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Community group buying has brought Big Tech disruption to China’s smaller cities

In China, a community group buying is the latest big e-commerce trend, with consumers ordering fresh food on their mobile phone and companies such as Didi, Meituan and Pinduoduo using technology platforms to pool and coordinate their orders.

This new way of commerce generates bulk volume purchases for primary food providers who can then offer deep discounts, cutting out the middleman and traditional retailers.

The cost-saving business model enables residents in a single community – a typical urban Chinese community can consist of thousands of people – to purchase groceries and household items in bulk via a community representative. Competition among different community group purchase platforms has become fierce though, especially in second- and third-tier cities such as Nanchang where consumers are more price-sensitive.

Zhao Yue, an analyst at research firm Analysys: “The platforms are now competing for scale advantage. Community group buying supplements traditional e-commerce, which delivers to individual consumers from the same warehouse. It enhances the shopping experience, as retailers are closer to the consumer, and it can save on logistics costs because group leaders are responsible for delivering to individual consumers,”

This can have unforeseen consequences for regular marketers. “I‘m losing 10,000 yuan (US$1,550) per truck. Few customers come to me now,” said a vegetable wholesaler surnamed Xiong, sitting in front of his wagon piled high with lettuce.

Meanwhile Tang, a fruit wholesaler, said he has lost a third of his business since October. “[Community group buying] is really messing things up.”

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Photo source: Dreamstime.com

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