Summary of Key Points
The community grocery shopping sector, once highly sought after by internet giants, now only has a few players left, such as Duoduo Maicai. Platforms like Meituan Youxuan, Chengxin Youxuan, and Taocaicai have successively shut down. The reasons behind this are not lack of funds, traffic, or technology, but rather four critical issues: mismatched business models, exorbitant fulfillment costs that lead to losses, inability to retain users, and the threat from instant retail. These factors have caused companies with billions in resources to fail collectively.
Detailed Analysis
1. Internet Giants Struggling to Adapt: What They Do Well Doesn’t Match What’s Needed
The core competencies of internet giants do not align with the operational model of community grocery shopping:
- Misaligned User Demographics: The main users of Meituan and Didi are people in first- and second-tier cities who value immediacy (e.g., receiving food within half an hour). In contrast, community grocery shopping targets users in third- and fourth-tier towns, who prioritize affordability and are willing to wait until the next day for delivery. Asking users accustomed to instant services to wait for deliveries the next day is like asking coffee lovers to suddenly switch to plain water—very difficult to convert them.
- Incompatible Capabilities: Internet giants excel at managing online traffic (e.g., Meituan’s food delivery algorithms, Alibaba’s shopping recommendations), but community grocery shopping relies heavily on offline operations: collecting fresh goods from producers, sorting them in warehouses, and distributing them to local distributors. To enter this market, Meituan spent 14 billion yuan on building cold chain infrastructure and equipment in 2021, yet it still couldn’t succeed because these activities don’t fit within their core competencies.
2. The More You Sell, the More You Lose: Exorbitant Fulfillment Costs
Community grocery shopping appears simple but is actually a money-draining endeavor:
- High Investment in Cold Chains: Fresh goods require refrigerated transportation and storage, which are scarce in rural areas, forcing giants to invest heavily in their own infrastructure. Meituan Youxuan’s logistics costs accounted for 10% of sales, plus commissions for distributors and warehouse rent, resulting in total fulfillment costs of 24%-30%. With a gross margin of only 11%, selling goods worth 100 yuan results in losses of 13-19 yuan—how can they make a profit?
- Complex Distribution Processes: The process from suppliers to shared warehouses, central warehouses, and then to local distributors involves multiple layers of sorting. Users place orders after 11 PM and need their goods by 11 AM the next day, requiring extremely efficient operations. Meituan lost 70 billion yuan over three years due to these high costs.
3. Unloyal Users: Customers Who Come for Discounts and Leave Quickly
Community grocery shopping users are often attracted by low prices and have little loyalty:
- Loss of Users with Subsidies: Early platforms used discounts (e.g., 1-cent eggs, 0.99 yuan per vegetable) to attract customers, but these users are price-sensitive. Once subsidies stopped, they either moved to cheaper platforms or returned to traditional markets. After regulatory restrictions on low-price dumping in 2021, user growth halted.
- Users Not Controlled by Platforms: Community grocery shopping relies on distributors to attract customers, who are often independent contractors. If a distributor switches to another platform, their users follow. Platforms lose control over their customer base.
4. Instant Retail Competing for Market Share: Users Want Immediate Delivery
The “next-day delivery” model of community grocery shopping no longer meets user expectations; instant retail services (e.g., Meituan’s Flash Purchase, JD.com’s Home Delivery) have become more popular:
- Significant Time Differences: While instant retail delivers fresh goods within an hour, community grocery shopping takes up to 24 hours. Third- and fourth-tier town residents are now accustomed to faster delivery times, so they prefer instant retail.
- Narrowing Price Gap: Instant retail platforms also offer discounts and special offers, making their prices competitive with community grocery shopping. Users want both low prices and fast delivery, so they naturally opt for instant retail. By 2025, the instant retail market is expected to exceed 970 billion yuan in size, while the community grocery shopping sector continues to shrink—no wonder giants are exiting.
Conclusion
Internet giants failed in community grocery shopping not because of a lack of capability, but because the logic of this industry contradicts their strengths: they excel at online traffic management and serving urban users, while community grocery shopping requires offline infrastructure; they are used to serving high-end customers, yet community grocery shopping targets rural areas; they rely on subsidies to attract new users but can’t retain them. Ultimately, they tried to use their weaknesses against the strengths of their competitors, leading to inevitable failure.