Scan the QR code in the image to register " Regulatory tightening, capital cooling, severe internal competition in the track, giants exiting early? " In the early morning of July 6, He Pengyu, founder and CEO of community group buying brand Tongcheng Life, issued an internal letter stating that Tongcheng Life would make strategic adjustments. "From today, we will adopt a new brand name 'Micheng Life,' focusing on supply chain innovation around group leaders (KOL, KOC), including private domain traffic operations, live streaming operations, and supply chain empowerment" , marking Tongcheng Life's shift from C-end business to small B-end, from supplying consumers to supplying group leaders, and abandoning its original community group buying business. "Robbed" Before the "Harvest" Public information shows that Tongcheng Life was incubated by Tongcheng Group in January 2018 and belongs to Suzhou Xiancheng Technology. In August of the same year, Tongcheng Life officially began operations, based in Suzhou, expanding to surrounding cities such as Wuxi, Changzhou, Nanjing, and Nantong. In just 4 months, Tongcheng Life covered over 1,000 communities and hundreds of thousands of families in East and South China. Thanks to the backing of Tongcheng Group, Tongcheng Life developed rapidly in its early days. At its launch, it secured nearly 10 million yuan in seed funding and tens of millions in angel funding. According to Qichacha data, since its establishment, Tongcheng Life has received 8 rounds of financing, totaling over several hundred million US dollars. The most recent round occurred in July 2020, led by Xianghe Capital, with participation from Bertelsmann Asia Investments (BAI), Yuanhe Capital, etc., valuing Tongcheng Life at $1 billion post-investment. During operations, Tongcheng Life also acquired small and medium-sized community group buying platforms. In 2019, it acquired Qianxianhui in South China, which was renamed "Tongcheng Life Select"; in July 2020, it acquired Kaola Select under Xingaoqiao, expanding into Hunan and surrounding areas; in the same year, it acquired "old rival" Linlinyi in Suzhou, forming three advantageous regions: Southwest, Central China, and East China. Thus, before internet giants entered, Tongcheng Life was one of the top three community group buying companies. In 2020, Tongcheng Life's GMV approached 10 billion yuan. CEO He Pengyu set a goal of "300-500 billion yuan GMV in 2021" and hoped for overall profitability. According to Tongcheng Life's internal letter, "By mid-2020, the company entered a healthy development stage, with front-end fulfillment breaking even, and had begun to find a sustainable development path for community group buying." However, coincidentally, in June 2020, Didi entered community group buying, establishing Chengxin Youxuan and starting pilots in the Sichuan-Chongqing region. On July 7, Meituan announced an organizational restructuring, establishing a "Youxuan Business Unit" and launching "Meituan Youxuan," officially entering the community group buying track. On August 31, Pinduoduo's community group buying project "Duoduo Maicai" officially launched, with pilots in Wuhan and Nanchang. The influx of Meituan Youxuan, Duoduo Maicai, and Chengxin Youxuan, relying on massive subsidies, disrupted the pace of startups. The capital accumulated by the "old three groups" over the past few years was insignificant compared to the internet giants, and they lost a large number of users and orders. By the end of 2020, more than half of the 70+ core cities covered by Tongcheng Life achieved break-even, with gross margins exceeding 20%. However, since the second half of the year, internet giants' aggressive subsidies made Tongcheng Life seem "overwhelmed," with He Pengyu exclaiming, "The subsidies are dazzling, and Tongcheng is under price pressure." Compared to Tongcheng Life's target of 30 billion yuan, in 2021, Meituan Youxuan set its annual GMV at 200 billion yuan, aiming for 50-60 million orders per day; Duoduo Maicai's 2021 GMV target is 150 billion yuan; Chengxin Youxuan's 2021 GMV target is 100 billion yuan. After players like Meituan Youxuan and Duoduo Maicai entered, the industry's gross margin for community group buying was compressed to 5%, and many companies operated with "negative gross margins," completely contrary to Tongcheng Life's past growth environment. In other words, Tongcheng Life, through financing and acquisitions, reached the top position in the community group buying track, but before it could harvest, it encountered cross-industry disruption from giants. Cash Flow Break, Suppliers Blockade According to 36Kr, in the past quarter, Tongcheng Life's order volume has dropped significantly, down more than 60% from its peak. The financial strain from declining orders squeezed Tongcheng Life's cash flow, leading to increasing supplier payment issues. A Tongcheng Life supplier said, "Originally, Tongcheng's payment cycle was similar to other platforms, T+3 or T+7, but now the payment period has been delayed to as long as a month or even longer." Another industry insider revealed that in the past month, more suppliers went to Tongcheng Life's Suzhou headquarters to demand payment, especially on July 5, when suppliers from all over the country gathered downstairs at Tongcheng Life's Suzhou headquarters, holding banners demanding payment. Tongcheng Life provided a solution on the evening of July 5. According to a contract provided by suppliers, "Party A 'Tongcheng Life' will first pay suppliers 10% of the payable amount, and the remaining 90% will be paid at an unspecified time, 'with both parties negotiating the specific payment time.' Suppliers must promise not to demand the remaining payment from Tongcheng Life in any form within three months after Party A pays the first 10%. It also specifically noted that suppliers cannot 'loiter, make noise, or otherwise affect Party A's normal office order at Tongcheng Life's workplace,' and cannot 'demand payment through litigation, arbitration, government complaints, etc.'" Suppliers did not accept the new agreement. So on July 6, Tongcheng Life sent suppliers a new payment solution, offering two options: Option A: Debt-for-assets (negotiated at 30%). The original business has stopped; warehouses will undergo asset inventory, taking one week. Option B: Debt-to-equity conversion, with priority exit when new business financing occurs. However, suppliers still could not accept this solution. Thus, the scene at the beginning of the article occurred: on the early morning of July 6, Tongcheng Life issued an internal letter, with He Pengyu apologizing, saying, "The unprecedented challenges and problems the company faces today, I as CEO have an unshirkable responsibility. I deeply apologize to all partners, employees who fought alongside us, the government, the media, and all investors who invested in us." However, in the announcement, He Pengyu did not mention the supplier debt issue in the internal letter. As for the previously rumored cash flow problems at Tongcheng Life, mainly because before deciding on strategic transformation, Tongcheng Life had discussed "acquisition intentions" with several community group buying companies in the market—JD.com, Alibaba, and even ByteDance—but ultimately failed for various reasons. Now it seems Tongcheng Life's cash flow break is indeed confirmed. Tongcheng Finally Joins Hands with Douyin One of the main contents of this public letter is that group leader and live streaming supply chain business will become the main business of "Micheng Life" in the future. In fact, as early as April this year, Tongcheng Life was reported to have officially entered Douyin, starting its live streaming operations. On the Douyin interface, clicking "Douyin Local" allows entry into Tongcheng Life, with the homepage featuring attractive items like "1-cent new user purchase," "hot products," and "red envelopes." At that time, Tongcheng Life, which had disappeared from public view for a while, immediately attracted attention in the track. According to industry evaluation, "The alliance between Tongcheng and Douyin, on one hand, uses Douyin's traffic to enter Meituan's local life business, using traffic to break Meituan's boundless network. Alibaba cannot surpass Meituan in local life because Alibaba has traffic anxiety, while ByteDance's traffic is as massive as Tencent's, using flood-like traffic to attack local life. On the other hand, ByteDance cannot afford to lose its e-commerce business, because the retail format transformation path is short, enabling the fastest monetization. Content drives traffic, retail monetizes—this is the best path. However, Douyin's introduction of Tongcheng Life hides ByteDance's ambition to build a WeChat-like ecosystem, using high-frequency fresh food group buying to reshape payment, transactions, and other scenarios. Douyin's alliance with Tongcheng Life seems to target Pinduoduo, but in reality, it is attacking WeChat's rear. Meituan is just a roadblock; the real ambition is to take down Tencent's market share." But now, it has been revealed again that Tongcheng Life will start strategic cooperation with Douyin. Tongcheng Life also encourages group leaders and brands to do live streaming sales, perhaps having already explored the possibility of business transformation. Undoubtedly, Douyin will become the main battleground for Tongcheng Life's future business transformation. "Brand self-broadcasting plus group leader live streaming, with POI positioning, will become the main live streaming strategy," but the trust crisis caused by supplier debts, how much traffic support ByteDance can bring, and the challenges of fresh food live streaming will all test Tongcheng Life. Review: Asher -END-