Latest Information on Community Group Buying，One of New Retail Market Segmentatios
Views About Community Group Buying Tracks
Core business models and logic verification of the tracks and the final discussion
Compared with offline physical stores and traditional online e-commerce, community group buying has much lower customer acquisition costs, execution costs and delivery costs. It is one of the few verified, scalable and profitable business models that have been tried by the fresh food e-commerce and community e-commerce platforms. The cost structure of the business model allows the entrance of low-margin and cost-effective goods.
Fresh food only has a gross margin of about 20%. If the community group buying platforms only focus on fresh food, they can’t make money, because of the 20% gross margin, 10% will go to the initiator of the group buying, and the remaining 10% will be used to cover marketing, coupons, delivery, storage loss, salaries for employees at the head office, etc. Therefore, fresh food is category that helps attract traffic. Its stickiness may expand to other categories and helps develop high-frequency and reliable channels where the housewives are willing to open their wallet. Such channels are major sales channels for daily products and planned consumption.
1st-tier cities (where the pain point is fast) and lower tier cities (where the pain point is high quality and cheap) have different pain points. At the same time, in terms of planned living consumption, 1st-tier cities (featuring low requirement, fast delivery, high requirements, layout of lead storage, high capital threshold) and lower tier cities (featuring low consumption power, low price and high execution costs) are tough issues to be dealt with later. — Concluded and summarized by iResearch based on interviews with investors and entrepreneurs
Core strategy & barriers of top players
Core Strategy & Barriers of Shixianghui
—From the official account, Jianshishijie: Shixianghui: Though still at the initial stage, the Top3 players in the industry will emerge this year
Manufacturing products of its own brand: Self-produced products account for less than 10% of the SKUs. For the household consumer goods, channels and advertising account for a big part of the costs. However, there is much time and space for our users in the closed channels to learn about the products. In the WeChat groups, the users may learn the details about the goods via images, text, audio and videos. This is impossible in other channels. The price can be 30% to 50% lower than that of similar products on the market. The key is to remove the intermediate links and the brand owners.
Operation of a Strong Industrial Chain: Shixianghui has always been profitable in each community, in each city and on the platform as a whole. This can be attributed to the effective operation
Core Strategy & Barriers of Linlinyi
—From the official account, Jianshishijie: Linlinyi will raise another 30 million USD: only to talk with investors for less than a day
Supply Chain Construction: We are building a supply chain model featuring centralized purchasing and distribution from the place of origin to the cities. The product quality can be controlled from the source and the costs are much lower thanks to the bulk and direct purchasing.
Upgrade and improvement of initiator-based operation system: The system relies on standardized management and hierarchical incentives to improves the activation and loyalty of the initiators. Beside initial training, “Initiator Business School” program for sales and skill trainings three times a week. There are also targeted training programs for top, waist and tail initiators.
R&D investment in back-end operation information system: Technology to integrate flow of goods, logistics and cash flow with modularized links.
Core Strategy & Barriers of Niwonin
—From the official account, Jianshishijie: Niwonin has a revenue of 10 billion Yuan in 2019: Overtake Alibaba, JD and Pinduoduo on this track
Supply Chain Construction: In this industry, 99% of the goods are purchased on local wholesale market. If there are tens of thousands of orders, we face the most difficult situation because it is beyond the supply capacity the local wholesale market and we can sell out the whole truck of goods purchased from the production base. It took us half a year to adjust and now the new cities are supported by the old cities. The surplus goods in old cities can be sent to new cities. In new cities, it is difficult to control and quality and price of the goods directly bought on local market.
Scaled management and operation: Core operation capacities include purchasing in nearby areas and cross-regional allocation, sorting and delivery, quality control and initiator management. It has already achieved systematic management of sorting, logistics and vehicles. While many competitors still rely on manual operation.
National city layout: It covers more than 30 cities including Changsha, Guangzhou, Chengdu, Chongqing, Wuhan, Zhengzhou, Fuzhou, Nanchang, Jinan, Qingdao, Yancheng, etc. in 10 provinces. The cities are well coordinated and the supply chain is expanding from the south to the north. Beijing is not covered for now. Firstly, big warehouses are built and then cities around the warehouse are developed. Of the 1st-tier cities, Guangdong and Shenzhen are covered and Beijing is to be covered this year. Shanghai will have to wait because Jiangsu and Zhejiang are not covered yet.