Pinduoduo Meets New Enemies In Sinking Market

Many people may not realize that the fresh food e-commerce of China's * * is not the daily excellent fresh dingdong shopping that often sells advertisements in the elevator, nor is it the box horse fresh food opened at the bottom of the community, but pinduoduo.

In an internal speech on the 5th anniversary of the founding of pinduoduo on October 8, Huang Zheng used a third of his speech to say, "buying vegetables is a good business, a bitter business, a long-term business, and a touchstone for pinduoduo people."

In 2018, pinduoduo sold 65.3 billion agricultural products. In 2019, the trading volume doubled to 136.4 billion. At the same time, the Gmv of fresh e-commerce in China is more than 200 billion, and the Gmv of Youxian and HEMA is about 20 billion every day, among which HEMA also contributes to offline stores.

Pinduoduo is good at fresh products, such as fruits, eggs and other products with a longer shelf life. Consumers can buy 20 eggs with 9.9 yuan, or 5 jin Fuji apple, or 5 jin ginger. The products are delivered from the place of origin and sent by parcel mail to their home, which makes people unable to understand before buying, and it is very fragrant after buying.

In August this year, pinduoduo further increased its investment in fresh food business and established "Duoduo buying vegetables". If it is said that selling clothes, bags and electronic products with excess production capacity and can still be stored is a question given by kindergartens, then selling fruit is about a big problem in the high school entrance examination, while selling vegetables and pork with scattered production areas and unable to store is simply the final issue of the Olympic mathematics finals. Therefore, whether it is front-end warehouse, store warehouse integration or pure trading platform, fresh e-commerce always achieves the same goal: loss.

But just need, high frequency, large-scale attributes, or let Internet companies wave after wave into the business of selling vegetables.

In addition to mobilizing thousands of people to sell vegetables in pinduoduo, Ali also dispatched five armies, namely RT mart, retail channel, rookie, HEMA and famo, to enter the fresh food group purchase in the community, and invested in the ten Hui group externally. Chen's team of "team 1000" was set up in the city. Jingdong has also launched group buying businesses such as League and District purchase.

China's four big e-commerce giants feel that they have finally found the right way to sell vegetables. But on this road of group buying, they all have to face an opponent who can't get around.

Changsha Uprising

In China, a vegetable usually goes through four circulation links from farmers to consumers. Rural buyers buy vegetables from scattered farmers and sell them to wholesale centers. Then, the dishes are transported to wholesale centers in the suburbs of the city. Then, the vendors and supermarkets in the vegetable market will purchase goods from the wholesale center and place them on the stalls and shelves for consumers to buy.

Due to more links, the price increase rate of products will be relatively high. Anxin securities once did a survey. It sold 9.8 yuan / kg of Shaanxi apples in Shanghai food market, but only 3.65 yuan / Jin for local farmers in Shaanxi. The difference between the two, let the wholesale center, warehousing, logistics to earn away.

Internet companies that like to "cut down the middlemen and make their own price difference" will certainly have to step in in the name of "efficiency revolution". They didn't expect to get bogged down.

Take the daily excellent fresh as an example, what we do is the "front warehouse" mode. First, large warehouses are built around the city, and then small warehouses are built near the residential area. Each small warehouse is equipped with dozens of distribution staff, so as to ensure that users can receive vegetables about 30 minutes after placing an order. Compared with the traditional mode, through self built warehousing and logistics, there are less wholesale centers in the production area, and also provide door-to-door delivery service.

The problem is, in addition to product losses, it also has to bear storage costs, logistics costs, personnel wages, water and electricity costs, coupons, and advertising fees. When did you see a vegetable peddler who went to the countryside to pick up the goods in person, and then spread out advertisements, coupons and delivery services?

The cost of the vegetable business with small profits but high sales is not low. According to the daily fresh data released to the public, to achieve 80 yuan per customer unit price to achieve break even.

If you divide the size of the food and beverage industry by 2.5 billion yuan per day, you can see that if you add up the size of the food and beverage industry by 2.5 billion yuan per person, you will have to divide it by the number of people who spend $1.4 billion per day. In this context, 80 yuan per customer is the only way to break even in vegetable business, which is a joke.

On the other hand, the box horse of "front shop and back warehouse" is not much better. There are specially renovated stores that allow consumers to eat while shopping, and to do warehousing and then provide door-to-door delivery service. It sounds very nice, but in fact, it means that there are two sets of people. According to the announcement of the listed company Sanjiang shopping in 2019, in 2018, its four hemamen stores had a total revenue of 300 million yuan and a loss of 23 million yuan.

Just as the head players of fresh food e-commerce are facing a bottleneck in their development, and even a series of popular enterprises are out of business, a new vegetable selling mode, community group purchase, quietly ignites a prairie fire in Changsha, Hunan Province, far away from the first tier cities.

Yue Lihua, from the rural area of Yiyang, Hunan Province, after opening a snack shop, convenience store and supermarket for more than 30 years, set up "Xingsheng optimization" in 2014 and started selling vegetables.

Having been immersed in the retail industry for decades, Yue Lihua is keenly aware of the problem of "difficult to buy vegetables, expensive to buy vegetables, and far away to buy vegetables" brought about by the relocation of vegetable markets in the process of urbanization, resulting in the loss of shopping venues in old residential areas and the high prices of new large supermarkets. Found a small shop in the community, let the owner part-time to sell vegetables to the residents of the community.

When Xingsheng chooses to enter a community, it often authorizes 4 or 5 small businesses to sell vegetables to the residents. Small businesses pull residents into the wechat group and send links to sell vegetables. After the user places an order, Xingsheng chooses to send the dishes to the store the next day, and the user can take it by himself. After a period of elimination, only one or two of the most enthusiastic service providers will take the initiative to pick up the goods and deliver the goods, so that consumers can get the dishes one or two hours before cooking, and "eat all" the whole community market, earning 10-15% of the sales commission.

For small businesses, this mode can make more money; for consumers, it is obviously more convenient; for Xingsheng optimization, 0 warehousing, 0 inventory and 0 distribution can sell vegetables, which is also very cool. Last year, the daily orders exceeded 4 million, and the annual Gmv exceeded 10 billion.

According to the flexible method of other fresh e-commerce, the customer unit price is 80 yuan, and the customer price of Xingsheng optimization is less than 20 yuan. Yue Lihua has been in business for more than 30 years, and only in 2018 did he raise funds for the first time.

02 battle of giants

Shengsheng's preferred method of selling vegetables has been summarized as "community group buying".

With the community as the center and the "leader" of small businesses as the distribution node, consumers can buy fresh and daily chemical products through wechat groups, small programs and other tools. Because orders are made first and then goods are distributed, the loss and inventory can be reduced; the head of the store is in the community, which also saves the cost of storage, customer acquisition and last kilometer distribution.

The Internet giant, who has been burning money for money but failed to find the right way to sell vegetables, suddenly saw hope.

Huang Zheng once wrote in his thinking of "turning capitalism upside down". Suppose a thousand people want to buy some kind of down jacket in winter in summer, they write a joint order to the manufacturer, and they are willing to pay a 10% deposit at last year's price. In this case, it is likely that the factory will give them a 30% discount.

This idea has been used in the practice of pinduoduo's fruit sales: pinduoduo's order making mode includes inviting wechat friends to make orders and directly collecting orders. The transaction price of order making is significantly lower than that of individual purchase, which meets the user's demand for low price. On the other hand, the platform gathers the scattered demand through the order making, which makes it easier for businesses to form scale effect and reduce costs.

However, the most difficult thing for fresh e-commerce is the industrial chain. Small, scattered and disorderly has always been the label of China's agriculture, and at the end of 2016, only 1.9% of the domestic scale agricultural operators accounted for. In recent years, pinduoduo has successfully sunk the agricultural product industry chain to Yunnan, Guizhou, Guangxi, Hainan and other provinces, so that farmers can directly enter the platform to sell agricultural products. The "second space" of agricultural products produced by the county magistrate's live broadcast with goods has become the norm. Indeed, the middlemen have been cut off, and the price is cheap enough.

After selling the fruits, pinduoduo turned its attention to the "vegetables" with a larger market scale, and entered the community group buying market with the "buy more vegetables" as the starting point. However, pinduoduo, which has always been known for its low price, encountered Waterloo when selling vegetables: it is often not as cheap as Xingsheng.

The price disadvantage stems from pinduoduo's lack of supply chain and logistics. The logistics demand of "buy more vegetables" is totally different from that of selling clothes, bags and bags——

(1) Sell clothes, bags, sent out by express, there are a large number of express companies competition, low cost;

(2) Vegetables need to be delivered to the community the next day. The distribution distance is short, but the time requirement is high;

(3) Xingsheng preferred to rely on its own convenience stores and supermarkets, with formed distributors and logistics system. Pinduoduo needs to build a complete set of new logistics system in Hunan.

Taking the supply chain as an example, the mode of pinduoduo is that the suppliers submit the goods, and after the platform selects the products, the group activities will be launched. The sales begin at 0:00 and end at 23:00 on the same day. The suppliers need to transport the goods from their own warehouses to the self built warehouses of pinduoduo within two hours before 1:00 a.m. of the next day, and then distribute them to each shop by the platform of Duoduo shopping. This requires suppliers to have their own warehouses in the local, to make up for pinduoduo's lack of warehousing and other aspects.

Xingsheng preferred only requires the supplier to unload the goods at the designated place. In almost every township, town and village in Hunan Province, it has a complete set of logistics facilities such as shared warehouse, B2C warehouse and service station, which can match goods from the warehouse to the shops in the community within 12 hours.

In a word, in a nutshell, for Xingsheng, selling vegetables is "by the way" using the existing outlets and logistics facilities; but for the giants such as pinduoduo, meituan and Ali who have moved into Hunan from other places, the need for "new" warehousing and logistics is the first hurdle they have to pass.

03 vulnerable life gate

In addition to warehousing and logistics, there are other problems facing Internet giants who want to sell vegetables.

Internet companies are burning money wars, from takeaway, taxi, unmanned shelves to community group buying. After robbing the couriers, express cabinets, takeout riders and drivers, Internet companies are now starting to rob the team leader and treasure mother.

As the supply hub in the community, the head of the team is mainly responsible for counting the number of people, distributing goods and providing after-sales service. They also gradually become small KOLs in the community, responsible for community operation and selection, and at the same time, they use their social relations to help the platform obtain customers at low cost.

Team leader resource is an important part of the development of community group buying, but it is also one of the most prone to problems. Under the low entry threshold, the operational ability of the head of the regiment is uneven, the mobility is high, and there are some problems such as "mutiny" and independent operation.

In the early stage of community development, the team leader who has operation foundation and good sales ability becomes a hot cake, which is repeatedly won by each family. It's common for a group leader to have several positions. It's not new to "mutiny" from small platforms to large platforms, or from low commission to high commission platforms.

When the head of the group has become a common practice, the mode of community group buying is also changing quietly: after each group buying company has launched its own wechat applet, in order to avoid the loss of private traffic, the head of the team starts to select several low-cost apps from each company and send them to the wechat group. After the residents place an order, the head of the group will place an order in the small program.

According to 36 krypton's report in "mutiny of the regimental leader", some community group buying platforms encountered strange phenomena: after the group leader dropped the small program of commodity group purchase into the wechat group, the group was quiet for a long time. After clicking on the small program, there was almost no commodity in the group. Every time before the deadline for delivery, a batch of large orders suddenly appeared in the small program mall of group purchase, and most of the leaders initiated the purchase.

In fact, the staff only saw the dead powder group that the head of the team bought with a few yuan. The group buying company never directly contacted the active group that the head of the team really owned. Group buying companies and community consumers are artificially separated. Group buying companies can only obtain distorted consumption data, and only a few low-cost products can be pushed to consumers.

In addition, the mismatch between pay and income has become a major reason for the loss of resources. In some areas with fierce competition, a small district may even occupy more than a dozen regiments, which results in only sporadic orders and income of only 20 or 30 yuan a day.

In addition to the competition between team leaders and warehousing logistics, which hinders the long-term development of community group buying and leads to fierce industry fighting, there is also a high degree of homogenization in the operation of community group buying projects. During the "hundred regiment war" in 2019, there are one or two hundred community group buying companies across the country, but these projects are similar in terms of team leader management and commodity supply. In the end, almost all people's supply sources are the same, and no company has a special advantage in price. Therefore, competition has evolved into a "subsidy war".

After all, fresh e-commerce is difficult to do, or is it because selling vegetables is not the same thing as playing games, selling clothes and delivering takeaway——

(1) Selling vegetables has no scale effect. You can sell your clothes to any place you like. Vegetables are sold in different places, and the timeliness of delivery is also high;

(2) Community leaders need to take on too many roles, which are difficult to be separated and standardized. They are all service providers. Delivery is highly standardized. When selling vegetables, you need to send links, pick up goods, deliver goods, and contact the neighborhood;

(3) The daily food intake per person is almost fixed, and the number of residents in the community is almost unchanged in the short term. We can play more games, buy more clothes, eat and eat for decades, and the number of residents in the community has an obvious upper limit. The fresh ceiling of the community is actually very low.

Therefore, fresh e-commerce is not e-commerce. Community group buying is a good model for the prosperity and optimization rooted in Hunan, but not necessarily out of Hunan. The same is true for the Internet giants that are aggressively entering cities.

Review and recommendation of 04 research paper

Ning Fujie and Wang Lingxiao (1) of China Merchants Securities Co., Ltd. wrote in "community group building: traffic patch or business restructuring?"? 》It is pointed out that community group buying is in essence a sinking means of online competition of fresh e-commerce, and the offline competition for the flow that giants can't directly obtain. The market of second and third tier cities is relatively large and the competition is small, so it is inevitable that community group buying will take root in the second and third tier cities.

Xu Rongcong, Ning Fujie and Wang Lingxiao (2) of China Merchants Securities pointed out in the book "a hundred regiments' war is coming, and near field retail is facing changes again". At present, the players on the community group buying track can be divided into four types: B2B background of convenience stores, background of community e-commerce, background of fresh e-commerce and start-up enterprises. There are some deficiencies in the innovation of community group buying mode, and it is more likely to be a supplementary form of physical stores in the future.

Liu Wenzheng (3) of Anxin Securities pointed out in "quantitative analysis: looking at the reform of domestic fresh industry chain and terminal channel from the perspective of circulation cost", pointed out that the problem of domestic fresh food industry chain is that under the condition of extremely weak brand value, consumers have to pay for high circulation cost. Fresh industry chain will change to the direction of lower circulation cost.