Bloomberg Businessweek - USA (2020-12-21)

◼ TECHNOLOGY Bloomberg Businessweek December 21, 2020

16

THEBOTTOMLINE Localleaderswhocoordinategroup

e-commercepurchasesaregainingprominence,anddeep-

pocketedbusinessesarerecruitingthemaspartners.

tobuyseedsandfertilizer,it’sbeensupercharged

bysmartphonesanda growinge­commercemarket.

Revenuefromcommunitybuyingis expected

totripleto 89 billionyuan($13.6billion)thisyear

from2018,globalresearchfirmKantarGroupLtd.

estimates.Thebusinesscentersononlinegro­

ceries,whichgota boostinthepandemicthat’s

expectedtolast.Groceriesaresettobecome

China’ssecond­largeste­commercesectorby2022,

behindapparelandfootwear,HSBCpredicted.

ThismakespeoplelikeChensurprisinglyinflu­

ential.“MygroupmembersjustbuywhatI rec­

ommend,”shesays.“Afterall,I’mtheirnext­door

neighborwhoknowsthemwell,fromwhatdishes

theycookinthekitchentowhatfruitstheylike.”

She’salsodrawntheattentionofdeep­pocketed

companiesthatviewcommunitybuyingasa vital

growthmarket.Foronlinegrocerycompanies,

localgroupleaderscanbea waytogaugedemand,

promoteproductlines,andsimplifyshipping.The

companiesoffertuanzhangsuchasChena com­

missionforeachtransactiontheyfacilitateandrely

onthemtoprovideconsumerservice.

Meituan,thehugemealdeliveryservice,wants

tocover1,000citiesandcountieswithitsowncom­

munitybuyingplatformbyyearend.E­commerce

upstartPinduoduoInc.is devotinga chunkofthe

$6.1billionit raisedina recentbondsaletostrength­

eningitscommunitybuyingnetwork.AlibabaGroup

HoldingLtd.,thee­commercegiant,haslaunchedits

owngroupbuyingservicesandco­invested$196mil­

lioninBeijing­basedleaderNiceTuan.

SoftBankGroup Corp.­backedDidi Chuxing

TechnologyCo.’snascentcommunitybuyingunit

hasabout1,000peopleworkingontheprojectand

operatesin 17 provinces.Didihassignedupa list

offoodproducerstodeliverthegroceriestocen­

tralwarehouses,fromwhichDidisendstheparcels

viaa networkofsmalldistributioncenters.Itsdaily

ordersexceeded 10 millioninNovember,upfrom

2.8millioninSeptember,accordingtothecompany.

The Chinesecommunity buying trend has

echoesofGroupon,theChicago­baseddailydeals

companythatwasonceoneofthebuzzierU.S.

startupsbutisnowseenmoreasa fad.China’s

startuplandscapeisn’timmunetothatdynamic.

Investorshavepouredbillionsintocrazessuch

assolokaraokebooths,whichsproutedupover­

nightacrossmallsin2017,andmassivebike­sharing

networks, only to see them dissipate as quickly as

they rose. Jason Yu, managing director of Kantar

Worldpanel Greater China, sees signs of trouble.

“There will be a bloodbath among community buy­

ing service providers, and a brutal consolidation is

much anticipated,” he says.

Community buying platforms require major

upfront investment in logistics and supply chains.

Meituan’s operating losses from its new initiatives

business hit 2 billion yuan in the September quarter,

up from 1.2 billion for the same period a year ago,

dragged largely by its expenditure on community

buying. Chief Executive Officer Wang Xing warned

analysts on a recent earnings call that the division’s

losseswilllastatleastseveralmorequarters.

Therearealsoseedsofa backlash.Thestate­

run People’s Daily recently ran a commentary tell­

ingtechcompaniestofocusoninnovationinstead

ofjuicingtheironlinegrocerybusinesses.Some

smallerdomesticfoodproducers have also report­

edly barred distributors from selling to the platforms

amid complaints about the heavy discounting.

Still, Chinese tech giants see group buying as a

waytobringinshoppersinsmallercitiesandvil­

lages,whichtheindustryhopeswillbethenew

growthengine ofe­commerce—and who they

believe are more inclined toward social shopping

experiences than people in larger urban centers.

Across town from Chen’s operation, Yang Bohuai

and his wife belong to another community buy­

ing group, from which they purchase items two or

three times a week. It saves them money, and Yang

says he’d rather have bananas delivered to the store

downstairs from his apartment than to have to walk

a kilometer to the closest fruit stand. He also says

they’re getting more than just a bargain. “My wife

loves the social element of community buying,” he

says. “Whenever she discovers a good purchase, she

can’t wait to share it with her friends.” �Coco Liu

▼ Value of China’s

communitybuying

market,in yuan

Estimate

2019

50b

2020

89b

2021

121b