Founded in 2018, Shihuituan is a gourmet community e-commerce service platform. It focuses on fruits and vegetables as well as household items targeting the community as the entry point.
For Youhaodongxi (meaning “Got Good Stuff”) founder Chen Ying, Shihuituan is ultimately meant to become the Uber of convenience stores. “We don’t own convenience stores, but we aim to revamp convenience store transaction models, supply chain models, software systems, and user outreach patterns.”
In the past six months, community group purchase has been a hot topic. After successfully tapping into the community scenario, the local services market is finally within reach of WeChat sellers. Communities, with their large numbers, can no doubt alleviate the consumer flow anxiety faced by both online and offline retailers.
Half a year in, the “thousand group-purchasing app war” is still going on. Several leading contenders have already emerged, leaving little room for small players in the battlefield. The evolving tactics of these leading companies will largely shape the future of community group purchasing.
Whether or not we will see another Meituan rise from the ashes will depend mainly on what these leading companies manage to deliver in 2019. Online for only half a year, Shihuituan (developed by Youhaodongxi) was first to publish their winning reports.
Their numbers show that after reaching the 100 million benchmark at the end of last year, Shihuituan’s GMV soon reached 150 million yuan in January of 2019. They have now penetrated over 10 million households in 60 cities, with 1.5 million registered users and 40 thousand group leaders.
“In third-, fourth- and fifth- -tier cities, the core challenge is ordering size, for which group purchasing is the perfect solution”, says Chen Ying. Previously, rural startups often failed because of purchasing power. Without subsidies, they find it difficult to survive.
Chen Ying first became interested in the group purchasing model 3 years ago. “Youhaodongxi is the first-tier city version of group purchasing, the ‘curator’ (in Youhaodongxi) and the ‘group leader’ (in Shihuituan) are the same things.” The only difference is that due to higher purchasing power in first-tier cities, Youhaodongxi takes on the role of guarantor.
Although group purchasing has only been around for a few years, companies in this arena have already passed the 100 million mark, which goes to show the potential of the field.
With the IPO of Pinduoduo, the market is increasingly welcoming of social retail businesses, while consumers are also beginning to embrace group purchasing. Chen Ying grasped this market signal: the world is ready for community group purchasing.
Youhaodongxi has already taken roots in the first- and second-tier cities. For Chen Ying, the question is how it enters into third- and fourth-tier cities, as well as the rest of the country. “Shihuituan is our major play in the bid to enter rural markets.”
Peng Wang’s first move after his appointment as leader of Shihuituan was to test out different models. “We chose two cities with different geological and consumer characteristics, Nanjing in southern China, and Tianjin in the north. We wanted to test different models.” The one in Tianjin was a convenience store model, while in Nanjing they tested a local mothers model, said Shihuituan CEO Wang Peng.
The advantage of convenience stores is that they already have a customer flow as well as storage space, so they took off fairly quickly. In comparison, it took much more effort for local mothers to start, but because of the tight-knit relationships between neighbors in a community, the delayed potential of local mothers soon became evident.
In July and August of last year, however, Shihuituan’s business in Nanjing took a drop due to the local mothers model. Wang and Chen learned the hard lesson that these local mothers will always put their child first.
“The more free time children have, the fewer time mothers have. If for example, the mothers go on vacation with their children during summer break, the business will stop. This is not a sustainable business model.”
Compared to convenience stores, it is also much harder to find a suitable local mother. One must gain entry into the online circles of the community to find an appropriate candidate…
Read the full article on the eBook: How a community-based e-commerce startup managed to reach 60 cities and 10 million households in China.