2021, Community Group Buying "Frustrated People Alliance"

Image source @ Visual China

Text 丨itlaoyou-com

In 2021, community group buying has undergone a sudden change.

In the first half of the year, community group buying soared, MPD (Meituan, Pinduoduo, Didi) settled in Beijing and Shanghai, basically completing the national layout; Shihui Group and Xingsheng Preferred have won a new round of financing.

In the second half of the year, the regulatory policy gradually became stricter, the market pattern "changed face", the community group purchase ushered in a new round of reshuffle, Tongcheng Life, Ten Hui Group, Orange Heart Preferred... One by one, the big players were defeated.

Sea water and flames.

Closures, retreats, and bankruptcies often come very suddenly, just one day before Tongcheng Life announced the transformation, on July 5, 2021, there were still suppliers delivering to Tongcheng warehouses.

Watching it rise to a tall building and entertain guests, watching it collapse.

Tongcheng Life and Ten HuiTuan, once the leader of community group buying entrepreneurs, were also "swept away by the big waves" in the fierce competition; Orange Heart Preferred also released the bold words of "no upper limit for investment", but in the end, due to regulatory reasons, it was helpless to shrink.

2021 has passed, a ticket player in the community group purchase track "crawling", experiencing ups and downs, they were the protagonists at the beginning of the story, but did not guess the end of their own story, came so quickly.

The community group buying players who have "gone" have formed the community group buying "Frustrated Alliance" in 2021.

The Great Purge

The starting point of the industry reshuffle stemmed from the new changes in policy in June last year.

In fact, since the introduction of the "nine no's" regulations on community group buying in December 2020, regulatory forces have been affecting the community group buying industry, and the top players on the track have basically received "fines" from the State Administration of Market Regulation.

However, in June last year, the regulatory policy was suddenly tightened, and the drainage tool of community group buying, "one penny second sale of goods", will no longer be allowed, and the front-line leaders have also received a notice: except for some of the new users' goods to enjoy the first 0.01 yuan discount, all other "one penny" preferential products will be cancelled.

The subsidies for community group buying have been pressed to pause, and the crisis under the iceberg has surfaced to sea level.

Internet giants have just entered the community group buying track, "subsidies" is the most effective weapon to leverage the market, which platform has a large discount, which platform's single volume and user scale will reach a peak in a period of time.

But the hidden danger of crazy subsidies is the lack of loyalty of users; when there are more consumption choices and less difference in goods, users vote with their feet, often only picking the "cheapest", and do not care about which platform they bought.

Whether more longboards can be established in addition to the price advantage, such as performance timeliness, commodity quality, etc., is an important indicator to test the sustainable development ability of the platform.

Otherwise, the tide will recede and there must be players "swimming naked".

When the "penny spike" was stopped and the subsidy was contracted, the single amount of major players also declined; at its peak, only in Sichuan, Orange Heart preferred to subsidize 10 million yuan per month, but after stopping subsidies, Orange Heart's local single volume fell by nearly a quarter.

In the survey, Dige Network also found that due to the suspension of subsidies, the Fuzhou market, which was originally in the top three internal sales of Orange Heart Preferred, also fell by nearly four-fifths of the time.

The negative impact of the decline in subsidies continues to spread; in Shanghai, in early August 2021, after the subsidy was suspended, the number of "daily active group points" with a daily trading volume of more than one order was only about 1,000, accounting for about 7% of the total number of local groups.

Although commodity subsidies are suspended, but the user demand remains unchanged, consumers' daily purchases of fresh and daily goods are fixed, "more choices" will become a burden at this time, and platforms that fail to establish user habits in depth will be the first to "suffer"

Most critically, the fixed cost of community group buying can be quite a lot.

Even if the subsidy is suspended, the warehouse rent of the community group purchase has to be paid, the grid warehouse commission and the employee salary must be paid, and the larger the operation scale, the higher the cost borne by the platform.

However, when continuing to burn money subsidies, mainstream players lack self-hematopoietic ability, and external capital is gradually "tightening the money bag"; enterprise investigation data shows that the last round of public financing of the Shihui Group occurred in March last year, and the last round of financing of Tongcheng Life was completed in August 2020.

Subsidies are suspended, single volume declines, fixed costs remain unchanged, and large players are more unable to make ends meet.

According to Didi's third quarter 2021 financial report, the net loss from Orange Heart Preferred's investment was as high as 20.8 billion yuan.

So the building fell.

On July 6 last year, Tongcheng Life announced its transformation; a day later, Tongcheng Life filed for bankruptcy, and "the company no longer has room to seek transformation", with a cumulative responsibility of about 1.4 billion yuan.

More than a month later, the Shihui Regiment and Orange Heart Preferred successively withdrew from the city and Closed Warehouse in a large area, the former only retained the business of important provinces such as Hunan and Hubei, and the latter also retreated to Sichuan, Chongqing, Fujian and other regions to seek steady development.

After the platform suddenly shrunk its business in a large area, each company had different degrees of employee salary bargaining, suppliers recovering payment and other incidents, and even caused huge business ethics controversies and the decline of the community group buying track.

A field of chicken feathers.

The tightening of regulatory policies is like a "butterfly effect", which quickly has a chain reaction on community group buying enterprises, triggering a new round of "clearance" in the industry, and finally leaving only the back of the "frustration" of many enterprises.

However, returning to the essence of business and putting aside policy factors, has the disintegration of this group of "frustrated people" already laid the groundwork?

The "old three regiments" disintegrated

From the second half of 2020, the giant changed the pattern of community group buying.

MPD with the trend of capital and traffic, the community group purchase upgrade to a tens of billions of war, including the late entry of JD.com and Ali, the giants dance together, the instant combat strength in all aspects, far more than the "old three groups" entrepreneurs.

When the land song network once investigated in Hunan, it was found that Orange Heart Preferred only took half a month to establish a sales (BD) team of more than 300 people in Changsha, "After opening Changsha and opening up foreign cities, BD is basically a continuous axis rotation." ”

Having experienced group buying and takeaway wars, the Most A.S. Group, which is the best at ground warfare, "swept" the small shops in Changsha City within two weeks, quickly covered the whole city, and completed the "Thousand Cities Plan" in less than half a year.

Under such combat effectiveness, the new three regiments continue to invest capital.

The new three regiments continued to attack, and the old three regiments were not far behind, but also introduced new capital from the outside: in February last year, Xingsheng Preferred was rumored to have completed a new round of financing of US$3 billion; a month later, the Shihuituan group completed a US$750 million Series D financing, led by Ali.

In terms of commodity subsidies, the old three regiments also copied the "homework" of the Internet. On New Year's Day last year, Xingsheng Preferred carried out a nationwide red envelope subsidy activity for the "first time in history"; the Shihui Group followed up the "low-price second sale" activity, listing explosive products such as "0.3 yuan and 4 eggs".

The old three regiments "catch up" with the pace of the new three regiments, but the gap is not just capital.

In the first half of last year, the new three groups burned money subsidies unabated, the entrepreneurial "old three groups" had to rush to fight, Tongcheng life in Guangdong has invested 100 million yuan in costs, the daily user-side subsidies reached 2 million-3 million yuan.

He Pengyu, CEO of Tongcheng Life, also admitted that the giant depressed the gross profit of the community group buying industry, and even the negative gross profit operation, which made Tongcheng Life feel pressure.

"Every day there is war."

As mentioned earlier, commodity subsidies have a certain "anti-phagocytosis" effect, and once the platform continues to subsidize commodities, it is often difficult to stop; because after the subsidies are extinguished, the platform users are likely to lose a large number of users.

User loss, single volume decline, once excessive commodity subsidies, will become unnecessary waste of resources, and new external capital can not be "supplied" in time, the platform will encounter a cash flow crisis.

In fact, community group buying should avoid waste of resources, which tests the organizational ability of the platform.

As strong as the Meituan preferred, it took half a month to open Changsha, and then rapidly reduced the sales force in a short period of time; more ferocious such as buying more vegetables, the sales team was all outsourced during the Opening Of the city, and during the city operation, it re-recruited its own BD and cut off outsourced sales.

Regardless of the process, the US group's ground warfare experience is rich, and the leadership thinking of Pinduoduo is highly rational, and the two are ultimately results-oriented in doing business, emphasizing execution, that is, combat strength, and avoiding all unnecessary waste of resources.

A high degree of intensification in organizational management and maintaining a relative balance between open source and throttling are the keys to meituan, Duoduo, etc. that can win in the fierce competition, and this is also an important difference between entrepreneurial players and Internet giants.

Subsidies are not in place to find external capital, the team is insufficient to rely on recruitment, but the continuous iteration of organizational management capabilities is a problem that cannot be solved in the short term by the Ten HuiTuan and Tongcheng Life.

Moreover, in the battle of community group buying, the giants have opened up a new model.

For example, in the warehouse distribution link, the shared warehouses preferred by Xingsheng are mostly self-built and self-operated, and Tongcheng Life is leasing land, self-built warehouses, and self-built cold storage in many warehouses.

In order to pursue scale and efficiency, the Internet giant adopts a social cooperation model in the warehouse allocation link, the central warehouse is leased from the professional logistics park, and the shared warehouse and the grid warehouse adopt the franchise system, which greatly reduces the performance cost and ensures that the giant can expand efficiently in the short term.

The multi-faceted transcendence of capital, scale and organizational strength will soon distance the Internet giants from the entrepreneurial "old three groups", and also indicate the inevitable failure of entrepreneurial players in the competition.

The founders of the three MDP companies have all "cheered" for the community group buying business, and Wang Xing's slogan of "must win this battle" is still in his ears; but in the end, community group buying is only one of the business units for the giants, and they can put all the precipitated business capabilities into the new war.

For the old three groups, the community group buying business is all they have.

After the community group purchase has become a "tens of billions" war, it is difficult for the entrepreneurial "old three groups" to find their seats.

However, under the new direction of policy, the giant pattern is also changing.

Turn the rudder

After the "penny second kill" was stopped, the giant forces were also "clearing".

Due to the regulatory "black swan" event encountered by the parent company, Orange Heart Preferred has been closed in a large area since September 2021, and as early as June last year, the account period of Sichuan Orange Heart Preferred suppliers was extended to three months, and the wages of Orange Heart employees in some areas were also owed.

The latest news is that Orange Heart Preferred is working on the group batch business in the original market, mainly promoting "orange wholesale" products, providing a transaction matching platform for small shop owners and wholesalers, and charging 1%-2% of the transaction amount to wholesalers as a commission.

Orange Heart preferred or adjusted for passive reasons, while another player, Jingxi Pinpin, voluntarily withdrew from shanxi, Ningxia and Fujian provinces, retaining strength to see the after-effects.

In addition to the withdrawal of the city, including the US group and Duoduo, there was also a brief decline in single volume after the subsidy tightening.

Most critically, the focus of competition for community group buying giants is changing.

In the past, giants continued to open up new cities and burn subsidies to increase the amount of orders; now, the top four players of community group buying (Meituan, Duoduo, Ali, and JD.com) pay more attention to the construction of back-end links such as supply chain and contract fulfillment.

From the hot war of burning money to grab the market, it has gradually changed to a dark war of deep ploughing circulation links and refined operations, and the smell of gunpowder on the battlefield is still strong, and players from all walks of life are gradually playing a "personal style".

The most intuitive difference is in the selection strategy, such as buying more vegetables in the selection of products to adhere to the logic of "the lowest price is the winner", comparing prices among multiple suppliers in the same category, and finally choosing the lowest price to purchase.

A duoduo procurement employee told Dige network that suppliers can ensure the bottom line of quality, such as eggs without frozen eggs, dirty eggs, but also can not guarantee how good the quality is, "after all, the price is so low." ”

Even if the Internet giant has been in the community group purchase for more than a year, it has been differentiated in the selection of products, Tao Cai Cai excavates mental products in many regions, and Meituan Preferred wants to focus on cost performance, but the start is not smooth...

The hot war turned into a dark war, but the supply chain war was even longer.

Community group buying competition has entered a new stage, after excluding the relative advantages of price factors, each platform has made sufficient efforts in mining single products and refined operations.

The business links involved in the back end are more complex, such as products, each region in the country has special high-quality agricultural goods, but the dealer network in each region is quite mature, the interest relationship is intertwined, and the new Internet platform can break the information gap and establish a more efficient supply and marketing system.

It is both broken and standing, and it is even more difficult than difficult.

Fulfillment, supply chain transformation is extremely expensive of resources and time, The Land Song Network discussed in an earlier article that community group buying will be a protracted battle for three to five years.

For players who have left the table, even if there is no regulatory policy impact, some players may not be able to persist for too long in the longer operation and supply chain competition of capital investment.

The establishment of the "Frustrated" alliance may be an inevitable ending, and under the back of the departing people, it is the new table of community group buying that continues to stir.

In 2022, the war on community group buying will continue to burn.