Core Guide:
- Is community group buying a good business?
- As the Matthew effect intensifies, how can small and medium entrepreneurs avoid pitfalls in the community group buying track?
- Entering the second half, what future opportunities exist for community group buying?
Since being heavily funded by capital in the second half of last year, the development of community group buying has been like adding a high-speed booster. Head platforms have accelerated expansion, and GMV has repeatedly hit new highs.
Take Xingsheng Youxuan, the industry leader, as an example. After completing the initial layout in 13 provinces, it has continued to penetrate lower-tier markets, connecting the dots to form lines. In November, its monthly GMV officially exceeded 1.2 billion yuan, showing remarkable development.
At the same time, platform closures, shutdowns, and transformations have also occurred frequently. After multiple rounds of consolidation, the community group buying track has finally developed into a competitive landscape where Xingsheng Youxuan dominates, with Shihuituan, Tongcheng Life, and Shixianghui competing for the top spots.
It is worth noting that besides the four major platforms, there are still many community group buying platforms across the country, and their initial motivations for entering the track vary. The platform we introduce today, Xiangtuan, was founded because the founder herself is a "foodie" who, frustrated by the lack of satisfactory products in the market, "reluctantly" embarked on the entrepreneurial journey of community group buying.
How did Xiangtuan develop? What reference significance does its development have for small and medium entrepreneurs?
-01- Female Executive Resigns to Start Business, Just for "Eating"!
"There used to be a fruit shop owner in Changsha who created a group chat and earned a million a year from it. I am the boss lady in that story," Ding Mengqi introduced herself.
In addition, Ding Mengqi has many other labels, such as entrepreneur, housewife, spendthrift, mother, foodie... However, what is most noteworthy to the outside world is that she is one of the earliest entrepreneurs to enter the community group buying track.
Before community e-commerce had taken shape, she had already seen the community as an undeveloped traffic depression. The reason she chose fresh food as the entry point was mainly due to her innate nature—eating!
"I am a foodie myself, and I am very picky about food. Before starting my business, my biggest frustration was that it was hard to find high-quality food and fruit in the market; a large number of expensive but poor-quality products flooded the market. At that time, I thought, why can't I select good quality products to sell?" Driven by this simple and primitive demand, Ding Mengqi began her entrepreneurial journey.
The reason she chose the community as the entry point was entirely influenced by her teacher. "A residential community has at least 2,000 households. With an average of three people per household, that's over 6,000 people. If we can base ourselves in the community and serve these 6,000 residents well in terms of food, clothing, housing, and transportation, it would definitely be a huge market."
At that time, in 2015, the real estate industry was at a high value. Although the market was still growing rapidly, signs of fatigue were gradually showing, which was undoubtedly a good opportunity to develop community e-commerce.
"At that time, the positioning of community group buying was far less clear than it is today. I only thought that if a group of women in the community bought something together, it would save money and reduce logistics costs, making it immune to e-commerce and internet influences, while also effectively reducing the loss of fresh food compared to individual purchases," Ding Mengqi told New Distribution.
When community e-commerce was far from as mature as it is today, Ding Mengqi believed that as long as she could gather users in the community and get to know a group of female consumers, she could start her "sell, sell, sell" entrepreneurial career.
"I'm a genius!" Ding Mengqi confidently described her initial idea. To this day, she still believes that community group buying is the community business model closest to consumers.
-02- Full of Confidence, Yet Failed Twice in Entrepreneurship!
Ideals are full, but reality is harsh. Ding Mengqi eventually hit a wall in the face of cruel reality!
1.0 Community Group Buying + Property Management
At the beginning of her business, Ding Mengqi focused on property management.
"Property management is the closest to community consumers. Their long-term handling of neighborhood relations has established deep relationships with residents," Ding Mengqi thought that relying on property management as a lever would quickly open up the community. But she ignored the complexity of human nature.
"When communicating and negotiating cooperation with property management, the biggest issue was the profit-sharing problem. At that time, we hadn't even made money, but property management often argued with us over profit distribution. Moreover, since community group buying mainly involves fresh food, food safety issues were also an important reason affecting their cooperation with us."
Property management, being overly cautious, caused Xiangtuan to develop slowly from the start.
In addition, the supply chain was also a constraint on Xiangtuan's development. Order volume determines bargaining power. In the early stages, with only a dozen orders a day, Xiangtuan couldn't get products with price advantages. Especially at that time, the community e-commerce format had not yet taken shape, and it was difficult to stand alone, which made suppliers unwilling to cooperate with this emerging retail format in its infancy.
After struggling for three months, Xiangtuan 1.0 finally ended in failure.
2.0 Community Group Buying + Physical Stores
The painful lesson of the first failure made Ding Mengqi realize that she shouldn't put her lifeline in others' hands. She also began to think: instead of relying on others as traffic entry points, why not build her own stores to radiate services to the community? The idea of opening offline stores came to mind and was eventually put into practice.
At that time, community group buying platforms had begun to appear in Changsha, and community consumers were gradually accepting this new shopping format, with a spark starting a prairie fire. As the industry developed deeper, the "store + group" model began to be recognized by more industry practitioners.
However, luck still didn't favor Ding Mengqi this time. The lack of retail genes, heavy investment in store rents, and long return cycles became the last straw that broke Xiangtuan's back. Xiangtuan 2.0 failed again.
"I still believe that opening stores is the most reliable implementation plan for community group buying. Order on mobile, pick up at the store. Stores break through time and space limitations, allowing community users to buy countless low-priced, high-quality products," Ding Mengqi said firmly. Analyzing the reasons for the second failure, besides the heavy investment in stores, changes in the objective environment also played a significant role.
In 2015, Pinduoduo was founded.
This emerging e-commerce platform, relying on WeChat fission, reached tens of millions in monthly transaction volume within just a few months, and its user base exceeded 100 million in less than a year. More importantly, Pinduoduo's tactics tore a gap in the originally dull e-commerce retail landscape, prompting more people to think about new business opportunities based on local life.
In the stage of stock competition, facing Pinduoduo's dimensionality reduction attack, Ding Mengqi, who also focused on low prices, realized for the first time the terror of the "barbarian." More seriously, the concept of community group buying began to rise. Platforms like Xingsheng Youxuan and Niwonin entered the market one after another, and capital with real money began to seize the last virgin land of community commerce.
"Platforms with capital backing find it easy to open the market. A product that sells well on my platform, they can directly sell to consumers through social groups at a lower price. I once saw a platform that entered community group buying with seafood as the entry point, and their best-selling single product could reach over 15,000 orders. Later, a head platform, when operating the market, directly reduced the price by 4 yuan based on their unit price. The former was eventually forced to sell itself and seek acquisition. Malicious price undercutting also led to fewer and fewer orders for us," Ding Mengqi told New Distribution.
Moreover, the lack of talent also brought team instability. Head platforms frequently poached talent with high salaries. Without professional team operations, the loss of Xiangtuan's customers became a natural consequence.
The brutal competitive environment made Ding Mengqi increasingly think about the value of Xiangtuan's existence. If it couldn't create value for users, what was the meaning of the platform's existence?
Ding Mengqi, with an operations background, thought of the seed users retained by the platform. She wanted to figure out why these people still chose Xiangtuan when there were so many platforms to choose from.
"Most of them said that Xiangtuan sells reliable products. The mangoes they sell are especially fragrant; they had never eaten such delicious mangoes. They would still buy mangoes from Xiangtuan next year. The quality of other products is also good, and they would continue to buy on the platform."
The feedback from seed users strengthened Ding Mengqi's determination to continue with Xiangtuan, but what kind of approach was suitable for small and medium entrepreneurs?
-03- Xiangtuan 3.0 Launch: Self-operated Warehouse + Drop Shipping
The two failed experiences made Ding Mengqi see the gap between Xiangtuan and platforms backed by head capital. A head-on approach wouldn't work; relying on low-priced products would only kill oneself. To continue, they had to take a roundabout strategy.
"From a capital perspective, we can't compete with capital. Our team is not as complete as big platforms. Compared to them, we are just a makeshift team. The only breakthrough points are products and operations. " Ding Mengqi said. This time, she cut offline stores, added a drop shipping business on the basis of the original self-operated warehouse business, and completely shifted to online. The overall operational strategy also changed significantly compared to before.
1. Stop Expanding Groups, Focus on Supply Chain, All-Staff Procurement
Strategically, Xiangtuan stopped expanding groups. At that time, the profitability of agricultural products was very poor. Inexperienced high loss rates could consume most of the platform's funds. Stopping expansion meant timely loss prevention.
On the other hand, while all platforms were spending heavily to poach group leaders, Xiangtuan cut a large number of small group leaders and focused on serving big group leaders, striving to achieve maximum business output with minimal investment.
Pleasingly, when the Xiangtuan team devoted all its energy to products and operations, customers gradually began word-of-mouth fission, and stickiness became stronger. Although the process was slow, it eventually gave Xiangtuan hope.
2. Increase Categories, Full-Category Product Supply
Good products depend on good procurement. However, no one in the Xiangtuan team had a professional procurement background, which made their procurement style distinctly different from other platforms. While most platforms relied on procurement's subjective judgment to stock goods, Xiangtuan could truly stand from the consumer's perspective, listen to their voices, and then decide whether to purchase a product.
3. Product Differentiation Strategy: De-branding, Factory Customization
In terms of products, Xiangtuan adopted a differentiated product strategy. Long-tail products were directly customized by factories, with strict confidentiality agreements signed. This not only prevented other platforms from imitating but also allowed consumers to form stickiness with the platform, thereby reducing dependence on brands.
4. Offensive Competition, Shift to Quality-Oriented Middle Class
Low-priced products can quickly open the market, but it's hard to rely on low prices to make consumers dependent on the brand. Moreover, once consumers form a "low price" impression of the platform, it becomes extremely difficult to raise the average order value. Therefore, Xiangtuan positioned its products as high-quality. This allowed Xiangtuan's average order value to reach 68-108 yuan, while the average for community group buying platforms was only 19-39 yuan.
5. Redefine Supply Chain, Cash Procurement
Xiangtuan currently cooperates with over 30 fresh produce production bases, all with long-term stable cooperative relationships established at the source. A reason that cannot be ignored for gaining the trust of "new farmers" is that most of Xiangtuan's orders are paid in cash.
In Ding Mengqi's view, fresh agricultural products emphasize quality and ultimately return to taste. This means using good fertilizers in the production process, adhering to the original intention in the trade-off between quantity and quality, and ensuring that agricultural producers make money. Therefore, when cooperating with orchards, Xiangtuan mostly chose to buy the entire orchard to completely eliminate the worries of fruit farmers.
"In the past three years, we have achieved a quality leap for local Hunan fruits such as yellow peaches, watermelons, pomelos, Dongjiang pears, and oranges. I firmly believe that only by capturing consumers' stomachs can we capture their hearts," Ding Mengqi said.
It is precisely by adhering to products and consumers that Xiangtuan finally found a development path suitable for itself. As of now, Xiangtuan has formed a business line with two legs: community group buying + supply chain product selection output. With only 15 team members, Xiangtuan's annual GMV has officially exceeded 30 million yuan.
Summarizing the reasons for Xiangtuan's growth, Ding Mengqi said: "The direction is never told to you by others, but by those who are willing to give you money. They know your differentiation better than you do. Entrepreneurs should think about: how to deliver the right product to the right customer through the right channel at the right time. "
Tips will be paid 400-2000 yuan once adopted.