The prosperity of community group buying in 2020 has not been able to continue until 2021, and it has begun to cool down or even extinguish the flames!
After the wave of closures in 2019, affected by the epidemic, community group buying ushered in a turnaround in 2020, and Internet manufacturers have entered the game. In June, Didi's community group buying brand "Orange Heart Preferred" was launched; in July, Meituan established the "Preferred Business Department" and launched the "Meituan Preferred" business; in August, Pinduoduo launched "Duoduo Buy Vegetables" and Hema Preferred Business Unit; in October, Suning Vegetable Farm Community Group Buying Platform was launched in Beijing; in November, Cheng Wei, chairman and CEO of Didi, said that "there is no upper limit on the investment in Orange Heart Preferred, and it will go all out to win the first place in the market". In addition, Ali, Tencent, and JD.com also split the community group purchase through war investment, such as JD.com's announcement of a $700 million strategic investment in December.
However, what followed was a subsidy war, a traffic war, and various chaos caused by it, such as low-price dumping, which was criticized by the market. In December 2020, the supply cut storm broke out, and community group buying was boycotted by suppliers, followed by the normative "nine no's" policy.
Entering 2021, regulations have been further tightened, and the barbaric growth of the industry has begun to converge.
In March, five platforms, including Meituan Preferred and Duoduoduo, were fined the top for improper price behavior; in May, Shihuituan collected fines for not fully implementing its rectification commitments; on September 6, the State Administration for Market Regulation once again filed a strict investigation and punishment of low-price dumping, price fraud and other illegal acts in the field of community group buying. At the same time, brands such as Food Sharing Club and Tongcheng Life have collapsed and triggered the butterfly effect, and the contraction of these head enterprises such as Ten Hui Tuan and Orange Heart Preferred has become a sign of a complete reversal of the industry's wind direction.
Under strict supervision, community group buying platforms have to tighten subsidies, which has led to the loss of users of many community group buying platforms and the decline in order volume. After seeing the uncertainty, capital also began to take a wait-and-see attitude, following two financings in July, there were no more financing incidents in community group purchases during the year.
Data source: "2021 China Community Group Purchase Financing Data List" released by Qichacha and Wangjingshe on January 7
After another wave of old players fell, according to the latest statistics of the Financial Associated Press, the current competitive pattern of community group buying is: the first echelon of duoduoduoduo, Meituan preferred, the market share is more than 30%; the second echelon of Taocai (the original Hema Market), Xingsheng Preferred, Jingxi Spelling, the market share is about 10%; the third echelon of orange heart preferred, ten huituan, Meicai network, most of them are facing the difficult situation of scale contraction, layoffs or transformation.
In the environment of stricter policies, peaked traffic, and tightened capital, players in community group buying slowly returned to rationality and recognized that if they want to seize the market, they ultimately have to rely on refined operations, supply chain construction and improved performance capabilities to find their own profit models.
It can be said that 2021 is a year of industry reshuffling and accelerating the clearance, and it is also a year to retreat impetuousness and let players sink their hearts and start thinking about how to seek high-quality development and cultivate hematopoietic ability.
Small and medium-sized players have withdrawn one after another
After the giants rolled up the money burning war, small and medium-sized businesses were difficult to overcome.
Less than half a year after the finalization of the all-in-community group purchase, Yipin Fresh suffered Waterloo. In late March 2021, Yipin Home announced the suspension of its Nanjing business, after which the number of operating cities plummeted, and by December, according to media reports, the number of operating cities had shrunk from 25 at its peak to only three cities, Fuzhou, Chongqing and Hefei.
In April 2021, tongcheng life, the veteran head of community group buying, also began to show a downward trend, when there were reports that due to strategic adjustments, the Hunan region, one of the most important markets for Tongcheng life, suspended operations and closed group points. Single volume fell sharply, cash flow is tight, supplier arrears, "facing the most difficult moment since the start-up", Tongcheng Life decided to strategically transform, although it did not clearly state whether to give up community group buying, but its transformation from the C-end business to the small B end has shown that it is trying to plan a new way out, almost equivalent to giving up community group buying. However, only one day, on July 7, Suzhou Fresh Orange Technology Co., Ltd., the main operating company of Tongcheng Life, announced that it decided to apply for bankruptcy due to poor management.
The departure of the food club is relatively "low-key". On July 26, the Wuhan headquarters of the Food Sharing Club was exposed to the empty building, and the co-founders left one after another, at the same time, its official website and mini programs could not be opened. Just when the outside world was suspicious of its closure, Dai Shanhui, the founder of the Food Sharing Association, said: "We are transforming, not going out of business, and the Food Sharing Association has not been merged into any one company." It is reported that the new business after the transformation of the Food Sharing Club is "Love Snacks", which is a community snack convenience store.
The 10 Hui Group, which took Ali's 4 rounds of investment, was not spared. In August 2021, after its founder Chen Ying announced self-innovation, the Ten Hui Group began to withdraw and lay off employees on a large scale, shutting down the business of 21 urban circles across the country in four months, retaining only the core metropolitan areas with 5 profitable states. At this time, it was also rumored that the business of its base camp, Hunan Changsha, would be shut down before the end of the year, but it was denied, but the relevant response also confirmed a series of "cost control" changes such as hunan business contraction and layoffs.
Although Xingsheng Preferred, which is also a member of the "Old Three Groups" and backed by the gold lord JD.com, has taken three financings in 2021, its development has not been smooth. In the second half of 2021, the daily single volume of Xingsheng Preferred in Shandong, Shaanxi and other places has dropped seriously, and Zhejiang, Jiangsu, Anhui and other places have also encountered "water and soil dissatisfaction", and only in Hunan, Hubei and Guangdong still maintain a strong position. Since June, Xingsheng Preferred has stopped all new and ultra-low discount activities, and since September, it has stopped its external expansion plan and closed inefficient group stores in many areas.
In the second half of last year, Baoneng Fresh closed 25 stores in Xi'an and 8 stores in Nanchong; the corresponding area of the mini program has been unable to place orders. A number of Baoneng fresh employees broke the news that tens of thousands of employees across the country were repeatedly owed wages by Baoneng Group for no reason. On October 14, some of the city services of Chuanmei Cai.com have been shut down, and the regions have begun to merge, and the layoffs have been opened two weeks ago.
There are also carrots that have recovered slightly with the normalization of the epidemic, and have once again fallen. On October 20, the company issued a suspension announcement, the company will stop business from now on, its "Dumb Radish App" will stop providing services to consumers, and all offline stores will be closed one after another.
It is understood that The carrot entered the bankruptcy reorganization procedure on January 23, 2020, and tried to turn losses into profits and regroup in the past 21 months, but still failed to introduce restructuring investors, resulting in deteriorating operations and unsustainable company. "It can only be said that our expectations and demand for growth are too high, underestimating the rate of burning money for fresh food, so that it causes consumption to be too fast, which is where we use it wrong." Li Yang, founder of Dumb Radish, said.
Recently, Qian Dama, a fresh brand known for "not selling overnight meat", had to close its stores in Beijing only one year after entering Beijing because she "underestimated the difficulty of the Beijing market and underestimated the operating pressure brought to us by the high rent of houses in the Beijing market". At present, relying on the advantages of the full-link supply chain, two-thirds of Qian Dama's stores are set up in Guangzhou, the base camp, which shows that it is still difficult to copy the South China model if qian Dama wants to go out of Guangzhou.
Giants are also starting to fall behind
Not only small and medium-sized players, but even Internet giants with strong capital have begun to fall behind in the face of stricter supervision after obtaining short highlight moments by burning money.
Didi's Orange Heart Preferred, which was launched in May 2020, once shouted the slogan of "no upper limit for investment", but in September 2021, it began to withdraw, the single volume dropped from the previous 12 million orders to 2 million orders, the number of teams dropped sharply from 16,000 to 5,000 people, and the service area also shrank from the previous 31 provinces in the country to 9 provinces, and even some reports quoted insiders as saying that the national business would be closed by November.
In December, Titanium Media App found that the Orange Heart Preferred Portal was officially removed from the Didi Chuxing APP, allegedly because the Orange Heart Preferred business is currently in the process of adjustment. According to the report, since November, Orange Heart Preferred decided to shift its focus to wholesale business, and quickly incubated the platform "Orange Wholesale" for retail terminals and wholesalers to trade services, and "Small B" can be purchased on Orange Wholesale to meet its daily business needs.
The person in charge of orange heart said that orange wholesale is only one of a variety of self-help methods, the most important thing at this time is to survive, as for the future orange heart what kind of posture adjustment, it is not so important. It is worth noting that Didi's latest financial report shows that the investment in Orange Heart Preferred has a huge loss of 20.8 billion yuan.
2018 has entered the game, and in the end of 2020 by Liu Qiangdong personally led the team, the battlefield of Jingdong community group buying is also shrinking. Since May 2021, Jingxi Pinpin has successively withdrawn from Fujian, Gansu, Guizhou, Jilin, Ningxia and Qinghai provinces.
Although Meituan, Ali, and Duoduo have not yet given up on adding: Meituan and Pinduoduo have carried out a wave of tug-of-war in first- and second-tier cities, and are preparing to sink; after Ali ended the "internal horse race", the scope of Taocai cuisine services has been expanded to more than 20 provinces, and the average daily single volume has reached 13 million pieces, but they are also more or less adjusting their business and organizational framework to varying degrees.
Due to the further expansion of losses, Meituan increased gross profit while lowering expectations for single volume and GMV; Taocai suddenly announced the suspension of Regional Services in Guizhou in November, officially saying that it was blocked because of interconnection; Duoduo buying vegetables joined the elimination system on the basis of continuing the flat system management, and the heads of provinces and regions with poor performance will be replaced by responsible persons with better performance.
Undervalued thresholds, overvalued profits
From the beginning of thinking that they could quickly win the war of community group buying, to falling into the strange circle of internal friction and loss, players actually underestimated the threshold of community group buying and the time it takes to win the market.
At present, community group buying is basically based on fresh categories. Fresh fruits and vegetables have the characteristics of high frequency, which can effectively maintain and establish the stickiness between the community and consumers, but the shelf life is short and the loss rate is high, which requires the platform to have a strong supply chain capability and cold chain logistics system, which requires a lot of capital investment.
In 2021, Meituan, JD.com and Ali still made a lot of investment and marketing in the community group buying business, which also led to the gradual enlargement of the losses of the giants.
In the first three quarters of 2021, the cumulative loss of the new business where Meituan Preferred is located reached 28.188 billion yuan, which has exceeded the loss of new business in 2020; the cumulative operating loss of JD.com's new business in the first three quarters of 2021 (JD Production and Development, Jingxi, Overseas Business, etc.) exceeded 7.3 billion yuan; Ali said in the financial report: The year-on-year decrease in profit is mainly due to our increased investment in key strategic areas. According to the financial report, Alibaba's key strategic areas include Taote, Local Life Services, Taocai cuisine and Lazada. Investment in this area also increased to 12.575 billion yuan in the third quarter.
In addition to the higher threshold than imagined, another pain point of community group buying is the thin profit. None of the existing players made a profit and had to face a trade-off between survival and expansion.
The reason is that the fresh supply chain is difficult to compress, and the gross profit space is limited. Under the traditional model, agricultural products need to go through the primary, secondary, or even tertiary wholesale markets after being shipped out of the place of origin, in order to be distributed to the store, and the cost of circulation is very high. Community group buying has been trying to shorten the supply chain and save costs with "direct procurement from the place of origin".
But the reality is that most platforms still rely on the local primary wholesale market, after all, the production of mainland agricultural products is relatively scattered, and the primary wholesale market obviously has more advantages in SKUs. An industry insider who has long provided supply chain services for e-commerce platforms said, "Direct procurement of origin is mostly gimmicks, and direct procurement of a single category of origin can be achieved, but direct procurement of all categories of origin is almost impossible to achieve." ”
Second, the industry competition is fierce, and it is difficult to achieve scale effects in the short term. In addition to the competition within the industry, community group buying platforms also need to face the challenges of other community retail models, such as the front-end warehouse model represented by daily excellent fresh and the O2O model represented by multi-point and JD.com. After all, the number of community group purchase SKUs and timeliness are not other models, and the user's mind also needs to be slowly cultivated, so it is difficult to achieve a breakthrough in the share in the short term.
Accelerate the concentration to the head platform, what will happen to the endgame?
Since the second quarter of 2021, many waist and regional community group buying brands have withdrawn from the core competition stage, and the trend of traffic concentration to the head platform has become more and more obvious. It turns out that community group buying is a game that only giants can play, because it is destined to be a heavy asset, long-term investment. Platforms that do not have hematopoietic capabilities and cannot continue to obtain financing blood transfusions have been gradually cleared by the market.
Even Dingdong Grocery, which went public in June 2021, has recently been on the hot search because of rumors of layoffs. According to reports, the number of Dingdong grocery workers is tens of thousands less than at its peak, and the core department has laid off up to 50%. However, Dingdong Quickly denied it through a statement, saying it was malicious speculation without factual basis and rigorous data sources. And said that individual post changes are the company's normal organizational resource adjustment, the recruitment needs of some positions are also released normally, and the company's business is currently operating normally.
However, the stock price of Dingdong Grocery Shopping has fallen for several days, closing at $4.95 as of January 21, 2022, a drop of 14.51%, which is nearly 80% compared with the issue price of $23.5 at the time of listing.
At present, the endgame of community group buying is not yet foreseeable, but it is certain that the future will not be a monopoly situation. There is a regional economy of scale in the community group buying model, the upstream relies on local suppliers, the midstream involves grid warehouse franchisees, and the downstream also needs to recruit high-quality regiment leaders, so it needs to be developed by one city and one city, and funds alone cannot promote rapid replication nationwide.
Because of this, community group buying will appear in different areas of different "ground snakes", and even foreign "strong dragons" may not be able to penetrate. This is unexpected for Internet companies that are accustomed to burning money and quickly occupying a track with resources, which is why giants like Didi have also flipped on the road of "buying vegetables".
Chen Ying, CEO of Shihui Group, once mentioned that as a community group buying model that is essentially retail, it does not have the network effect and Matthew effect of the classic Internet model, and the platform needs to effectively improve its supply chain capabilities. In the future, at least 3-5 community group buying companies will exist for a long time, and the best user experience will win the market.
According to the forecast of Guohai Securities, meituan preferred and duoduocai, which is in the first echelon, will divide most of the market share in the future; Xingsheng preferred may occupy a strong position in Changsha, Wuhan, Nanchang and other regions; the situation of Shihuituan and Taocai depends on Ali's overall strategic ability and remains to be seen; and the share of Jingxi pinning will decline.
In fact, whether it is Meituan Preferred, Duoduoduo, Jingxi Pinpin or Xingsheng Preferred, Tencent can be seen behind it. Perhaps in the future, Tencent will promote the integration of resources in the industry and eventually form a multi-legged oligarchy with Ali's platform.
Although community group buying is inevitably moving towards "oligarchy", at the same time, the collapse of community group buying in the first half shows that innovation in the field of community group buying will not stop before finding a profit model.
In the early stage of the development of community group buying, due to the imperfect infrastructure such as supply chain and logistics, the burning subsidy is an effective way to seize the market, expand the scale, and then dilute the input cost of the platform. After the industry bids farewell to barbaric growth, the exploration of the profit model of community group buying will become the theme of the industry, and Meituan, Ali, and Pinduoduo will shoulder the burden of building industry infrastructure.
In the future, the construction of industry infrastructure and the optimization of the supply chain in the sinking market will become the focus of long-term investment by all parties in the future, which is doomed to community group buying has not yet reached the stage of "winner-take-all", but a protracted battle.
(This article was first published on the Titanium Media APP, written by | Zhai Biyue, Liu Mengmeng, editor| Tianpeng)