A version of this article originally appeared in Lillian Li’s new long-form tech newsletter, Chinese Characteristics. Lillian recently returned to China after working at Salesforce Ventures and Eight Roads Ventures in London.
Talk to any tech adjacent person in Beijing this year and ask them about what’s hot in tech. They’ll probably say it’s community group buying, followed by livestreaming e-commerce. Billions are being poured into startup investments right now, all of the major tech players have thrown their hats and money into the ring.
Rumours circulate that entire business development teams get hired over from their competitors in a month. Subsidies are feeding entire villages. This is all over *looks it up* online grocery purchase in lower-tier Chinese cities?
Fresh groceries have remained the holy grail of e-commerce. A task so daunting that even Amazon hasn’t been able to crack it. In China, the retail grocery market is estimated by McKinsey to be worth 5.2 trillion RMB (794bn dollars) in 2019, with only 10% of that currently online. In 2020, it seems like we’ve finally found a business model where the unit economics works at scale. Theoretically at least. That’s 社区团购 or community group-buying, the least understood business model in online retail right now. In this edition, we’ll look at this business model’s innovations, its enabling factors, what will determine the winner’s success and ultimately its challenges.