In recent years group buying in China has gradually changed the consumer behavior of many Chinese people. Group buying is shopping, which refers to a way of buying in which consumers unite to increase their bargaining power. Making the sacrifice of small profits for more frequent turnover, merchants can offer discounts for group purchases below retail prices. As an emerging e-commerce model, community group buying market in China improves the bargaining power of consumers through the forms of consumer self-organization and professional group buying websites.
Data Source: iiMedia, designed by daxue consulting, China’s community group buying market size
In 2020, community group buying market in China has become one of the most popular industries, reaching 72 billion yuan, up 112% from 2019. Furthermore, it is forcasted to reach 100 billion yuan by 2022.
Source: Zhuanlan, What is community group buying in China?
What are the advantages of group buying in China?
Since the development of community group buying is based on social networks, the cost of acquiring customers is very low. The community group buying model has high conversion and retention capabilities. Additionally, the channels for acquiring traffic are more diversified.
Community group buying integrates small orders from households in the community into a large order. Merchants can deliver the goods in a unified manner, and then the consumers pick them up. Substituting delivery to the stores and shops for express logistics to customers, greatly reducing the logistics cost. At the same time, it saves the cost of home delivery by couriers through group leader delivery or consumer pick-up mode.
The next advantage is that supply chain in the community group buying market in China is simple: as there is no middleman, the price is more affordable. The group leader serves as an intermediate bridge between the community group buying platform and consumers. Compared with traditional marketing models, community group purchases have low logistics costs, less inventory pressure and higher sales efficiency.
Who are the main consumers?
Based on the user statistics from the group-buying platform Niwonin, 44% of users are between the ages of 30 and 39, while 85% of daily active users are women. Citizens of Chinese low-tier cities where people have sufficient purchasing power and have a close community make most of the community group purchases, whereas users in tier 1 cities tend to choose more traditional Chinese e-commerce platforms like Taobao and JD. People in high-income cities often do not know their neighbors, which also makes it difficult to create groups.
Data Source: QuestMobile, Which cities the users of group buying in China live in
How the COVID-19 outbreak boosted the group buying market in China
The group buying form of shopping became especially popular when Covid-19 began to spread across China in early 2020. As cities in China experienced lockdown, many communities created a food collection team. The grassroots organizations of the Communist Party especially helped in this situation. These quasi-formal units maintain social stability and become the basis for self-organization of citizens for community shopping. The idea became nationwide, spreading to other cities after Wuhan.
China’s tech giants compete for the group buying market in China
Nice Tuan: platform for farm produce backed by Alibaba
Nice Tuan is a group buying platform in China headquartered in Beijing. Operating through small programs and APPs, it brings local ingredients and daily necessities to community groups, and is especially popular in second- and third-tier cities in China. Nice Tuan treats the community as a unit, and has developed and trained many community leaders.
Housewives and local family shops generally act as Nice Tuan’s key customers, and receive approximately 10% commission. While this seems fairly small amount of money, it is a significant additional income for households in lower-tier cities. Nice Tuan received a 196 million US$ investment in 2020 from Alibaba as the COVID-19 pandemic has significantly boosted consumer demand for online fresh food purchases in China.
The number of members of Nice Tuan has reached approximately 800,000 monthly active users, 6 million monthly orders, and 200,000 orders per day in 2019.
Xingsheng Preference: a group buying platform in China backed by JD.com and Tencent
Xingsheng Preference is a new retail platform focusing on the community group buying market in China. Moreover, it is the first “unicorn” company in Hunan Province with a valuation of more than 1 billion US$. The positioning of the platform is to meet the daily needs of Chinese consumers, providing such products as vegetables and fruits, meat, poultry, rice, noodles, grains and oils. Relying on community physical convenience stores, it provides services to users through the “sale + self-pickup” model.
At present, Xingsheng Preference covers 13 provinces, including Hunan, Hubei, Guangdong, Jiangxi, Sichuan, Chongqing, Shaanxi, Guizhou, Henan, Guangxi, Fujian, Hebei and Shandong, and more than 30,000 towns.
Data Source: China Traffic Online, Xingsheng Preference daily orders
In the community group buying race, Xingsheng Preference has been far ahead, with an average more than 8 million daily orders in 2019. According to its official website, in 2020, Xingsheng’s annual GMV reached 40 billion yuan, comparing to 10 billion yuan in 2019. Same year Xingsheng Preference got 700 million US$ investments from JD.com.
Tencent’s Meituan plans to cover 1,000 cities with its group buying platform in China
China’s largest food delivery company, Meituan, has also decided to expand its business towards community shopping. It has created a grocery group buying platform in China called Meituan Youxuan, which covers up to 1,000 cities in 20 provinces. Meituan launched this segment in July 2020, but at first it was only available in Jinan. In a WeChat mini-program, the leader of a community group gathers people living next to each other to order groceries and picks them up in person the next day. Meituan Youxuan is currently available in Jinan, Wuhan, Guangzhou and Foshan.
E-commerce giant Pinduoduo: one of the biggest group buying platform in China
Pinduoduo is a Chinese C2M group shopping platform established in September 2015. By creating groups with friends, family, neighbors, users can buy high quality products at lower prices. Pinduoduo is actively developing at the moment. The value of Pinduoduo GMV for the twelve months of 2020 was 1,457 billion yuan, which is 73% more than 840 billion yuan in 2019.
Data Source: Pinduoduo, designed by daxue consulting, number of monthly active users of Pinduoduo
The average monthly active users for the third quarter of 2020 were 643 million, up 33% from 481 million in the third quarter of 2019. There were 731 million active users in the twelve months ended September 30, 2020, up 52% from the 481 million in 2019.
The future of the group buying market in China
Group buying platforms in China improving convenience, but creating monopolies
The popularity of group buying poses challenges for traditional supplier channels. For example, offline sales of vegetables will decline and become less and less motivated. The end result is that fresh food vendors will have to rely on online channels in the future. As it develops rapidly, almost everything will be in the hands of group buying platforms. If a monopoly platform wants to force suppliers to lower prices, they cannot resist. The danger is that a few giants can monopolize the market and get the pricing in their hands. In addition, the platform uses its advantage to further reduce prices for suppliers (producers, growers) and distributors, thereby increasing profits.
On the other hand, community group buying increases the efficiency of users’ lives and is more convenient in emergencies such as lockdowns.
More WeChat groups for the group buying market in China
Source: WalkTheChat, Community group buying in WeChat
WeChat groups are the main tool of community shopping. There are several ways to make use of WeChat for that. For example, using WeChat CRM to identify keywords will allow quickly resolve problems if they arise. Encouraging user reviews can increase engagement and trust. For example, people can post photos of dishes they have prepared from goods they received. Moreover, sharing unpacking videos can inspire other users to buy it. It’s also important for farmers and suppliers to share content. These can be videos and photos of farms or fields where vegetables are grown. It helps to increase users’ trust. Such tools as red envelopes on WeChat can nudge users to pay attention to a community group and keep abreast of promotions.