China’s Massive Community-Buying Industry Is Collapsing

Demand, however, was unable to keep up with the intense competition. Additionally, the industry has been impacted by President Xi Jinping's massive crackdown on China's internet giants. The government fined several community-buying platforms last year for excessive spending on promotions.

One of the country's hottest online trends in recent years has been halted by China's richest tech giants and financiers: community buying, in which technology companies facilitate the traditional practice when neighbors pool their resources to buy inexpensively in bulk. It is another cautionary tale about how quickly a shift in Beijing's attitudes can lead to the collapse of a thriving industry. Already hundreds of startups have gone bankrupt, and investors have lost billions of dollars.

Community buying started as a rural phenomenon, where farmers banded together to purchase supplies in bulk to save money. Recently, it has become more urbanized, facilitated by smartphone technologies, and used primarily for grocery shopping rather than seeds and fertilizer. The use of platforms such as JD.com, Meituan, and Pinduoduo by tens of thousands of neighborhoods seemed to be a revolution in e-commerce.

Demand, however, was unable to keep up with the intense competition. Additionally, the industry has been impacted by President Xi Jinping's massive crackdown on China's internet giants. The government fined several community-buying platforms last year for excessive spending on promotions.

Beijing, Shanghai, and other cities faced lockdowns during COVID, which should have resulted in a windfall for the platforms. Nonetheless, disruptions in their logistics networks compromised their ability to meet demand. Now even the largest companies have been forced to cut expenses. Sherri He, managing director of Kearney in Greater China, says the sector has been a roller coaster because of the pandemic.

After a surge of https://liquidity-provider.com/news/zero-covid-is-breaking-china-liquidity-provider-news/ cases in April, Meituan halted its community-buying operations in Beijing. As a result of this, hundreds if not thousands of pickup points in the city have been closed. There was no indication when the service may reopen from a Meituan representative.

https://liquidity-provider.com/app/uploads/2022/05/unnamed-2.png

According to a person familiar with the matter and who requested anonymity because the information was private, JD.com, one of the country's biggest e-commerce companies, has slashed its Jingxi community-buying unit workforce by 10% to 15%. The community-buying arm of Didi Global Inc. was hit the hardest by a 20% cut in staff. Alibaba Group Holding Ltd. reduced promotions and decreased expenses as well. Responses to requests for comment were not received from JD.com, Didi, or Alibaba.

The industry experienced a stunning expansion before its contraction. Early in the pandemic, online community-buying startups seemed a sure bet, as locals in smaller towns ordered their daily necessities in bulk online. Many investors followed, including live streaming company Joyy Inc., which invested $100 million in community-buying company Tongcheng Life, hailing the company as a "brilliant example" of how the internet can increase efficiency. Investing in the sector has grown sixfold in three years, to 57.7 billion yuan ($8.7 billion) in 2021, according to Qichacha, the site that searches corporate registries. India and other countries began to adopt similar business models.

To stimulate the markets, China's large technology companies burned through cash to acquire new customers. These firms, which were unable to compete, collapsed. According to Wang Shouren, the founder of community-buying startup Youjing Youtian in Zhengzhou in central China's Henan province, more than 80% of the 1,500 community-buying businesses in the sector in September 2020 had closed six months later.

Bruno Lannes, a partner at Bain's consumer products and retail practice, says top companies also snatched up most of the investment capital, squeezing out smaller firms. "Many businesses struggled with tough regulations and an unstable business model and finally were forced to shut down."

In the absence of small competitors, big tech firms began to recoup their investments. However, the Chinese market watchdog imposed 1.5 million yuan fines on Nice Tuan, Meituan, Pinduoduo, and Didi in March 2021, citing excessive giveaways and anticompetitive discounts. Two months later, Nice Tuan was fined again for dumping products and engaging in a price-fixing scheme.

Although there is little reliable data on this nascent market, there were already signs of slowing growth in the sector by the end of 2021. According to a Bain report, the total value of items sold through community-buying shopping sites reached 54.8 billion yuan in the three months prior to last June but then dropped by 12% to 48.3 billion yuan in the following quarter.

One of the sector's first large bankruptcy proceedings took place that summer when Tongcheng Life filed for bankruptcy after raising over $300 million from investors. A week before the company declared bankruptcy, its founder and chief executive officer, He Pengyu, wrote a letter to staff, suppliers, and investors warning that the community-buying industry was experiencing a sudden shift from an epoch of innovation and operational excellence to a race of subsidies and capital. Shixianghui, a company backed by Tencent, also announced its bankruptcy around the same time.

The scale of this industry's collapse is similar to the China bike-sharing industry's collapse five years ago when over ten million bicycles piled up in landfills after startups worth billions went bankrupt. For community buying, the rate of growth failed to match expectations, as it did for bike-sharing. However, this industry is unique because there is a significant demand for its services, especially in smaller cities, since the current pandemic is causing commerce to flourish online at an unprecedented rate.

One of the few startups in China to survive and be profitable is Youjing Youtian. A marketing campaign by the big tech companies has helped spread the community buying concept, says Wang at Youjing Youtian. "Meituan, for example, is actually one of our allies. They use money as bombs in an attempt to penetrate markets while we follow them up with more sophisticated operations."

As part of the community-selling phenomenon, tuan zhang has arisen, a term for a neighborhood representative who helps distribute goods as they're ordered. Today, people such as 28-year-old Xiang Meiling have been abandoning community-buying forums in droves as shrinking demand hit their livelihoods. During the first three months of last year, she received about 20 orders per day on Meituan Select, and in March, she only received two or three orders for the whole month. As a bulk purchaser, she collected commissions of about 1,500 yuan per month from a group of 150 people in a small town in Hubei province, which increased her income by almost 40%. One single mother, a nurse at a local hospital, did not feel it was the right time to continue this business after commissions dropped to 100-200 yuan. "Most people buy only on the days when they receive their paychecks," she explains. "It isn't worth the time."

Subscribe Our Newsletter

Semiconductor Industry Lost $725 Billion in Six Months. It's Going to Get a Lot Worse

Alexander

Semiconductor Industry Lost $725 Billion in Six Months. It’s Going to Get a Lot Worse

The market cap of semiconductor giants like AMD, Nvidia and Intel have fallen dramatically this year. There is no sign that this nightmare will end anytime soon.

Companies
Stock Market News Live Updates: Stocks Deliver Best Weekly Performance Since November 2020 As S&P 500 Jumps 6% From Last Week
Stock Market News Live Updates: Stocks Deliver Best Weekly Performance Since November 2020 As S&P 500 Jumps 6% From Last Week

Stocks in the United States rose towards the close on Friday, marking the fourth straight day of profits. The main market indexes also saw good weekly gains as traders reacted positively to the Federal Reserve's first step toward boosting interest rates.

Stocks
B2BROKER Liquidity B2BROKER Liquidity
Sponsored
Liquidity Provider

How Does the Cryptocurrency Exchange Business Work?
Unlike any other moment in contemporary history, the universal adoption of Bitcoin has been unparalleled. There has been a rapid growth in the number of firms that specialize in bitcoin.

discover
Core Liquidity Providers

Constantine

The Nature of Core Liquidity Providers: Who Are They and What is Their Feature?

Get an idea of core liquidity providers, their features, types, and main functions in trading markets.

Liquidity
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Constantine

    Financial Planning in the Cryptocurrency Era — Master Crypto and Digital Asset Strategies

    Financial Planning in the Cryptocurrency Era

    Hazem

    Best Platforms to Trade Perpetual Futures in 2025

    Best platforms to trade perpetual futures in 2025

    Alex

    Top 10 Fintech Website Development Agencies for 2025

    Best Fintech Website Development Agencies for 2025

    Сonstantine

    Internal vs External Range Liquidity In ICT Trading Explained

    Internal vs External Range Liquidity In ICT Trading

    Constantine

    Portfolio Backtesting — Tools, Metrics, and Methods Explained

    Portfolio Backtesting

    Сonstantine

    ICT Trading Explained: Smart Money Concepts, Tools and Setups

    ICT Trading Explained

    Сonstantine

    CFD Trading Strategies: A Practical Guide to Risk and Execution

    CFD Trading Strategies

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap

    Vitaliy

    Triangle Patterns in Trading: Mastering Ascending, Descending & Symmetrical Strategies for Maximum Profit

    Triangle Patterns in Trading: Ascending, Descending & Symmetrical Guide

    Alexander

    What Is COTI? Payments, Token & Price Prediction

    What is a COTI coin

    Constantine

    Best Copy Trading Software in 2025

    Best Copy Trading Software in 2025

    Alex

    What Is an AI Agent? The Future of Finance Explained

    AI Agent Explained

    Constantine

    How to Start a Liquidity Provider Business?

    How to Start a Liquidity Provider Business

    Constantine

    How to Start a White Label Brokerage?

    How to start a white label brokerage

    Constantine

    How to Start a Multi-Asset Brokerage?

    How to Start a Multi-Asset Brokerage

    Hazem

    Crypto Ransomware – How They Happen and How to Avoid Them

    Crypto ransomware explained

    Constantine

    Best Web3 Browsers in 2025

    Best Web3 Browsers

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.