For two months, 25 million Shanghainese relied on group buying to get groceries, but it is unlikely to continue on the same scale.
Photo from CFP
By CHENG Lu, SHE Xiaochen
When Shanghai was in lockdown, the first thing WANG Hui did every day after waking up was check her group-buy chat. There would be a list of grocery items available that day, and the group leader, in her case the owner of the tobacco shop downstairs, would remind everyone of the cut-off time and delivery window. For two months, all three hundred families in her building got their food this way.
Grocery group buying had a lousy start in 2022. Facing mounting losses, companies that for two years had been burning money like there was no tomorrow started to cut costs, lay off workers, or even close up shop for good. Even Meituan Youxuan, the likeliest winner of the grocery group-buying war, stopped doing business in Northwest China.
But during the lockdown, group buying alleviated pressure on the overstretched supply chain by allowing bulk purchase and delivery, throwing a lifeline to 25 million homebound residents in Shanghai in desperate need.
There were groups for essential goods, such as rice and vegetables. And there were plenty for “frivolous” items, like fried chicken or Coca-Cola.
Although the Shanghainese had never exactly been fans of buying groceries with neighbors or picking up goods from their local tobacco shop, the lockdown experience changed things and provided a beam of hope to languishing online grocers.
Could these two months of changed habits last forever? The answer is likely no.
“The lockdown did boost demand, but I don’t think the habit will stick,” an operations manager at a big online grocer said. “The fundamentals remain the same. Demand is not up. Costs are not down. Whoever loses money has to shut down. Cost control. That’s the name of the game this year.”
Wang Hui, a Shanghai resident, said: “I’d rather go to a real supermarket or use plain vanilla online grocery apps. The product selection is much more limited in group buying. You can’t guarantee freshness. And there’s always a minimum order requirement.”
Many grocers that dabbled in group buying have wound down their operations. Dingdong Maicai, one of the “plain vanilla” online grocers, realized at the beginning of the outbreak in March that it couldn’t possibly fulfill every single order on time with demand soaring and warehouse workers forced to stay at home.
In less than a week, it switched to group buying to save time and manpower in sourcing, packing and delivery.
Even so, it struggled to meet demand. Users complained about unavailable products, wrong orders, and late deliveries. The chaos became so bad that the app went dark for two weeks before going back online again, with some twists in the user interface and packaging.
Over two months, the grocer delivered 800,000 group orders to 100,000 people, a remarkable feat considering the circumstances. But in June, Dingdong Maicai quietly discontinued group buying and switched back to business as usual.
“Supply and demand have gone back to normal. We want to focus on what we are already good at,” said LI Huan, an operations manager. “It’s no easy task to ensure punctuality and quality. We are working on a few different things right now to make the supply chain more reliable, such as building our own food processing facilities.”
Hema, on the other hand, got some new ideas from the short stint. “We realized that people have grown to like buying cheap and buying in bulk,” said Hou Yi, head of Hema.
The supermarket-online-grocer hybrid, known for its single-serving, ready-to-eat food and pricey gourmet products, has since launched two new stores in Shanghai, the first a member-only big-box retailer, the other focusing on near-expired, heavily discounted items.
But non-grocery businesses may be inspired to explore new opportunities in neighborhood networks, said CUI Lili, professor at Shanghai University of Finance and Economics.
Neighbors who otherwise may not have known one another have become acquaintances or even friends, and people have grown to be more comfortable buying directly from individuals instead of businesses.
Cui moonlighted as a group leader during the lockdown and helped her neighbors buy 60,000 eggs and “several tons of vegetables.”
“What’s unique about Shanghai is that the transactions were built on trust. Producers and wholesalers now realize they can reach customers directly through someone in the neighborhood that everybody trusts,” she said.
Instead of competing with existing grocery group-buying companies on staple food, Cui said, these businesses should focus on niche, gourmet products that traditional retailers do not carry. The sellers still need to figure out sourcing and shipping, but marketing and customer service will be the job of group leaders.
Over 130,000 people worked as group leaders during the lockdown. Most were amateurs and volunteers like Cui. But a small group who enjoyed the work and were good at it, continue to do it, either as a part-time job or even as their full-time job.
Some companies, such as coffee chains, that had never imagined themselves in the group-buying business are now actively hiring and training group leaders. It turns out that plenty of families love to get their beans or even freshly ground coffee delivered; it’s just not necessarily something they had thought of doing before.
Group leaders are usually paid below 10 percent commission, but it soon adds up. A woman who runs several thousand-person groups says she can make a living out of it as long as she can put together 15 group orders every month, each with more than 100 participants.
“The group leader must know what product sells and how to keep her community engaged. It takes skill,” she said.
Group buying is unlikely to stay around at the same levels as when amid an intense lockdown, but it might well find a niche to flourish on a reduced scale.