Community groups buying ＂fever reduction＂ ｜ Titanium media depth

Zhang Dan, who had just become the head of the Ten Hui Group, recently found that the head of the group could not be used. Zhang Dan told the Titanium Media APP that he had heard that the Ten Hui Group had completed the D round of financing led by Ali, and thought that the Ten Hui Group could hold on until the end.

In fact, not only the ten Hui group, with the normalization of epidemic prevention and control, overnight, the community group buying that has become popular since 2020 fell from heaven to earth.

Main front warehouse model Missfresh, Dingdong Maicai has gone to the US stock market, but the outside world has questioned the front warehouse model burning money, loss;

At the same time, once with the prosperity of the preferred, ten Hui group ranked the community group buying head of the same life, in the recent announcement of strategic transformation adjustment, the launch of the new brand name "Honey Orange Life" only one day, the unicorn enterprise crashing at the moment;

Headquartered in Wuhan, the community group buying old players will be exposed to the suspension of business, empty buildings, arrears in payment to some suppliers. At the same time, the official website of the food club, Mini Program have been unable to open.

Since 2012, fresh food e-commerce has gradually grown from a niche market to an important vertical track in the retail industry. Today, this track is increasingly crowded. In addition to unicorns such as Missfresh and Dingdong Maicai, it also gathers Internet Tech Giants such as Alibaba, Meituan, JD.com, Pinduoduo, and Didi.

However, today, there are still many unresolved problems in the fresh food market. The variety of products is limited, the development of logistics and distribution is restricted, the supporting infrastructure is not perfect, and the consumer demand is segmented and changing rapidly. These problems require fresh food e-commerce enterprises to continue to invest and iterate the model.

This is also the reason why this seemingly low-barrier track has seen multiple closures in the past few years.

Today, there have been Yummy 77, Wonderful Life, Xianshengyouqing, Dailuobo, Ji Ji Fresh and other regional merchants have fallen, and Yiguo Fresh, the "originator" of fresh food e-commerce that once relied on Ali, has not been spared.

As the state tightens supervision of monopolistic behavior and the chaotic industry of burning money and subsidies, this is undoubtedly the most severe moment for fresh food e-commerce since 2019.

Compared with the same journey life, the dilemma of the ten Hui group was unexpected to the outside world.

After the same journey life, as a community group buying the leading enterprise ten Hui group, also exposed about the city and layoffs. However, ten Hui group responded to titanium media APP this statement is wrong, it is business upgrading, reform inefficient area.

In March 2021, a number of media reported that Ten Huituan received a $750 million D round of financing jointly led by Alibaba and DST Global. At that time, Ten Huituan officials revealed that the financing will be used to build a supply chain infrastructure in the lower-tier market and strengthen the ability to collect fresh goods at the source.

But by the middle of the year, with the collapse of Tongcheng Life, the situation in the entire industry also took a sharp turn for the worse.

• The community group buying old players in Wuhan was exposed that the business was suspended, the building was empty, and some suppliers were in arrears. At the same time, the official website of the Food Sharing Club and the Mini Program could not be opened.
• Subsequently, the Wuhan Municipal Market Supervision Bureau Group interviewed seven major community group buying operators, including Xingsheng Preferred, Shihui Group, Meituan Preferred, Orange Heart Preferred, Duoduo Shopping, Hema Market, Missfresh, etc., and asked them to strengthen the main body of the industry. Responsibility, false information such as out-of-stock, grab of goods, and discounts shall not be fabricated in the course of operation, and the independent pricing power shall not be abused, etc., and the price shall be clearly marked. Seven community group buying operators signed the "Commitment Letter", promising to ensure the stability of market prices during the epidemic.
• In mid-to-late August, there were reports of layoffs and shutdowns in several cities.

"As a member of the Ten Hui Group, I should have spoken for the company, but the way the company handled it has caused dissatisfaction," Wang Lei of Guangdong told Titanium Media APP. He only joined the company this year, and it has not been six months. But he did not expect that not only was he fired in this round of so-called adjustment and upgrading, but what made him even more unacceptable was that employees like him who joined the company for less than six months did not receive compensation, and were "fired on the same day."

Wang Lei recalled that after the meeting, HR interviewed the employees who were about to be fired one by one. First, sad-fishing said that the company had no money and could not pay their salaries, asked them to sign for automatic resignation, and threatened that if he did not sign, the salary in August would "probably not be paid".

Due to HR’s promise to leave voluntarily and get an interview opportunity at Hema Market, Wang Lei finally chose to sign.

But not everyone is like Wang Lei.

"Such a big company shut down part of the city business without notice. It only notified the afternoon meeting on the morning of the 21st, and began to clean up the company’s assets and send them away in the afternoon. The previous day, the employees were working seriously until 10:30 pm, and then suddenly announced that they were unemployed the next day."

Originally, Li Ye expected the company to compensate according to the labor law, but to her surprise, the person in charge of the entire Central China was still drawing big cakes and playing emotional cards at the meeting that day, and did not mention the compensation issue of the company’s employees at all. The questions of the employees were also delayed and perfunctory.

According to Li Ye, he had been in the Ten Hui Group for more than five months, and he had changed from a single break to a single break. The organizational structure would change every month, and the performance standards would change again and again, and the salary would not increase but decrease. What made Li Ye even more disappointed was that the person in charge of Central China was now threatening that he might not pay his salary for more than 20 days this month without signing his resignation.

"I’m really tired, and I hope everyone can be more decent in the end. The company will stop doing some old bad behavior! Please abide by the law!" Li Ye told Titanium Media that many of her colleagues refused to sign, and she planned to apply for labor arbitration with her colleagues.

Titanium Media APP learned from the affected employees that the so-called "regional integration" of the Ten Hui Group affected a number of provinces and cities such as Yunnan, Fujian, Guangdong, Zhejiang, Tianjin, Shaanxi, etc., and the business of the entire province in many provinces was directly abolished.

For the large-scale layoffs, the Ten Hui Group official gave its own explanation. On August 21, Chen Ying, the founder of the Ten Hui Group, released an internal letter, in which Chen Ying mentioned that the Ten Hui Group would carry out a comprehensive business upgrade.

The internal letter shows that in the near future, Shihui Group will conduct regional integration with Ali MMC in some regions; at the supply chain end, various partners, including Ali Ecology, will be deeply involved in the supply resources of Shihui Group; as for some less efficient business areas, Shihui Group will integrate with Ali MMC in regional warehouse distribution, head operation, etc.

In fact, in the internal letter, Chen Ying did not respond directly to the reasons for the current dilemma of the Ten Hui Group, but also admitted that more players and capital poured into the community group buying track, setting off a subsidy war that disrupted the development rhythm of the entire business industry. "In order to cope with competition, we also gave up profitable growth in stages and focused on expanding our territory. This year, the Ten Hui Group has accelerated its wild run, the speed of city expansion has accelerated significantly, and the sales data has been constantly refreshed."

The hottest community group buying model has subsided, but the front warehouse model that swept the industry in the past may not be able to support the future of fresh food e-commerce.

The front warehouse model born in 2015 has obvious advantages and disadvantages, and it has always been controversial in the fresh food e-commerce industry. However, there has always been no shortage of experimenters. Among them, there are not only entrepreneurial teams such as Missfresh, U shopkeeper, Dingdong Maicai, but also Hema Fresh backed by Ali.

In early 2019, in order to realize the advantages of scale and client base, Hema began to try two aspects, the first is Hema small station, similar to the front warehouse model; the second is Hema mini, similar to the small shop model.　

"We found that the biggest weakness of the Hema Fresh model is that it is very large, the investment is very large, and the requirements for the store are very high." Previously, Hou Yi, the president of Hema, believed that this would lead to Hema’s development speed not being fast, and it would be difficult to find a facade.

Why try front warehouse?

In the eyes of the Hema team at that time, the biggest advantage of the front warehouse model is that the investment is very low. A front warehouse store is about 70 or 800,000 investment is enough. At the same time, the front warehouse has very low requirements for property and can quickly cover the cost.

On March 19, 2020, despite having done more than 70, Hema announced that it would withdraw from the front warehouse mode and upgrade to a mini store.

"We believe that the front warehouse model has no future." After a year of verification, in Hou Yi’s opinion, there are several systemic problems in the front warehouse that cannot be solved: flow stability, low gross profit, loss, inventory balance, etc.

In fact, Hou Yi’s thinking is not without reason.

In 2020, fresh food e-commerce seemed to usher in a turning point. Capital and major factories such as Ali, Meituan, Pinduoduo, and Didi entered the market one after another, allowing the front warehouse to win the favor of capital again. According to public information, Missfresh completed three rounds of financing in 2020, Dingdong Maicai also completed one round of financing, and completed two rounds of financing in 2021.

But as the epidemic normalizes, more and more problems have surfaced.

Due to the packaging, sorting, logistics and other links of fresh food, it will lead to product loss and reduce profits. Therefore, customer unit price, order density and scale are extremely critical for fresh food e-commerce in the front warehouse model.At present, the growth and repurchase rate of front warehouse enterprises still rely on subsidies, and the performance cost is high.

According to the prospectus data released before the IPO of Missfresh and Dingdong Maicai, in the first quarter of 2021, the prospectus shows that in 2020, Missfresh’s net loss was 1.6492 billion yuan, while Dingdong Maicai’s net loss was 3.1769 billion yuan. The net loss ratio of Dingdong Maicai and Missfresh was 36.4% and 39.9% respectively. At the same time, the performance gross margin reflecting the profitability of the two single orders was -20.1% and -16.4% respectively.

The main reason for the losses of both companies is the high cost of compliance, but another important factor cannot be ignored – subsidies.

The front warehouse has solved the pain point of the "last mile" of delivery to some extent. After the cultivation of user habits during the epidemic, the penetration rate of fresh food e-commerce is also gradually improving.

Once subsidies are stopped and orders return to normal, it will be difficult to maintain growth in both order volume and user numbers.

Taking Missfresh as an example, although the scale of Missfresh’s losses is shrinking. But according to the Missfresh prospectus, Missfresh’s annual effective users in 2018, 2019 and 2020 were 5.0826 million, 7.1722 million and 8.6761 million, respectively, and as of March 31, 2021, this figure became 7.8924 million, but decreased by 784,000 compared with before.

At the same time, in the face of operating pressure,Missfresh is also gradually downsizing its front warehouse.In more than a year since 2020, the Missfresh front warehouse has shrunk from 1,500 at the peak to 631, the number of closed warehouses has more than half, and the number of C-end users and orders has almost stagnated. The total number of orders has also decreased from 65.06 million to 62.17 million.

Dingdong Maicai, which has been insisting on expanding the front warehouse, continued to maintain a high growth trend in revenue in the second quarter of this year, increasing by 77.94% to 4.646 billion yuan. It is worth noting that Dingdong Maicai’s loss scale is also rising sharply. In the second quarter of 2021, Dingdong Maicai’s net loss was 1.937 billion yuan. Not only did the total loss exceed the loss amount in 2019, which was 39.86% higher than the 1.385 billion yuan in Quarter 1 in 2021.

This also means that Dingdong Maicai is still burning money for volume. While old rival Missfresh intends to make strategic adjustments in 2020, the model is closer to the community retail platform, and focuses on the transformation of the smart vegetable market business, trying to get rid of the front warehouse model.

"Just the expansion of the membership base, the expansion of the client base, the increase in sales, andFlow stability, low gross margin, loss, inventory balance, etcIf these core indicators are not fundamentally changed, I think the model itself will lose a lot of money. "Hou Yi believes that the future distribution cost will rise rather than fall in terms of trend.Continued investment in front warehouse will lead to new losses…

Obviously, after going through subsidies, burning money, and losses in 2020, like other Internet trends in the past few years, fresh food e-commerce will inevitably reach the winner-take-all stage after the giants enter the market. But winner-take-all may not be the final outcome of fresh food e-commerce.

Although fresh food e-commerce has online attributes, it is still inseparable from the retail industry, especially offline. Therefore, the key to fresh food e-commerce competition is still operational efficiency and supply chain. Due to the complex supply chain of domestic agricultural products, and consumers also have requirements for the cost performance of fresh food, brands rely on local supply chains, community operations and other local advantages to survive.

Once you choose to operate across regions, it means that you lose your "local advantage", and you not only need to rely on subsidies and other means to regain traffic, but also the cost and capital pressure will increase sharply.From the current perspective, after the entry of capital and giants started a capital war, everything changed. We see that any players who follow the giants to run blindfolded are now all chicken feathers.

A typical example is Aunt Qian.

This community fresh food store established in Shenzhen in 2013 has been operating in Guangdong until now. Aunt Qian, who used the slogan of "no overnight meat", also launched a stepped discount marketing method and became very popular. Relying on the franchise policy, it expanded rapidly in Guangdong, with as many as 1,500 stores at one time.

From 2015 to 2019, Aunt Qian was invested by many well-known investment institutions. Immediately, Aunt Qian expanded across the country, and as of now, the number of its national stores has exceeded 3,400. Previously, the industry also reported that Aunt Qian went public in Hong Kong.

But just recently, the rising stars of this community fresh food store have also encountered the rights protection of many loss-making franchise owners.

In order to avoid the service standardization, control and management issues under the franchise model, Aunt Qian chose to control the decoration, equipment, procurement, pricing and other aspects of the store, so as to effectively balance the brand expansion and service standardization, while also being closely tied to the franchisee.

However, this model has gradually revealed problems in the expansion of Aunt Qian. It is reported that Aunt Qian has to rebuild and build warehousing and other infrastructure before opening the city and expanding the store. It is equivalent to transferring the heavy operation model of the headquarters to various places. This approach seems to adhere to the standardization of stores, but being away from Guangdong means being away from the huge fruit and vegetable market in South China.

Even if you can still have the advantage of centralized procurement in various places, without the local advantage, Aunt Qian will have to pay huge supply chain and subsidy costs, which will be more or less passed on to franchisees.

The opposite of Aunt Qian is Fat Donglai, an Internet celebrity supermarket in Henan.

In an era when supermarket stores are dying, the supermarket’s service has been hailed as the "Costco + Haidilao" of the supermarket world, and it is also a paradise for employees. But that is not the secret to its success.

In fact, the reason why Fat Donglai was able to become a well-known Internet celebrity supermarket in Xuchang, Henan Province is not based on absolute low prices. Its core logic is localized operation and service system.

In fact, Fat Donglai, like Aunt Qian at the beginning, took advantage of the local large-scale centralized procurement in the supply chain, with freshness and service as its selling points.That is to say, Pangdonglai seeks profits from the local supply chain, takes advantage of good service to bring passenger flow and continuous repurchase, and makes employees willing to adhere to service quality through good benefits.

But once he leaves his base camp, Fat Donglai will face the same predicament as Aunt Qian. According to the official account of Fat Donglai, Fat Donglai currently has 12 stores in Xuchang and Xinxiang City, Henan Province, and 10 in Xuchang.

Similar examples abound, as well as the thriving selection of giant entry community groups buying before.

Looking back at the changes in community e-commerce over the past year, the Titanium Media APP found that…Before the influx of capital, there was also a flourishing attitude, and regionalization and localization allowed more players to survive.

But the practice of burning money for traffic and market has completely changed the old development law of the industry.

For online giants like Meituan, Pinduoduo, and Ali, the cost can be diluted through economies of scale. But for the vast majority of players who are short of ammunition,The entry of capital and giants did not actually bring fresh food e-commerce is not disruptive innovation, but the promotion of the entire industryFollowing the giants to burn money is to drink poison to quench thirst. If you don’t follow the living space, you will be seriously squeezed. Instead, fresh food e-commerce will follow the trend of O2O, online car-hailing, and shared bicycles.

As Hou Yi’s previous judgment, Hema does not have to compete with community group buying, they will die, so why not let three years? Can the advantage formed by price subsidies be subsidized for a lifetime? He believes that,The community group buying model is a serious regression of the innovation ability of giant e-commerce. They lack patience to cultivate the industry, do a good job in systems and logistics, but copy, copy, and then capital smash the market.

Coupled with the policy up the ante, even the giants, without the "killer" of burning money and grabbing customers at low prices, it is difficult to break out in a short time.In December 2020, the General Administration of Market Supervision interviewed a number of community group buying platforms and formulated new "nine must not" regulations, requiring platforms not to abuse their independent pricing power through low-price dumping, price collusion, price gouging, and price fraud.

Internet Tech Giants has also contracted community group buying. In March this year, Meituan Preferred, Chengxin Preferred and other platforms have begun to reduce their sites and shift to refined operations; in May this year, JD.com’s Jingxi Pinpin successively withdrew from Fujian, Gansu, Guizhou, Jilin, Ningxia and Qinghai provinces; Didi Chengxin Preferred, which "has no upper limit on investment and wants to win the market", has also closed its Chengdu headquarters at the end of July. Its business objective has also shifted from losing money to pursuing profit.　

There is no doubt that the idea of the giants ending the battle in the short term is no longer realistic, and the entire industry needs to return to the essence of retail.(Note: At the request of the respondents, Zhang Dan, Wang Lei, Li Ye, etc. are all pseudonyms.)

(The first titanium media APP of this article, author | Gao Mengyang, editor | Tianpeng)