Will the community group buying with “no upper limit on investment” destroy the vegetable market?

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Source: China News Weekly
Is the basic reason for the low price of group buying in communities? Is the mode superior to the vegetable market or does it rely on subsidies
“It won’t completely replace the vegetable market, but the business in the vegetable market is not as good as it was before.” referring to the current situation of the traditional farmers’ market, Li Ling, born in the 1970s, and Wang Xia, born in the 1980s, have the same answer. Li Ling and Wang Xia share the same identity: the head of the community group buying. In Changsha, Hunan Province, the starting city of China’s community group buying, they all operate the community group buying in their own community.
Li Ling used to be the owner of a small restaurant, while Wang Xia was a full-time Baoma with children at home. However, the seemingly part-time job of regimental commander has made them extremely busy in the past year.
With the rise of their part-time job, a vigorous community group buying war is staged all over the country. In this campaign, there were beneficiaries like Li Ling and Wang Xia, as well as victims such as vegetable market vendors and shopkeepers. The end of the change, can not prevent multiple internet giants into the Bureau community group buying. By the end of 2020, many voices suddenly exclaimed that the community group buying would steal the business of the peddlers in the vegetable market, and the way of purchasing fresh vegetables would change.
How can this community group buying battle burn up, where will it go, and what kind of impact will it have on the vegetable market? Is the root cause of the low price of community group purchase, the mode advantage or the subsidy? And the role of the Internet giant, is it really just like a catfish?
Money saving game
In 2020, a community group buying war will start across the country. Strangely, in this wave of Internet wave, whether users or internet giants themselves, saving money has become mutual consensus.
In Changsha, Hunan Province, Li Ling runs a restaurant with more than a dozen employees. Before becoming the head of Shengsheng’s preferred group, she was a real community group buying consumer. She told China News Weekly that the original intention of becoming the head of the group was to be optimistic about the low-cost mode of community group buying. “In our district, Xingsheng has requirements for the head of the regiment. I need about 600 orders a month. I open a restaurant, and I place a lot of orders every day. I don’t worry about the quantity of orders.” Li Ling said.
In general, Li Ling submits the purchase demand to Xingsheng preferred operation personnel one day in advance. The next day, the delivery personnel will send the vegetables and other goods purchased by the group members to Li Ling’s restaurant, and the group members will come to the restaurant to pick up.
However, if there is no storefront, the mode is not so easy. Wang Xia was a full-time treasure mother with her children at home before she became the head of the ten gathering group. She told China News Weekly that she would personally be responsible for the delivery of almost every single order as the head of the team. “Because I don’t have a store, it’s really hard.”. However, what makes Wang Xia happy is that the group members she runs have a high stickiness. “Some neighbors seldom go to the vegetable market since they bought vegetables here.”.
Save money, become a big trump card of community group buying. The reporter looked through several community group buying apps and found that compared with the vegetable market and supermarket, the price of community group buying was extremely attractive. For example, in the Shihui group, a jin of Xinjiang Aksu bingtangxin apple sells for 1.99 yuan, and a jin of carrot costs 0.69 yuan; in the meituan optimization, 3 Jin Mayang rock sugar orange is sold for 2.99 yuan, and a jin of Huajia is sold for 3.99 yuan.
At the same time, a large number of Internet giants have entered the track of community group purchase.
In June 2020, Didi launched the community group purchase brand “orange heart optimization”. The founder Cheng Weigong announced: “there is no upper limit on the investment of orange heart optimization, and we will try our best to win the first place!” On July 7, meituan announced the establishment of the optimization business unit to join the community group purchase, and launched the “thousand city plan”, aiming to achieve nationwide coverage by the end of the year, and gradually sink to the county-level market; in August, the pinduoduo community group purchase project “buy more vegetables” was launched; in September, Ali set up HEMA Youxuan business unit, and personally joined the community group buying; in October, the headline “today’s optimization” was launched, Set up e-commerce department.
In addition to admission in person, Internet giants also invest more in community group buying. Tencent and Ali, respectively, have invested in the current hot community group buying operators, Xingsheng preferred and Shihui group.
Zhang Meng, a securities analyst, told China News Weekly that the reason why internet giants like community group buying so much lies in the fact that compared with the amazing money burning speed of fresh e-commerce before, community group buying is a way to “save money”, especially for the sinking market.
According to the report released by iResearch, the market transaction scale of China’s fresh food e-commerce industry will reach 279.62 billion yuan in 2019, an increase of 36.7% over the previous year, and it is expected to exceed 800 billion yuan by 2023.
On the one hand, there is a huge market space, on the other hand, the news of fresh e-commerce bankruptcy is endless. For example, Yiguo Shengxian, once backed by Ali, had a debt of 2.3 billion yuan and filed for bankruptcy in July this year. Founded in Shanghai in 2005, Yiguo fresh food is the first fresh food platform e-commerce in China. It has been favored by Alibaba, KKR, Suning and other capital, and was once the industry leader.
The previous wave of fresh e-commerce closures has taken away a number of well-known fresh e-commerce brands, such as our kitchen, fresh and fresh, wonderful life and dairadish.
Zhang Meng analyzes that the fresh e-commerce companies in the past few years who have been fighting for money have mostly adopted the front-end warehouse mode. However, the relative cost of this mode is relatively high, which greatly tests the operation ability of the team and the unit price of customers. The winners left behind are mainly positioned at the middle and high-end fresh e-commerce, such as HEMA Xiansheng. However, community group buying is different. With the help of social traffic such as wechat, community group buying is closer to users, with low threshold, low cost, advance booking and localized operation mode, which saves a lot of storage and transportation costs and fresh loss, making it possible for fresh food market to sink.
Community group purchase is the first mock exam in Changsha. Xingsheng optimization is a new retail e-commerce platform of Furong Xingsheng’s community group purchase. Relying on the community convenience supermarket, with the help of “pre-sale + self-service”, it sells selected commodities such as fresh food, fruits and local local specialties to consumers around the store in the form of limited time special sale. It was launched in February 2014, and gradually formed a business model of “community pre-sale + store self collection”.
The battle of cannibalism
Is the savings in community group buying due to mode advantages or Internet subsidies?

China Newsweek learned that prior to the Internet giant’s intervention, Xingsheng optimization had actually taken root in Changsha for many years. The reporter learned from a number of local community group buying users in Changsha that the time when they began to use community group buying was generally in 2018.
“I’ve been using community group buying for two years, and it’s always cheaper than the vegetable market. However, Xingsheng’s subsidies are limited. But recently, there are more and more new groups and more subsidies. I didn’t expect it would be so cheap. ” A user who started using community group buying in 2018 told China Newsweek.
Zhang Meng analyzed that as an e-commerce platform for community group purchase, many fresh products were directly purchased locally, reducing the links of middlemen. In addition, due to booking one day in advance, the cost of warehousing and logistics is also greatly reduced. “According to our calculation, the customer unit price of the community group purchase model is about 20 yuan, which can make a profit.” Zhang Meng said.
The other side of the battle to save money is the damaged physical stores and food market vendors. Compared with community group buying, traditional small and medium-sized supermarkets and vegetable markets are undoubtedly under great pressure. When ye Guofu, founder of mingchuangyupin, talked about community group buying, he even publicly asserted that if community group buying continued for another year or two, supermarkets with an area of more than 500 square meters would be basically useless.
For many years, Li Yangguang has been operating a small physical supermarket in Changsha, selling fresh department stores. However, at present, he has become the head of the group buying of meituan, Shihui, Xingsheng, Chengxin, and more vegetables.
Li Yangguang said frankly that at the beginning, he did not want to do community group buying, but the development of community group buying was too fast. If he didn’t do it, other people in the community would also do it, so customers would lose to other homes, so they could only try to do it together.
“The profits of group buying are not high, and they are worried. I do group buying, the first is helpless, the second is to bring some customer flow to the store, “Li said. However, he also admitted that the community group buying will become more and more comprehensive, and the commodity richness is far beyond his own physical supermarket. Your store may have only one advantage left: it has stock.
Compared with the community shops that turn around quickly, the vegetable market may become the real target of the community group buying.
Li Yangguang observed that compared with the physical supermarkets in their communities, vegetable vendors with vegetable farms as their main strongholds are more difficult to transform. Li Ling also thinks so. She says frankly, she has known many vegetable vendors for many years, but she is at a loss because they are too familiar with the original selling method. Recently, two of the vegetable vendors she knew had decided to go back home.
“Many of my group members are office workers, so it’s convenient to pick up food in the community. On the contrary, they go to the vegetable market at 6:7 p.m. after work, and they can’t buy fresh vegetables for a long time. The vegetable market model may be more suitable for retired elderly people. ” Li Ling expressed her views on the decline of the traditional farmers’ market.
In fact, the market share of farmers has been declining in recent years. According to Euromonitor, the proportion of traditional farmers’ market has decreased from 61% in 2015 to 44% in 2018, while the market share of supermarkets and fresh e-commerce has slightly increased.
In terms of specific cities, the number of farmers’ markets in Zhengzhou has been reduced by half in recent eight years. From 2005 to 2015, more than 60 vegetable farms in Beijing’s Third Ring Road were closed down The news of the closure of the vegetable market is common.
Chu Xuejian, a professor at Shanghai University and a well-known research scholar on supply chain, told China News Weekly that for a long time, China’s fresh food market has been a traditional mode, that is, farmland is transported to the farmers’ markets in various cities through vegetable wholesalers. In the farmers’ market, retail to consumers in the form of stalls. In general, vegetables are sold in the front and small warehouses are in the back.
“We have statistics that the loss rate of fresh food in this mode is about 50%. Extensive mode, huge loss rate, has become more and more unsuitable for development, which means that the gate mode has reached the edge of change. ” Chu Xuejian said.
Xu Yong, vice president of Express branch of China Communications and Transportation Association, also told China News Weekly that at present, in most of the country’s agricultural markets, the poor shopping environment and relatively high stall fees add to the cost of fresh food, which is becoming more and more difficult for consumers to satisfy. Therefore, in recent years, the loss of customers in the vegetable market has become an inevitable phenomenon.
Change is around the corner
Even if the Internet giants do not intervene, China’s traditional mode of fresh small scattered has also reached a turning point of change.
Chu Xuejian said frankly that even if there is no community group buying, there will be other opportunities to promote the reform of China’s fresh food market. Internet giants are like catfish, accelerating the process. He analyzed that in terms of agricultural supply chain, large farms in Europe and the United States are generally directly connected with supermarkets, with high efficiency. However, the source of agricultural production in China is relatively scattered, which can not be copied. However, in the source of fresh food supply chain, deep processing industry is also urgently needed.
Xu Yong analyzed that whether the community group buying is a mature fresh food selling mode still needs time to test. “Community group buying is only a form of Internet platform. In the future, the ideal state is that the upgraded farmers’ market, the fresh supermarket in the community and the Internet fresh food sales coexist to meet various needs.” Xu Yong said.
Compared with the previous national group buying users, community group buying is limited by the geographical scope and supply factors, so it can not achieve such a large batch, and whether the price range can be achieved is still questionable.
When the community group buying is in full swing and seizing the business of the small shops in the vegetable market, the leaders of the group buying community are also “rolling in”. Because the Internet giants continue to enter, this track has become increasingly crowded.
Wang Xia told China News Weekly that in the past few months, the rebate given to the head of the group was only about 60% to 70% of the original. In addition, more and more new groups have brought more fierce competition. “Our community on these people, the basic development of all expanded, can penetrate all penetration.”. These, let Wang Xia have to give up when the head of the mind.
On the other hand, Li Ling is also facing new puzzles. She told China News Weekly that at present, new players such as meituan are constantly digging for the best team leader in Changsha. She also hesitated, but she also felt that the number of customers that could be developed in the community was very small. I’m afraid it would be difficult to guarantee the sales volume if new players such as meituan entered the Bureau.

A number of business community group buying leaders told China News Weekly that they had their own difficulties in the return and exchange of goods. “Some people are not satisfied with buying eggs for one cent and want to return them. After the subsidy stops, the user retention rate is worthy of attention. ”
Xu Yong believes that at present, the community group purchase is still in the primary stage of development. Although compared with the farmers’ market model, some of the direct purchasing modes adopted by the community group buying have no booth fees and are not affected by the double effects of purchase and retail price increases, but from the Perspective of transportation and storage, it is still unable to reduce costs on a large scale.
“The operation of this mode of community group buying itself also needs a certain cost. Only when community group purchase is the first mock exam to achieve profitability, will this mode be considered effective. Otherwise, relying on subsidies to take the old way of listing and cash out, the contribution to society is questionable. ” Xu Yong said.
(interviewees Li Ling, Wang Xia, Li Yangguang and Zhang Meng are pseudonyms)