---
title: "Thoughts and Strategies for the Community Group Buying Down-Market"
description: "At the Central Plains Community E-commerce Summit held in Zhengzhou on July 26, Li Bingyuan, founder of Youletuan, shared insights on strategies for down-market expansion. He emphasized that township consumer needs are far from met, and community group buying will become a key consumption model in these areas. He also discussed logistics outsourcing, product selection, and团长 recruitment tactics."
author: "李炳元"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-07-30"
language: "en"
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# Thoughts and Strategies for the Community Group Buying Down-Market

> At the Central Plains Community E-commerce Summit held in Zhengzhou on July 26, Li Bingyuan, founder of Youletuan, shared insights on strategies for down-market expansion. He emphasized that township consumer needs are far from met, and community group buying will become a key consumption model in these areas. He also discussed logistics outsourcing, product selection, and团长 recruitment tactics.

Click 'Read Original' for details.
On July 26, the **Central Plains Community E-commerce Summit** was grandly held at Zhengzhou Huazhi Hotel, co-hosted by New Distribution, Innovation Retail Society, Community Social E-commerce Insider, and Central Plains Community E-commerce Club, with Boda Noodles as a co-organizer.
At the forum, Li Bingyuan, founder of Youletuan, gave a presentation titled **"Strategies and Thoughts on Down-Market"**, which was compiled and published by Innovation Retail Society for readers.
In August last year, Shihuituan entered Zhengzhou. At that time, I was the operations director of a campus e-commerce platform called "Woniu Street". Shihuituan approached us because we had 50 forward warehouses in universities across Henan Province. They hoped our warehouses could integrate into Shihuituan as pickup points and group leaders.
**Data Summary**
"Group efficiency" refers to the daily turnover of a group. Based on our data analysis over the past few months, we currently have 140 group leaders in Linzhou, with 49% in the county seat and 51% in townships.
Before data analysis, I thought township group efficiency would be lower than that of the county. Now, if a family has some money, they might buy a house in the county; those with more money in the county might buy in a prefecture-level city, and so on.
Data analysis revealed that township group leaders' efficiency is almost equal to that of county group leaders. Yesterday, on our official account, Innovation Retail Society, a similar conclusion was drawn. Why is Xingsheng Youxuan the industry leader? Because it covers 500 urban and rural areas, penetrating many fourth- and fifth-tier cities, even counties and townships, while other leading community group buying platforms cover about 50 cities.
In townships, the variety of goods is far from meeting consumer needs. In second-tier cities, or third-tier cities like Anyang and Luoyang, the consumption experience is already on par with first- and second-tier cities.
So we draw a small conclusion: **in the down-market, township consumers' needs are far from satisfied, and community group buying will be an important consumption method in township markets. Even if Yonghui Superstores or Hema Fresh go deeper, they cannot open stores in every village; I don't believe they can place outlets in every village.**
**Strategies and Thoughts on Down-Market**
Next, we should consider how small platforms like ours can resist external competition. We are doing community group buying in Linzhou, but we are not the only one; there are already five or six platforms, including some from Beijing. How should we compete?
Has anyone heard of a community group buying platform being profitable? Frankly, our team became profitable in May. Now that June has passed, after paying salaries, we still have surplus. I think this is a small victory for the community group buying industry, because we only operate in a county area.
Many platforms are losing money now. Where are the losses? It is said that a leading platform burns 400,000 yuan per month on logistics in the Zhengzhou area. But few platforms spend money on subsidizing users; almost no platform subsidizes users now. Among community group buying platforms in Zhengzhou, I haven't seen any subsidizing users. There may be platforms that reduce gross margins to give group leaders more rebates, but no platform uses marketing models like flash sales or coupons to subsidize users. Most community group buying companies lose money on logistics. So what is our logistics solution?
**Logistics Solutions**
Zhengzhou has professional logistics outsourcing companies that specialize in delivering community group buying orders. But Linzhou and most third- and fourth-tier cities do not have such companies. In the down-market, those with logistics and transportation resources are distributors. We need to find distributors and share their delivery vehicles and drivers. We must find distributors of short-shelf-life products.
What is a short-shelf-life product distributor? They distribute products with short shelf lives, such as Junlebao yogurt, Huahuaniu yogurt, Taoli bread, and Maikeqi bread, with shelf lives up to 21 days. These distributors have strong control over outlets, basically ensuring daily visits to all outlets. Distributors of other FMCG products with longer shelf lives cannot guarantee daily visits, so they are not suitable as outsourcing partners for community group buying.
Another option is to outsource to frozen food distributors. In Anyang, "Hepintuan" cooperates with a distributor of Synear quick-frozen products, which gives them a great advantage in frozen products. If you cannot distribute frozen products, your frozen product ratio is low. But by cooperating with Synear or Sanquan distributors, we have a big advantage in distributing frozen products because all our vehicles are refrigerated.
**Advantages:** I don't need to worry about upfront logistics costs. In Linzhou, I can deliver as far as 50 kilometers to mountainous areas. Why can I deliver to places 50 kilometers away? Because I cooperate with a Junlebao distributor whose delivery trucks are not full every day, so they can carry our goods. For them, it is also a sharing economy, increasing their company's income.
**Disadvantages:** We have a nationally renowned town called Yaocun. Basically, every village has enterprises, and everyone is a worker. In other towns, maybe only one person per family works, but in Yaocun, as long as you want to work, you can find a job. So their household income is higher than other towns.
That town has about 20 administrative villages, and we cover all of them, with a higher coverage rate than in the county. Our partner only has two trucks delivering there, and since the town is relatively wealthy, their own goods fill the trucks, leaving no room for our goods.
Although short-shelf-life product suppliers are powerful, they also consider costs. So now we receive many applications from people wanting to become group leaders, but we have to reject them because they are not on the main route or in villages with slower development; our partners cannot deliver there or cannot guarantee next-day delivery.
In other words, outsourcing partners will consider delivering to their own outlets. If an outlet happens to be your group leader, they can bring your goods. But if the group leader is not their outlet, they refuse to make a separate trip.
Up to now, the outsourcing model has begun to restrict our development, but it greatly helped our profitability in the early stage. I didn't have to pay drivers' salaries or buy vehicles, which is why we became profitable in the third month.
So through logistics outsourcing, you can reduce costs in the early stage, but in the middle and later stages, you need a combination of self-distribution and outsourcing. We have started self-distribution in the county and Yaocun. The advantage of self-distribution is better user experience, but you pay more: you need to pay drivers and buy vehicles.
**How to Select Products?**
Most platforms, some even sell only fruits, which I find a bit ridiculous.
Changsha is the birthplace of community group buying. Around 2011, Changsha people started group buying fruits in QQ groups. Later, with WeChat, they moved to WeChat groups. So if you start a community group buying project in Changsha, selecting high-cost-performance fruits in the early stage can be a hit.
Changsha groups buy fruits, and you also group buy fruits. Do you still group buy fruits when you go to Zhengzhou, Anyang, or Linzhou? This is why many community group buying platforms don't make money; even with a 30% gross margin, they don't profit.
Our approach is simple. Before starting community group buying, we joined many local group buying groups in Linzhou. We found that in these unorganized groups, the initiator, the group owner, is the opinion leader. They might be children's clothing store owners or mothers, who pull a group and organize their own supply, doing group buying through group chats.
For example, our platform has a rice noodle product. Those group owners would regularly open group buys. So when we first started, we group bought this rice noodle. In March, when our volume was small, with only a dozen group leaders, we sold 1,500 packs in just one hour. Now this rice noodle is our traffic-driving product, with a flash sale at noon every day, 300 packs each time, usually sold out within 30 minutes.
Besides rice noodles, those groups also group buy local Linzhou products with high visibility and reputation, such as "Chunsu Mask" and "Juxing No.1 Detergent". Some platforms, including us, have tried group buying beauty products, but they almost never sell well. However, the day before yesterday, we listed Chunsu Xiaoxi masks and sold several thousand boxes in one day. I couldn't believe this product would explode. If you start community group buying, it's worth researching local original group buying groups to see what they group buy; this helps with product selection. Product selection should be adapted to local conditions, plan before acting, and don't start with fruits, as that can easily lead to losses. Changsha groups have always been group buying fruits; the emergence of community group buying mini-programs just facilitated order collection and payment. What do local WeChat groups group buy? These group products roughly outline the product selection profile. Based on that profile, you can definitely create hit products.
**How to Recruit Group Leaders?**
Our team is small. Before mid-June, we had no BD personnel for recruiting group leaders. After June 15, we started having BDs recruit group leaders in the county. To this day, we have no BD in townships, yet the number of township group leaders is 1:1 with county group leaders. This shows a big problem: township needs are far from met, and township small shop owners are very enthusiastic about community group buying.
Our methods for recruiting group leaders are as follows:
> **1. Find FMCG distributors or B-end platforms**
>
> FMCG distributors or B-end platforms have a large number of convenience store resources. They can rely on the trust built between salespeople and store owners through long-term supply to quickly introduce many group leaders.
>
> **2. Group leader fission**
>
> Serve the first batch of seed group leaders well, and fission will definitely occur; group leaders will refer others. Guide group leaders to develop the habit of posting on Moments, or hold Moments repost activities. Township market circles are simple and spread quickly. Then bind the interests of referring group leaders and new group leaders.
**How to Increase Group Leader Loyalty?**
**1. Set common goals; only with aligned thinking can actions be aligned**
I tell all group leaders that in some counties and townships in Hunan, community group buying started in 2016. For example, Ren Zong's hometown is Miluo, which is not as good as Linzhou, but this is their fourth year in community group buying. They can earn 5,000-10,000 yuan a month now. This is our first year, so earning less is not scary. Our goal is to help 200 group leaders in Linzhou earn an extra 2,000 yuan per month.
**2. Transform from a service provider to a leader.**
Previously, we thought of ourselves as post-90s, and most of our group leaders are post-80s or even post-70s. We led our group leaders with a service attitude every day.
But after learning from successful platforms elsewhere, we tried to change our identity. We are leading everyone in a revolution, leading you to make money. We are together to complete the second retail revolution. If you want to do it, continue here; I can empower you. If you don't work hard, you will be eliminated.
**My Understanding of Community Group Buying**
The first stage was 20 years ago, around the 1990s, when villages had supply and marketing cooperatives. But from 1999, the first supermarket appeared in Linzhou. Since then, many supply and marketing cooperatives transformed from counter-style sales venues into convenience stores with richer product variety. During the development of supply and marketing cooperatives, some upgraded to convenience stores. If a local cooperative didn't upgrade, someone else would definitely step in to open a convenience store and take away its business. I believe the current stage is the same as the previous evolution. If traditional convenience stores don't upgrade and add online community sales, then water stations, clothing stores, or even mothers will step in to do community sales and encroach on the convenience stores' share. We have a classic case: a doctor at a village clinic became our group leader, and now he has more customers picking up goods than patients. The supermarket next to him has daily turnover of less than 1,000 yuan, while our doctor group leader sells 500-600 yuan every day.
Whether in the supply and marketing cooperative period, convenience store period, or the current store/mother + community period, where do their goods come from? In the cooperative period, store owners had to go to the county or town to purchase. In the second stage, when cooperatives became convenience stores or small supermarkets, brand distributors emerged. Then they no longer sat and waited for people to come; they drove or hired salespeople to go door-to-door in villages asking if stores needed goods. In the third stage, community group buying companies will become innovative supply chain companies.
This is my understanding of community group buying.


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