After preliminary research on community group buying, I came to a conclusion: the giants will not give up the business of selling vegetables, because the market is large enough to create another brilliance of Pinduoduo.
Up to now, the barbaric development model is no longer possible. Continuously building a supply chain system is in line with business common sense and economic principles, and efficient growth is the only way to go.
Barbarian Law
The barbarian law was proposed by Reed Hoffman, which refers to stepping on the wind. When faced with market uncertainty, the priority is speed rather than efficiency.
At the same time, we must accept chaos, tolerate poor management, ignore customer complaints, and raise excess funds, let the flames burn, and quickly grab the market.
The result will inevitably lead to continuous burning of money subsidies, chaotic management, repeated product development, waste of resources, etc., until the leading enterprises form a preliminary monopoly advantage.
Use the fastest speed to win the largest turf, which is also the law of competition that the giants have tried repeatedly.
The follow-up content will focus on the following main lines:
- What is community group buying?
- The development history of community group buying;
- The core needs of community group buying and the necessity of existence;
- Why do giants want to seize the market?
What is community group buying?
Community group buying is a new retail model that relies on the social relationship between the community and the group leader to realize commodity circulation. It mainly sells fresh food and daily necessities, and most of them have the characteristics of rigid demand, high frequency, and low value.
Community group buying relationship diagram:
Typical community group buying business process:
- The leader of the group shares cost-effective product links in the self-built WeChat group;
- Users in the group click on the product link or place an order directly through the platform applet before a specific time point, and choose to pick up points at the same time;
- After the platform collects the order on the same day, it mobilizes the supply chain, and the warehouse sends the goods to the pick-up point the next day;
- The group leader delivers or the user picks up the goods at the pick-up point.
Community group buying mainly includes five elements:
Element 1: The nature of community group buying
Community group buying is essentially an innovative channel. It is a new type of community retail model that uses high-frequency fresh products and relies on the resources of the community and the group leader to circulate commodities.
Behind it is that it has unique advantages in procurement, logistics and customer training, and has completed the closed-loop business model.
Element two: head
As the importance of the supply chain continues to increase, the proportion of store managers in retail stores continues to increase. According to the data, the group leader Zhongbao Ma accounted for 27%, and the retail store manager accounted for 73%.
The platform of the cable store can convert these people into specially appointed heads after the assessment, and the mothers have more time to do part-time jobs.
However, the group leader currently has no exclusivity and exclusivity, so there is a situation where the head platform competes for the high-quality group leader.
Element Three: Tools
Such as WeChat groups, WeChat public accounts, WeChat applets, SaaS tools, etc.
The WeChat group is created and managed by the leader, which has advantages in management flexibility and timeliness; the mini program lists the products to improve the efficiency of order management.
Element Four: Supply Chain
Community group buying companies accelerate competition at the end of the supply chain, and those who win the supply chain win the world.
Element Five: Logistics and Distribution
With the increase in orders and the intensification of competition, the requirements for logistics allocation are getting higher and higher.
For fresh commodities, the cold chain in the middle reaches has an irreplaceable guarantee for the reduction of commodity losses.
Community group buying generally adopts the "store + self-pickup" model, which reduces the delivery cost of "home". At the same time, some platforms realize "undifferentiated delivery" in the deep coverage area, which can penetrate into the township and county area.
Advantages of community group buying:
- Supply based on demand (similar to Pinduoduo C2B model), with fewer SKUs to improve turnover efficiency;
- There is no store operation and terminal distribution logistics costs under self-pickup or store manager distribution, and low operating costs can support low customer unit prices;
- Improve logistics efficiency and reduce fresh food loss;
- Low-cost social acquisition;
- Obtain user consumption data, which is expected to realize data-driven user fine operation.
Community group buying development history
Embryonic stage: 2014 – 2015
Community group buying is not a brand-new fresh food e-commerce model. Group joining and social e-commerce have already existed in the early days.
The emergence of WeChat red envelopes has popularized mobile payment functions to a wider range of people and is the social foundation for the development of community group buying.
In 2014, in Changsha, Wuhan and other regions, delegation leaders collected orders through WeChat and QQ groups and placed orders with suppliers in order to obtain lower procurement costs.
The maturity of mobile payment, group joining and wechat business has created conditions for the emergence of community group buying models.
Initial stage: 2016
"You, Me, You" was established in Changsha, based on the family consumption scene with the community as the entrance, marking the birth of community group buying.
At this stage, QQ groups and WeChat groups are the main carriers, and manual accounting is adopted.
At the same time, the SKU categories of community group purchases are limited, which is easy to touch the ceiling of development, and operating income is generally not high.
The community group buying model has taken shape initially, but the products are mainly displayed in QQ groups and WeChat groups, with limited categories and difficulty in increasing operating income.
Development stage: 2017
WeChat ecology continues to release dividends, and the release of small programs improves the efficiency of community e-commerce transactions;
The expansion of the SKU category of community group buying is opened;
Community group buying has opened an offline store model, companies with supply chain resources are favored, and supply chain logistics infrastructure is gradually improved.
With the release of small programs, some community group buying companies have begun to shift their operations to small programs, and group buying categories and models have increased.
Outbreak stage: 2018
Community group buying is developing rapidly in the sinking market, attracting capital one after another:
A group of community group buying companies such as Linlinyi, Squirrel Pinpin, and Shihui Tuan received investment from first-line venture capital institutions such as Sequoia China, IDG, and Zhenge.
The monthly GMV of a single city group buying company in some second-tier cities reached 20 million, and the regional model was verified;
Community group buying has entered the stage of large-scale expansion of product expansion and area expansion;
Large companies such as Meituan, Daily Youxian, and Baiguoyuan began to pay attention to and make arrangements.
Mini programs have developed rapidly in 2018, and the e-commerce model has become a major application method of mini programs.
Community group buying companies generally use small programs as their main operating carrier, with mature business models and large amounts of capital entering.
Integration stage, shuffle period: 2019
The bubble receded in 2019 and the industry ushered in a reshuffle and integration.
After experiencing the prosperity of the community group buying track, in 2019, due to the fragile supply chain of the industry and the decline in passenger flow, it suffered a large-scale bankruptcy and merger.
Squirrel Fighting to fall into the collapse of the storm, the Shihui Group merged with you, you, you, and Daradish announced that the capital chain broke.
Rebirth from the ashes: 2020
The 2020 new crown epidemic has played a very good catalytic and educational role in the community group buying market.
During the epidemic, residents went out less and shopping channels were blocked. At the same time, information transmission and management were mostly based on the community, and the community unified procurement and distribution models were gradually popularized.
The community group buying category happens to be mainly fresh food, which solves the high-frequency and rigid demand of consumers every day, and has developed rapidly during the epidemic.
According to data from the Ministry of Commerce, the proportion of residents buying fresh food through community group buying channels has increased significantly compared to before the epidemic.
According to Kantar statistics, a quarter of users used the community group buying platform for the first time during the epidemic.
The epidemic has played a very good role in educating consumers, and has significantly reduced the cost of new community group buying platforms.
Community group buying has ushered in explosive growth, and the profit model is running through. Didi, Meituan, Pinduoduo, and Ali have successively made community group buying a key business expansion, and community group buying has begun to expand across the country.
There are two operating modes:
Light operation mode:
Go to the store wirelessly, saving staff wages and store expenses, the city scales faster, and the operating cost is lower.
Heavy operation mode:
The offline store has weak flexibility, but the product display function and user experience are better, which is helpful for the continuous promotion and promotion of the platform brand.
Comparison between community group buying and traditional distribution links:
The core needs of community group buying and the necessity of existence
Meet the needs of consumption classification and stratification:
Community group buying satisfies some consumers' pursuit of cost-effectiveness
Consumers in first- and second-tier cities are under high pressure and time constraints. They value purchase efficiency more, are willing to pay a premium for borderlines, and purchase channels are highly diversified.
Consumers in third- and fourth-tier cities are more price sensitive
Ample time, low pursuit of timeliness, and limited purchase channels are also important reasons for Pinduoduo's brutal growth.
From the perspective of mode characteristics:
Community group buying companies use fresh fresh food to enter the market, and use the pre-sale model to achieve sales and purchases to reduce fresh fresh inventory losses.
The next-day delivery + self-pickup model effectively reduces the performance cost and superimposes the platform subsidy, so that the terminal product has a high cost performance, and effectively meets the consumer demand of the population with characteristics of the sinking market (more leisure time, price sensitive).
At the same time, due to the high frequency and rigid demand for fresh products, community group buying channels can effectively reach and wake up a large number of consumers, so they naturally become potential offline new traffic entrances, which also attracted many Internet giants to increase their layout.
The retail formats in lower-tier cities are dominated by department stores and small supermarkets, and the types of formats are relatively scarce compared to first- and second-tier cities.
Therefore, for consumers in low-tier areas, the lack of shopping channels and the high price of goods make the consumer's needs far from being met.
Community group buying has lower rent, logistics and terminal distribution costs through the "pre-sale + self-pickup" model.
Community group buying relies on existing convenience stores, express delivery sites, etc. as offline pickup points, first reducing the investment in terminal store rents.
Community group buying adopts the pre-sale model. After consumers place an order on the mini program or APP one day in advance, the group leader or platform has sufficient time to collect the orders and carry out the centralized distribution of goods, thereby reducing logistics costs; in addition, the purchase is determined by sales. It also reduces platform stocking and corresponding loss costs.
Since consumers pick up at the store, terminal distribution costs are also eliminated. Compared with the front-end warehouse model, the terminal delivery cost per order is around 7-8 yuan. Under the community group buying model, the logistics cost from the grid warehouse to the pick-up point can be compressed to less than 1 yuan per order. The substantial reduction in performance costs has also greatly increased the reach of merchandise sales.
Why the giants should seize the market
There are many community group purchasers:
Relatively broad spectrum:
Community group buying has entered the market with fresh products. The domestic fresh food market has ample space and low online penetration.
According to Euromonitor's statistics, the domestic fresh food market is expected to exceed 5 trillion yuan in 2020, and the industry has a broad space.
However, due to the low per customer price, low gross profit, perishable loss, and high logistics costs for fresh produce, it has always been a problem of online penetration.
According to 2018 data, the online penetration rate of fresh products is still only 5%, which is much lower than that of electrical appliances, clothing and personal care.
Social group buying model innovation reduces costs and increases efficiency:
Community group purchases enter the market with fresh products, and use pre-sales to maximize sales and purchase, which reduces the loss of fresh inventory.
Compared with traditional e-commerce and pre-warehouse fresh food e-commerce, community group buying requires lower unit price for customers, which is more suitable for sinking the market.
Through the next-day delivery + self-pickup method, under the premise of sacrificing certain delivery timeliness, the performance cost is effectively reduced, combined with platform subsidies, and more cost-effective products are provided.
In a horizontal comparison, the price of fresh products on community group buying platforms is significantly lower than that of traditional e-commerce platforms such as Taobao, so it better meets the consumer needs of people with characteristics of the sinking market (more leisure time, price sensitive).
high frequency:
Fresh food consumption just needs high frequency. As Internet giants' traffic growth slows, fresh food categories have become a new battleground.
According to the statistics of iiMedia Consulting, in 2019, the average proportion of residents buying various types of fresh food more than twice a week reached about 50%.
On the other hand, e-commerce giants represented by Taobao, Tmall, JD.com, and Pinduoduo have slowed down their online traffic growth, and the cost of acquiring customers is getting higher and higher. They also urgently need to find a new growth curve.
With its broad market space and high-frequency consumption characteristics, fresh food is expected to create new growth poles for e-commerce giants, and therefore naturally become the next battleground.
to sum up
The epidemic will continue in 2021, and community group buying will continue to play an active role in solving people's daily rigid needs. The market scale is expected to continue to expand, and the steady and healthy development of the industry is the main theme of the future.