Once seen as the next big wind outlet, community group buying is now shrinking across the track. From Didi, the news came out that Orange Heart Preferred is shrinking in batches across the country, and the first batch will shut down 60% of the existing city's business, and the once large-scale expansion has suddenly stopped.
In addition to Didi, those waist enterprises have also begun to withdraw, and a considerable number of early testers of community group buying have gone bankrupt and transformed. There have been predictions that buying vegetables will be a trillion-dollar market, why did it enter the big reshuffle stage so quickly?
In fact, community group buying is not a new thing, as early as 2016 in china, but has not become a climate, tepid. It is the "difficulty in buying vegetables" under the influence of the epidemic, as well as the development and maturity of major platforms in logistics, distribution, organization and management and other links in recent years, which has led to the rigid recovery of the community group buying model.
As with the previous invasion of other fields by the Internet industry, it is necessary to wait until the Internet giants enter and open the money-burning promotion model, and an application or a service can truly enter the vision of the general public. However, cheng also burns money, defeat also burns money, the community group buying enterprises that have been defeated obviously cannot afford to fight the war of attrition, and the dismissal of orange heart preferred means that the cake of community group buying, even if it is an Internet giant with a large volume, can not lay a victory just by smashing huge funds.
In fact, Didi Orange Heart prefers to move from a high-speed progress to a substantial reduction in business scale, which can be said to be an inevitability. The reason is simple: times are different.
First of all, Didi entered the community group purchase, deviating from its own main business, and its core driving force was the demand for listing to increase valuation. Travel growth is slower, and community group buying has all the characteristics of "lightning expansion", so Didi sacrifices the old magic weapon and uses capital to hold it high. But the days of rapid capital-based leadership are over. In particular, community group buying requires the development and maturity of logistics, distribution, supply chain, organizational management and other links, which is a protracted battle, and it is difficult to win quickly by relying on capital alone.
Second, the endless low-price strategy, even subsidies to find, occupy the market and squeeze out other competitors is outdated. New regulations prevent e-commerce companies from engaging in unsustainable subsidized price wars and limit the forced exclusivity that large platforms have exercised in the past. What's more, compared with the previous money-burning wars of online car-hailing, shared bicycles, takeaways, etc., community group buying involves a long chain, more objects that need subsidies, and higher subsidy costs, if the subsidized business cannot form a synergy effect with the company's existing business, then it will cause higher customer acquisition costs, resulting in unbearable final losses.
In June and July, Duoduo buy vegetables and Meituan Preferred stopped subsidies in some areas in accordance with policy requirements, and the order volume fell by nearly 20%
Third, the regulatory climate has changed. China's tech companies, both public and unlisted startups, often try to outdo their rivals and sacrifice short-term profits to gain user traffic in pursuit of market dominance and industrial leadership (Didi was the best at this). Today, however, the attempt by a consumer Internet company with a dominant platform to generate large amounts of cash with minimal incremental investment has become alarmed by governments.
The reason is that the costs brought by consumer Internet companies to society are not reflected in private market value. For example, who is responsible for the negative effects of huge subsidies? Huge subsidies have disrupted the price system, endangering not only the livelihoods of vegetable vendors, but also thousands of suppliers. That's why, after the central government proposed to prevent the "disorderly expansion of capital," community group buying was also dragged into a broader policy debate about the economic role of big tech companies.
For tech giants, community buying isn't just a different distribution channel, it's a way to reach specific untouchable groups of users and fully digitize their buying process. We are in the latest armageddon in China's consumer technology field, although Didi has lost, but Xingsheng Preferred, Pinduoduo, Meituan, Alibaba, etc. are still fighting to the death, and it will take some time before we see the results.
This will be an unwinnable battle for several reasons: there are no network effects in this market, and success in one region does not guarantee success in another region, because local preferences and sourcing strategies are very different; fresh produce is a market with a low degree of standardization, and scaling up poses a challenge; and how to grasp the needs of users? How to ensure the loyalty of users and leaders? In the coming months and years, these challenges of community group buying deserve our close attention.