Anti monopoly, starting from the vegetable market

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Source: quanshiji
Author Ma Cheng
“If we don’t become the leader, it will be very difficult for us to continue our business.”
Convenience shopkeeper Wang Wei, who lives in Baibuting community in Wuhan, Hubei Province, is the head of several community group buying platforms. She sighs, “look at all the stores around here, from fruit sellers to vegetables, non-staple foods and snacks, which one will not be affected?”
When the price of group buying in community is lower than that of offline stores, many shopkeepers in different places become “team leaders” of community group buying. The short-term subsidy behavior brings some commission and commission to the shop and team leader, but the influence of store business can not be retrieved.
This is just a case of the rapid development of community group buying, which has impacted on various agricultural trade and FMCG industry chains.
Picture source / visual China
In 2020, meituan, pinduoduo, Didi, Ali, Jingdong and other Internet giants will enter the bureau one after another, competing for team leaders, suppliers and users everywhere, sinking into every community. With the coming of the new year, the rapid development of community group buying has aroused the vigilance of businesses and the government.
On December 9, Nanjing Municipal Market Supervision Bureau issued the notice on compliance operation of e-commerce “dish community group purchase”, which regulated the operation of e-commerce platform, the responsibility of group leader, and the standard of imported cold chain food. Many platforms participating in community group buying in Nanjing promise to strictly abide by laws and regulations and carry out orderly and benign competition in future business activities.
At the same time, from grain and oil brands such as COFCO and golden dragon fish, to snacks such as Weilong and Xiangpiao, to daily necessities brands such as batteries, bans have been issued to resist malicious price reduction behaviors of community group buying.
In the trend of anti-monopoly, the government has stepped forward to regulate community group buying. Will this wind outlet continue to grow as a core business to improve efficiency, or will it be forced to cool down?
01
Fresh food trap: bad money or good money?
Jinan, Shandong, a community fresh supermarket is facing the problem of poor management.
“During the epidemic period, people dare not go to supermarkets and vegetable farms, and the surrounding communities come to buy vegetables here. In July, we specially rented the store next to us, expanded from the store to a small supermarket, and added a lot of imported fruits and fresh food. ” Xu Cheng, the boss, said.
A local fresh food supermarket is purchasing goods in tuyuan / visual China
But since the popularity of group buying in Jinan, his turnover has dropped by nearly half. “The main problem is that the price is too low. Every time we buy food, we have to go to the surrounding vegetable market. The food market also takes goods from Baliqiao every morning. The total cost is high, which is higher than the price of group purchase in the community. ”
In fact, it is the giants of community group buying that compete with small and medium-sized supermarkets and convenience stores in Xucheng and other communities in the primary and secondary wholesale markets.
According to Quan’s current understanding, in Shandong and Hubei, the fresh prices of meituan’s preferred and bought more vegetables are almost equal to the wholesale prices in the farmers’ markets, and they have a considerable price advantage over convenience stores and supermarkets. This does not include a large number of highly subsidized products on the platform. Under the low price competition, many local traditional fresh food practitioners are squeezed.
An employee who bought more vegetables told Quanquan that the group buying of fresh food in the community can’t get around the regional first-class wholesale market, so it can’t completely achieve the direct purchase of the base all over the country. At the same time, we need to have a strong supply chain management ability
China’s traditional fresh food supply chain is very long, starting from the origin, we have to go through the multi-level wholesale mode to reach the farmers’ markets and supermarkets. There are some problems, such as high loss rate of fresh products, drastic price fluctuation caused by changes in supply and demand, and difficulty in optimal matching between wholesalers and market.
After the emergence of community group buying, it has been emphasized to integrate the agricultural product industry chain and improve efficiency.
However, at present, the integration card of community group purchase on agricultural products market is half, so it can’t rely on the origin to get goods to reduce the cost. Instead, it can only use the way of low-cost subsidies and one cent second to promote the innovation. As a result, the terminal fresh outlets in front of the giants were directly crushed.
“It takes time to improve efficiency. Now we can see that the form of the last kilometer is different. Apart from subsidies, it may be hard to say how far the new model can be offline. ” Zhuang Shuai, founder of Bailian capital and an e-commerce analyst, thinks that.
Low price second kill tuyuan / official website
In Wuhan and other areas where the development of community group buying is relatively perfect, under pressure, many fresh food shops have directly transformed into group buying self collection points, and their income is subsidized by the group leader’s commission.
The boss Wang Wei says to Quan now that even his employees are only buying vegetables on pinduoduo. “A bag of salt is sold for $1.9 on the orange heart. Before we took the goods for $2.2, many heads of snack shops began to take goods on the community group buying platform.”
A supervisor of a small and medium-sized vegetable market in Jinan said that 70% of the daily customers of the market are ordinary residents, and the rest are restaurants and canteens. “Every vendor is a small business. If the low-cost strategy of community group buying affects vegetable vendors in the future, they may move to other areas or even leave directly.
Fresh food market in each city, region has a big difference. For example, Beijing’s online retail accounts for 29.7% of the total retail sales of consumer goods, while that of Shanghai is 17.7%. The competitiveness of offline retail in some cities is stronger. Cities and communities with weak offline retail capacity may suffer greater impact.
At present, the market of community group buying is arousing doubts from all walks of life.
02
It’s not just fresh food: FMCG is a wake-up call
At present, each community group purchase platform has extended SKU to a number of categories other than fresh food, such as cereals, Oils and condiments, snacks and beverages, consumer goods, potted plants, digital products and so on.
Most FMCG brands have distributors all over the country. When these suppliers cooperate with the community group buying giants, they are often required to cooperate with preferential activities to lower the price or pay out to participate in subsidies.
Many brands that rely on offline retail are wary of the low price strategy of community group buying.
In December, Weilong, one of the “hot and spicy fish” and “golden dragon fish” of edible oil, Zilin vinegar, COFCO, Xiangpiao and Huahai Shunda, Hebei grain and oil seasoning company, successively announced “bans” to prohibit the supply of goods to community group purchase platforms.
Huahai Shunda ban. Tuyuan / official website

Huahai Shunda’s notice shows that it has received complaints from various parties, such as the community group buying platform represented by “buy more vegetables” and “meituan optimization”, etc., and even some products are far lower than the ex factory price, which has a serious impact and damages the interests of customers. Subsequently, Huahai Shunda responded to the “ban” and stressed that this was to prevent breaking the price system.
“In recent years, grain and oil platforms have been playing with high quality. There are exclusive stores all over the country, as well as Taobao and Jingdong stores. If the pricing of community group buying platform is too low, the overall brand image will be damaged. ” Mr. Zhang Yuan, head of Zhongyu, a pasta brand, said to Quanquan. The company was also invited by meituan and other businesses, but due to the low price, no cooperation was reached.
Xiang Piao Piao ordered a ban from Duoduo to buy vegetables, and made clear the punishment standard, ranging from 5000 yuan to 20000 yuan, freezing the authority on the order until all of them were removed from the shelves.
COFCO and Xiangpiao’s ban picture source / network
It is reported that the general retailers in the promotion activities, each sub category of the sub category to select 1-2 single products for promotion, through the supplier. However, the community group buying method is more radical. Pinduoduo and other platforms directly judge and select supplier brands through bidding, which leads to low price competition for all categories in different regions.
Zhang Yuan revealed that although the brand will clearly mention the pricing problem in the contract with the dealer, the company’s headquarters can not master all the data of the dealer, and it is difficult to manage it. Therefore, some brands will send notices in time as a warning.
In fact, it is very difficult for companies to really “control” distributors.
Many media learned from Dali food, jiaduobao, Wahaha and other enterprises that the company’s headquarters did not layout in the field of community group buying, but focused on the current sales system. However, the products of these companies can still be seen on the platforms of meituan’s selection and buying more vegetables in some regions.
Even Weilong, which is “forbidden” to supply goods, can also find links on orange heart optimization and meituan optimization.
“For a long time, dealers will sell goods at will, the price system will be chaotic, and inferior products will prevail, and brands, suppliers and retailers will be damaged.” Zhang Yuan thinks.
However, at the same time, many brands do not exclude new traffic, but actively embrace, especially the newly established or offline weak brands. A large number of orders and sinking channels brought by online community group buying have increased the sales volume of the brand. According to Quan’s understanding, the old domestic beauty brand meifubao and the community group buying brand have cooperation in some regions. “Take community group buying will have price control, generally lower than the mainstream channel.” A person in charge of meifubao said.
A marketing director of wanghong xuanma egg yolk pastry told Quan that now, xuanma has cooperated with community group buying deeply, and was put on the platform of Shihui group a year ago.
Using high-frequency fresh food to drive sales of low-frequency products with higher profit margin is a story told by most community e-commerce platforms. Just like the rise of live with goods, the brand is faced with the choice of whether to participate, which is the remodeling of the old channel. For the brand, is it an opportunity to sit on the new air outlet, or is it a muddy water of being collected? Feelings vary from person to person.
03
Why do the government “beat” community group buying?
It is difficult for regulators to sit idly by as giants spread money to expand. The notice issued by Nanjing market supervision bureau shows the concerns of relevant departments from the aspects of food safety and low price competition.
Liu Xu, a special researcher at the National Institute of strategic studies of Tsinghua University, has been studying the phenomenon of Internet monopoly. He said that the agricultural and fresh food systems in various cities are planned by the government to ensure the food basket and people’s livelihood. Fresh food belongs to the basic social security for the government.
“If we all use community group buying, some grass-roots service stations can’t operate and close down. The new year will soon be over, and vegetable vendors will not come back in the coming year. It will be difficult to recruit new workers. Many communities may have problems in fresh food supply.” Liu Xu said.
At the same time, food safety is also the direction that the government must supervise. In the traditional vegetable market, the market supervision department will regularly send people to conduct sampling inspection, inspection and management. Many of the supply chains of community group buying come from the origin of direct purchase, and there are many large warehouses and cross regional supply. It is difficult for local market supervision departments to supervise one by one.
“Fresh products have high requirements on the cold chain, coupled with the hidden dangers of imported fresh products since the outbreak of the new crown, it is difficult to control them through the enterprises themselves.” The person in charge of Jinan vegetable market said.
Picture source / visual China
Not long ago, Wuhan City on imported cold chain food for the detection of new coronavirus nucleic acid, found that Brazil imported frozen pork sirloin 1 test results were positive. However, 24 households in Huangzhou District, Huanggang City, Hubei Province purchased the same batch of products online through meituan optimization platform. Although no one was infected with the disease, as a community group buying platform, meituan preferred food safety standards still attract attention from all walks of life.
Liu Xu believes that, in the final analysis, the business model of community group buying involves the problem of grassroots community governance.
“The Internet forms a system parallel to the grass-roots government at the grass-roots level. There is a complete network in every urban community with a large number of people, wide coverage and high-tech, which endows Internet companies with great” power. ” Liu Xu believes that as a platform, relying on the team leader can affect everyone at the grass-roots level, including the price control, quality control of goods supplied by the community, and even the organization of people. While it is convenient for the people, there are big hidden dangers.
“This will increase difficulties and even threats to the governance of grass-roots governments. If the service lacks supervision, it is easy to deviate. ” Liu Xu thinks.
As a matter of fact, the price control of the vegetable basket project is the focus of government control, with huge investment in ensuring supply and stabilizing prices. From the perspective of the whole fresh food market system, the government still controls the source.
For example, the allocation of vegetable market density and number of people, such as the cold chain necessary for fresh food, belongs to agricultural infrastructure, which is mostly purchased and built by government departments in various regions.
Recently, the Ministry of agriculture and rural areas issued a notice to launch the construction project of cold chain logistics facilities for storage and preservation of agricultural products with relevant departments. It is expected that by the end of December this year, more than 9000 new agricultural business entities will be supported to build or rebuild 14000 cold chain logistics facilities for storage and preservation in agricultural product production areas, with a scale of more than 6 million tons.

The state’s guarantee for fresh cereals and oils continues to follow up, making this category not only a market commodity. When the expansion of Internet companies has touched on the issues of “agriculture, rural areas and farmers”, the vegetable basket project, and even poverty alleviation, as commented by the people’s daily, it is not as simple as “a bundle of vegetables”.
If each platform wants to purchase fresh food on a large scale, it can’t go around the primary wholesale market. From this point of view, if the government really wants to control in the name of people’s livelihood, the lifeline of community group buying is not in their own hands.
However, Liu Xu also said that market supervision often adheres to the thinking of “prudent, inclusive and unregulated”, and it is difficult to directly intervene in accordance with the price law or the anti-monopoly law in the short term.
Antitrust — the general trend
In recent years, Internet companies have made great strides in shopping, travel, fresh food and other fields, which has a profound impact on people’s lives. Through large-scale merger and integration, it has squeezed the living space of many traditional industries and made many people sigh that the world has suffered for a long time.
Community group buying is questioned everywhere, not an independent event, but the general trend of using anti-monopoly law to restrict Internet giants.
On December 14, the antimonopoly official website of the State Administration of Market Supervision announced that Alibaba’s investment in purchasing Yintai commercial equity, Yuewen group’s acquisition of Xinli media’s equity and Fengchao’s acquisition of China Post zhidu’s equity violated articles 48 and 49 of the anti monopoly law and were fined 500000 yuan respectively.
This is also the first large-scale punishment since the promulgation of the “anti-monopoly guidelines on the field of platform economy (Draft)”.
All over the world, technology giants are being questioned. From 2017 to 2020, the four major technology companies Google, apple, Facebook and Amazon have encountered 84 anti-monopoly investigations and disputes in 17 countries and regions around the world.
In October 2020, after 16 months of investigation, the judicial committee of the US House of Representatives issued a 449 page anti-monopoly investigation report on science and technology, pointing out that the four major technology giants abuse their dominant market position, suppress competitors, hinder innovation, and harm the interests of consumers. Since then, the U.S. Department of justice, together with prosecutors General of 11 states in the United States, filed an antitrust lawsuit against Google, accusing it of illegally maintaining its monopoly position in the search and search advertising market through anti competitive and exclusive behavior.
Many US internet giants encounter antitrust picture source / visual China
At the same time, the European Union has also launched the most stringent regulation in history, and relevant agencies are drafting a “blacklist” to curb the market dominance of Internet giants through new rules.
Under the general trend of anti-monopoly, the method of “talent, money, quick come, quick retreat” has been brought into more strict supervision.
Community group buying is not rare, but also a predatory pricing behavior. Predatory pricing is a monopoly behavior in traditional antitrust theory, that is, enterprises deliberately squeeze competitors with unreasonable low prices, control the market after obtaining scale and share, and then increase prices.
A recent comment on FT chinese.com points out that the “predatory pricing” of the Internet industry has existed for a long time, and the government and the society as a whole are in a tolerant attitude. After all, it has solved many social pain points, such as taking a taxi. At present, a large number of criticisms are based on people’s livelihood and moral level, rather than fair competition.
However, judging whether there is a real problem in community group buying depends on whether this mode is as envisioned by the industry, and whether it can really improve market efficiency after the short-term subsidy ebb.
On December 16, the people’s Daily published an editorial saying, “for regulatory authorities, we should encourage innovation while conducting effective supervision, and find a balance between inclusiveness and prudence in order to achieve the goal of good law and good governance. Regulation is not about restricting development, it is about healthy and sustainable development. “.
From criticizing the tycoons for their eagerness in the flow of “several bundles of cabbage” and “several catties of fruit” to advocating both tolerance and prudence, the official attitude towards community group buying turned to moderate after the social debate. In the anti-monopoly trend, Internet giants may also need to slow down and find the balance between traffic and social value.