Community buying also owes its success in rural areas to its ease of use, as the service is accessible via WeChat, China’s main messaging app. The rural market is nothing short of a goldmine for Chinese e-commerce. According to estimations, the value of the market could exceed EUR 69 billion this year! It is therefore becoming a new battleground for China’s tech giants, like Meituan and Pinduoduo.
Easy to use and accessible to all
How does the model work? Buyers in a community, such as a village or neighborhood, form a WeChat group. Among the members of the community, a self-designated leader creates and maintains the group, which is limited to 500 people.
The group leader displays a daily or weekly selection of products using a WeChat mini-program. Since 2018, WeChat has enabled other entities to create services in its app using mini-programs. The order is only placed when demand for an item reaches the required quantity. This bulk order is then sent to the group leader, who unpacks it for the buyers to collect at a location that suits all.
In the event of a problem, the group leader is the first point of contact for members. They pass complaints on to the platforms and manage incident resolution on behalf of members. Because WeChat groups are simpler to use than traditional online shopping apps, this model enables elderly people to easily take part in community buying. The model is tapping into new segments of China’s population, which are either geographically isolated or overwhelmed by current digital uses.
A win-win model
The pandemic has been a catalyst for the model's popularity. Repeated strict lockdowns and border closures have led residents of rural areas to turn to new solutions to source supplies easily and at a low price. What’s more, the model is a win-win option for consumers, community leaders and product platforms.
Consumers make savings on their purchases: according to a resident of the mountain region of Lichuan, for example, a kilogram of mandarin oranges costs RMB 15 (EUR 2) at the supermarket compared with RMB 6 (EUR 0.82) on Meituan, one of the apps that provide an online community buying service. As for the community leaders, they receive a commission of 10% on bulk orders. These commissions enable some small business owners to supplement their income without having to put a great deal of energy into running WeChat groups. Community orders can be managed as part of their usual business operations.
For platforms like Meituan, the model resolves the problem of the high logistical costs involved in delivering to remote areas, and spoiling of food products, which other delivery models have been unable to effectively address until now.
According to QuestMobile, the number of active monthly users of online group buying mini-programs reached 101 million in September 2020, representing an increase of 68% on the previous year. The market is set to double over the next five years, according to estimations by the bank Credit Suisse.
The final battleground for China’s tech giants
Chinese e-commerce giants Meituan and Pinduoduo are the main players in this new market. Meituan stated that it has nearly half a million active online vendors in China’s most impoverished areas, which generated more than 700 million orders on the platform. Last year, Pinduoduo announced that it would invest the equivalent of at least EUR 7 billion to stimulate rural e-commerce over the next five years. These two companies were the first to offer this new distribution model. Alibaba and JD, two latecomers to the sector, are now striving to catch up with their competitors’ lead.
By addressing problems related to the last mile delivery in rural areas and providing a more economical and greener solution for shopping deliveries, this new model could rapidly replace traditional grocery stores, which saw their incomes halved in 2021 in China.
Community group buying is not a new concept in France, where it has been made popular in particular by AMAPs (associations working to maintain rural farming) for grouped buying of fruit and vegetables. The Chinese model differs in that it covers all consumer products. What’s more, it works through mini-programs developed by tech giants, which are available through the Chinese social network WeChat. This communication and distribution model could inspire e-commerce players in Europe’s retail sector to serve rural areas, where use of online shopping services remains very limited.