without changing any element." Fortunately, the designer was exceptionally perceptive and slightly raised the ends of a horizontal line, creating a curve from A to Z, symbolizing "everything from A to Z." It is said that Bezos approved it on the spot.

That year, Amazon had just become the world's largest e-commerce platform. Time magazine put Bezos on its Person of the Year cover, writing that the e-commerce and internet boom peaked in 1999, truly affecting every one of us. The same year, Amazon opened its platform to third-party sellers, and these small and medium suppliers gradually became an important part of the "smile curve."

Amazon's old and new logos

Twenty years later, a Reveal audio report titled "Behind the Smiles" revealed the other side of the story: Amazon indeed brought lower prices and faster delivery, but at the cost of employee safety and even lives.

There are many examples: In Amazon's automated warehouses, the rate of serious employee injuries was once more than twice the industry average; after an employee died at an Indiana warehouse, the government, in order to attract Amazon investment, actually "discouraged" investigators; Amazon also uses AI cameras and wearable devices to record employee performance, calculate slacking time, and generate online termination orders based on real-time data.

For instance, an employee named Parker Knight was responsible for sorting at Amazon. He had to sort 385 small items or 350 medium items per hour. Due to a completion rate of only 98.45%, he was fired. Between August 2017 and September 2018, at least 300 employees at Amazon's Baltimore warehouse were fired for failing to meet targets.

Suppliers also had a hard time. In 2014, dissatisfied with Amazon's deliberate lowering of prices and commissions on Kindle, French publisher Hachette rejected Amazon's terms. Amazon's retaliation was to redirect consumers searching for Hachette books to other publishers' pages.

When the news broke, it caused a huge stir in the industry. Nine hundred and nine sympathetic writers, including Stephen King and John Grisham, published an open letter in The New York Times condemning Amazon's actions. Eventually, under pressure, Amazon allowed Hachette to set its own prices.

But the matter didn't end there. Several writers went to Washington to demand the Department of Justice investigate Amazon's monopoly. Economist Paul Krugman also published a column in The New York Times titled "Beware of Amazon's Monopoly Power." However, the DOJ responded:

"Amazon provides consumers with excellent service and low prices. The writers' reasons are insufficient for the DOJ to launch an investigation."

The DOJ wasn't wrong: Amazon achieved near-monopoly status, but it didn't raise prices; instead, it kept lowering them, delivery got faster, and the company's market value kept rising. As for the bullied suppliers and employees who lost their lives, most users don't care anyway.

The documentary "Amazon Empire" interviewed many of Amazon's partners, all well-known companies, but they dared not show their faces on camera. Only a few small sellers spoke their minds. A little-known fact about Amazon: Before naming it Amazon, Bezos considered the name "Relentless."

Amazon employees protesting inhumane working conditions

For internet giants, the significance of monopoly lies not in pricing power but in discourse power. The former only allows for Rockefeller-era tactics like price increases, while the latter means the platform holds the power to distribute benefits and can sacrifice any link in the value chain for profit.

In the discussion triggered by community group buying, the idea that "vegetable vendors can choose to become platform suppliers" is quite popular. Compared to the busy life of working from dawn to dusk, being a platform supplier offers shorter working hours and higher pay. This logic sounds reasonable, but remember, the small and medium sellers on Amazon thought the same way back then.

Although community group buying has been officially defined, the trend of large internet companies "crossing the river by feeling the stones" of Amazon should undoubtedly be taken seriously. The trend of internet trusts is not unique to China; it is a global problem. But even in the United States, which has the longest history and most sophisticated means of antitrust enforcement, antitrust lawsuits often drag on for over a decade and end in futility.

On May 18, 1998, the U.S. Department of Justice, along with 20 states, sued Microsoft for pre-installing its IE browser, alleging antitrust violations. During the process, a district court took two years to rule that Microsoft had monopolized, then ordered Microsoft to be split. Due to its high profile, the case was also known as "United States v. Microsoft Corporation."

Because Microsoft appealed, the case was sent back to the district court in 2001. A dramatic turn occurred: the 2000 presidential election produced a new DOJ, and its attitude toward the case changed dramatically. Yesterday they were calling for a breakup, today they were friendly, making the story less Black Mirror and more House of Cards.

This lawsuit had strong political significance in the U.S. Milton Friedman, a standard-bearer of neoliberalism, called the case "a dangerous precedent for government intervention in the free market." Paul Krugman believed that attacking Microsoft "would make previously free software start charging fees." Later, George W. Bush, who won the election, consistently said he stood on the side of innovation, for a simple reason: "Were consumers' interests harmed?"

This is also a constraint of the antitrust legal framework in the U.S. and globally—only when monopoly causes harm is it necessary to punish the monopolist, and the interpretation of harm often refers to harm to consumer interests.

From this perspective, Microsoft's pre-installation of a free browser naturally did not harm consumer interests, and Amazon's reduction of book prices from tens of dollars to $9.99 was even more harmless. Therefore, the DOJ not only did not trouble Amazon but in 2012 sued publishers and Apple, which also sold e-books, for "colluding to raise book prices."

In fact, Amazon dominated the e-book retail market in 2009, selling over 90% of e-books. Yet at the hearing, Bezos only talked about Amazon's share of the "global retail market" being less than 1%. Even the term "market share" was a "banned word" inside Amazon. It won't let you know how powerful it is; it only keeps emphasizing how weak it is.

If we place domestic community group buying platforms under this framework, they are clearly not ferocious monopolists but charitable institutions that sacrifice their own interests for consumer welfare. But later facts proved that the DOJ overestimated the energy of browsers as traffic gateways but underestimated the social impact that tech giants can have once they hold discourse power.

American scholar Barry Lynn, in his book "Cornered: The New Monopoly Capitalism and the Economics of Destruction," fiercely criticized the efficiency goal of U.S. antitrust and advocated that antitrust should "embrace freedom." In 2017, Lynn publicly criticized Google as a model of modern monopoly. A few days later, he was "efficiently" optimized out of the think tank where he had worked for 15 years, and Google was one of the think tank's major investors.

Bezos attending a House antitrust hearing via video

The core of determining whether a tech company has caused "harm" is not how to judge the degree of harm, but first to define the object of harm. In the traditional context, the object of harm seems to include only "consumers." But in an era where internet companies are constantly restructuring industrial chains, this object should also include all people in the chain, especially ordinary people who are unable to resist change.

**-04-**

**Metaphor**

On March 22, 2000, Issue 28 of "Mass Feedback," under the State Bureau for Letters and Calls, published a letter from a grassroots civil servant in Hubei Province, titled "A Township Party Secretary's Inner Thoughts." The letter writer was Li Changping, who had worked for 17 years in Qipan Township, Jianli County, Hubei Province, his hometown. In the letter, Li Changping said, "What I want to tell you is: farmers are truly suffering, rural areas are truly poor, and agriculture is truly in danger!"

Li Changping later wrote two books: "I Told the Premier the Truth" and "I Told the People the Truth." In a media interview, this economics master's degree holder born in 1963 said, "I am not an expert; I am a son of farmers. I should tell the truth." Although the title "son of farmers" mostly appears in tearful confessions of corrupt officials.

Li Changping's letter had a huge impact on rural work and also provides a warning for our current environment: the well-being of ordinary people should always be the top priority.

Jia Zhangke once said: "When a society is rushing forward, it cannot ignore the person it has knocked down just because it wants to move forward." Jia Zhangke was not talking about the internet at the time, but these words apply here as well. Over the past two decades, China's internet has risen at a devastating speed, disrupting every industry it could, achieving success for many but also knocking down many.

Great companies should be respected, not feared. In the undercurrents of 2020, those companies that once inspired fear will inevitably feel the same sentiment in the future.

Source: Yuanchuan Research Institute (ID: caijingyanjiu)

Tips will be paid 400-2000 yuan upon adoption.


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671