China's community buying hits the buffers | WARC | The Feed
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China's community buying hits the buffers
Many community buying start-ups have gone bust in China while investors stand to lose billions as a result of COVID-19 restrictions and a regulatory crackdown on tech platforms, Bloomberg reports.
Background
Community buying originally grew out of farmers joining together to purchase supplies in volume. In recent years, however, it has become an urban phenomenon, as smartphones enabled city neighbourhoods to do the same with groceries via platforms like Pinduoduo, Meituan and JD.com.
Early in the pandemic, community-buying start-ups seemed to offer the answer to the needs of residents locked down in cities across the country, and significant investment followed. But of about 1,500 community-buying companies in business in September 2020, more than 80% had closed six months later as the big tech companies effectively bought their users. Big tech companies were subsequently fined for those promotional efforts which the regulator regarded as excessive giveaways and anticompetitive discounts.
What’s happening now
- COVID-19 lockdowns have disrupted logistics networks and hit platforms’ ability to meet demand. Last month, for example, Meituan stopped its community-buying operations in Beijing and closed hundreds of pickup points.
- Since January there have been significant staff reductions – between 10% and 20% – at the community-buying units of JD.com and Didi.
- Tuan zhang, neighbourhood representatives who gather orders and help distribute goods when they’re delivered, are quitting in large numbers as orders drop off and the commission they earn plummets.
An alternative take
Wang Shouren, founder of community-buying startup Youjing Youtian in Zhengzhou in Henan province, suggests that spending by big tech companies actually helped the category. “They are the ‘air force and rocket army’ using money as bombs to open the market while we follow up with more sophisticated operation,” he told Bloomberg.
Sourced from Bloomberg [Image: Qilai Shen/Bloomberg]
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