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Text / Zhou Yifei
Source/Wired Insight (ID: lxinsight)
Choosing the prosperous option of fighting a protracted war has taken a big step back.
Even if it successfully survived the off-season of summer and immediately ushered in the peak season of community group buying, it has not changed the prosperous city closure plan.
Since August this year, Xingsheng Preferred has been closed successively. First, the business of some provinces was gradually reduced to the provincial capital cities, and then the remaining provincial capital cities in some provinces were shut down.
Today, Xingsheng Optimization has successively withdrawn from the five provinces of Shanxi, Jiangsu, Zhejiang, Hebei, and Anhui, and the business in Shandong and Shaanxi has also been greatly reduced.
“The closure of the city is not sudden, we received the news in advance. The main reason is that the daily order volume of these closed cities is too low, and the competitiveness is not strong, so we withdrew it early.” A prosperous preferred supplier Xiang Lian Line Insight said frankly, “It’s just that the provincial capital city has also closed down, which is a bit surprising.”
Wired Insgiht learned through a number of people familiar with the matter that the GMV and order volume of the recently shut down provinces are very low, “probably only 5%-10% of the total order volume, and they do not belong to the core market that is prosperous and preferred.”
Prosperity Optimization also gave a similar reply to Wired Insight: “These provinces are all areas with short settlement time and small volume, and the cumulative proportion of GMV is only a single digit of the total.”
Since the entry of the big Internet companies, the withdrawal of the city has become a unified action for many community group buying players to save themselves. However, the impact of a series of recent shutdowns of Xingsheng Select has not caused industry panic like the “butterfly effect” of other companies before. But like a stone thrown into the middle of the lake, there is no sound.
The same is true of investors’ reactions. On the one hand, the retreating cities are not core markets. On the other hand, it means that this community group buying unicorn has received less attention.
Several primary and secondary market investors who have been following the community group buying industry for a long time told Wired Insight: “I haven’t paid attention to Xingsheng Select for a long time.” They felt that “the industry pattern is already obvious, and the mainstream players in the industry in the future will be Meituan and Pinduoduo. There is no need for high-density tracking like before.”
Although the outside world can strongly perceive the efforts of Xingsheng Optimization to survive in the model iterations and hard work financing, it still cannot stop the outside world from worrying about Xingsheng Optimization.
I have to admit that the power of Internet giants in the community group buying track is beyond imagination.
After a long-term investigation, a senior executive who used to be a leading community group buying platform found that Pinduoduo has actually successfully figured out some of the successes of Xingsheng Optimization, “such as supply chain stratification, contract performance capabilities, etc.”, and has been in the community group buying business experiments were carried out.
As one of the earliest entrants to the community group buying track, the model run by Xingsheng Preferred is being referenced, but its living space has been squeezed.
The recent continuous closure of the city has also become the basis for verifying this view. One year after the Internet giants entered the market, they covered and stabilized the national market, which directly led to the withdrawal of Xingsheng Select from some of the newly added cities in the country that had spent the past two years.
Not only that, people close to Xingsheng Choice in many places also revealed to Wired Insight that the core provinces of Xingsheng Choice, such as Guangdong, Hubei and other places, have mostly fallen behind Meituan or Pinduoduo, and even lag behind Taocaicai. .
Now, the two leading players of Meituan and Pinduoduo have entered a new stage of competing for qualifying, and the prosperous selection in the cold wind is struggling to move forward. The founder, Yue Lihua, said frankly when he held an internal meeting that he knew how much money there was still in the account, so he would shrink first if he couldn’t, at least to ensure that he was alive.
To be alive has also become the main theme of this year’s prosperity selection.
expected shrinkage
The once high-spirited prosperous selection has now also started a big retreat.
According to Wired Insight, the current Xingsheng Optimization has not only completely withdrawn from the 5 provinces of Anhui, Zhejiang, Jiangsu, Shanxi and Hebei, but also many cities in the northern provinces of Shandong and Shaanxi, and has also closed group spots and grid warehouses.
Most of these areas are prosperous and preferred to spend money to open up new markets soon.
Suppliers with a sharper sense of smell pulled away long before closing the city. A core supplier of Xingsheng Preferred voluntarily suspended cooperation in many cities in the north because “the order quantity in many cities in the north was too small to cover the cost”. In his opinion, “It is a good thing to stop losses and cut down cities with high loss rates in time for prosperity.”
Several northern leaders who operate multiple community group buying platforms at the same time attribute the low order volume of Xingsheng Select to “the traffic of the app is too low”. Residents of many cities in the north have never heard of Xingsheng Select before, and when there is no price In the case of advantages, the platforms of Meituan and Pinduoduo are more popular.
Although the withdrawal of the city was not started until the prosperity of the election in August, the “signal bomb” has been released since the second half of last year.
In September 2021, two months after Xingsheng Select received a new round of financing, it launched a marketing plan called “Rock Plan” internally, which allows its own BD to develop the national market and maintain store operations. According to the report of LatePost, the person in charge of the “Panshi” project is the former vice president of Dingdong Maicai, Xiong Wei, who was responsible for the user growth and client operation of Dingdong Maicai.
The launch of the “Rock” plan is an important transition node for Xingsheng Optimization.
According to an insider close to Xingsheng Optimization, the so-called “Rock Project” is actually an independent store expansion system newly proposed by Xingsheng Optimization. Prior to this, Xingsheng Preferred has only adopted the store expansion model of the third-party service company Shoude for many years.
Before the Internet giants entered the market, Xingsheng Select was able to secure a top spot in the community group buying industry. One of the reasons is that it has cultivated a group of high-quality group leaders with high loyalty and community marketing capabilities. As a result, after the major Internet platforms entered the market, the upsurge of competing for the prosperity of the group leader was set off.
And the marketing plan for cultivating this group of high-quality heads is the Shoude system.
A “qualified” BD under the Shoude system must first become a team leader, pass the threshold test of “an average of 30 orders per day and maintain more than 7 days”, and at the same time successfully develop three team leaders and other tests, and then can Develop your own downline. The more orders the stores developed under BD, the more commission.
Therefore, under this incentive mechanism, in the early years, Xingsheng chose to create a large number of high-quality team leaders and BD teams for itself. At that time, the head of the Xingsheng preferred group not only got high commission income, but also got the salary of Shoude (exploration commission).
However, after Internet giants such as Meituan and Pinduoduo entered the market, the prosperous and preferred Shoude system became difficult to apply.
As the number of group tours in each city is approaching saturation, the order volume of most tours is flat, and the commission ratio of the group leader is reduced, but their motivation becomes less and less when they have to take more responsibility for picking, stocking, and ordering. This vicious cycle is constantly being staged in many provinces every day, and the promotion of the Shoude system is becoming more and more difficult, but it was not until the second half of 2021 that Shengsheng Selection began to launch the Rock Plan.
From “Shoude” to “Panshi”, from less than 10 single customs groups to less than 3 single customs groups, from third-party expansion companies to the establishment of self-operated BD teams, Xingsheng Optimization has been adjusting, but it can’t keep up with the Internet giant.
After the launch of the Panshi plan, Xingsheng Preferred immediately stopped the opening plan of the new city, and closed the inefficient group sites where the daily order volume of the online area was less than 3 orders. !”
However, the dual advancement of the old and new systems of Panshi and Shoude has not resulted in a significant improvement in the market share of Xingsheng Preferred.
A set of data obtained by Wired Insight shows that in the first quarter of this year, about 50% of Xingsheng’s order volume came from Hunan, about 30%-35% came from Hubei, Jiangxi and Guangdong provinces, and the remaining provinces accounted for about 50% of the cumulative order volume. 15% or even below. A set of data that can be referred to is that before withdrawing from the city this time, Xingsheng has opened business in 17 provinces.
Along with the “Rock Project”, there is also the new internal slogan of Shengsheng Optimization. Following the “user experience, sacrifice one’s life and run wild”, Xingsheng has added a new eight-character policy of “reducing costs and increasing efficiency, and deepening and deepening”.
It’s just that few people know that “cost reduction and efficiency increase” is not the first time that Xingsheng Optimization has proposed.
A former Xingsheng Select employee recalled to Wired Insight, “In the second half of 2019, there was a period of time when Xingsheng Select’s loss rate was high and financing became difficult, so at that time Xingsheng Select put cost control in the first place.”
The ending was as seen by the outside world later. Prosperity Optimal beat other entrepreneurial platforms that time, and received multiple rounds of high financing in the following year.
However, when “cost reduction and efficiency increase” are mentioned again this time, the competitive environment faced by Xingsheng Optimization has become so severe that the final result is unpredictable.
Going around in circles, I was still trying hard to learn the prosperity and optimization of Internet companies burning money for growth a year ago, and I began to return to the original “starting point”.
Pressure concentrated on core markets
Hunan in mid-September is still as hot as summer.
Self-promotion points with the word “prosperity selection” can be seen in the streets and alleys, whether in cities or remote villages, everywhere, tenacious and fresh. It’s just that this kind of freshness seems to be more and more difficult to see outside of Hunan Province.
Photo courtesy of the intervieweeThe data obtained by Wired Insight shows that in March this year, the national daily order volume of Xingsheng Preferred was about 6.7 million, of which Hunan Province, Hubei Province, Jiangxi Province, and Guangdong Province accounted for nearly 70% of the order volume.
Now that many provinces have withdrawn from cities, the pressure on single volume seems to have shifted to several core provinces such as Hunan, Hubei, Guangdong, and Jiangxi. Suppliers of some categories have already felt subtle changes.
“In September, Xingsheng Optimization suddenly began to reduce the prices of some products, which has rarely happened before.” What made this big supplier even more dissatisfied is that Xingsheng Optimization “not only reduced prices, but also raised quality requirements”, he also He can understand that “Xingsheng Preferred wants to provide consumers with a high-quality and differentiated experience”, but using the “beauty pageant” selection criteria, but not allowing suppliers to increase prices, it really makes him a little overwhelmed.
Do these few core markets still have the ability to allow Xingsheng to stabilize the “backyard”?
What makes the above-mentioned suppliers’ dissatisfaction even more intense is that “the order volume is not large, and the requirements are so demanding, and we are not short of this order.”
According to a report by LatePost, in the first quarter of this year, Xingsheng Select has achieved profitability in four provinces of Hubei, Hunan, Jiangxi and Guangdong. However, switching to the order level, the daily order volume in Hunan is only more than 2 million, and the daily order volume in Hubei is about 700,000. These are already two provinces with a higher daily order volume. In addition, in Guangdong Province, Meituan’s preferred daily order volume remained stable at 4 million orders, and Xingsheng Preferred’s order volume was about one-eighth of that.
The volume of orders in the core market is shrinking sharply. According to a former employee of Xingsheng Optimization, in October 2020, the daily order volume of Xingsheng Optimization in Wuhan alone was 1.2 million; by February 2022, the daily order volume in Hubei Province was reduced to only 1.2 million orders. There are more than 700,000 left.
The reasons for the reduction in single volume include price differences. Several users in Guangdong, Hubei and other provinces believe that Xingsheng Choice has no obvious advantage in price compared with Meituan Choice and Duoduocai.
Xingsheng Optimization has not established a national centralized procurement like Pinduoduo and Meituan, but relies more on regional procurement. According to the minutes of industry experts from Jiuqian Zhongtai, the centralized procurement of Xingsheng Preferred is only about 3%, which makes the procurement cost uncontrollable. For the “price-sensitive” community group purchase users, this is a dead end.
In addition, the customer base with a high degree of overlap with Meituan also hinders the possibility of Xingsheng Select to develop into a national platform.
The report of Orient Securities once concluded that “different platforms have different resource endowments, different goals and specific strategies, resulting in user differentiation, which may eventually lead to the stratification of platform users and the competitive landscape.” While focusing on user experience and product quality Meituan, and the prosperous selection that hopes to attract middle and high-level people, the user overlap is more and more obvious, and the overlap of the competitive market is also increasing.
A middle-level executive of a community group buying platform told Wired Insight that in June this year, the gap between Meituan Select’s repurchase rate in Changsha and Shengsheng Select was already very small. This is a red flag for Prosperity Optimization.
Due to the low order volume and the inability of revenue to cover the cost, many old suppliers also choose to reduce the scope of cooperation with Xingsheng.
Some Hunan suppliers said frankly, “Except for Hunan, the order volume in other provinces is so low that our group of suppliers can’t see it.” Therefore, he and some local Hunan suppliers who followed Xingsheng Selection in the early years also quit one after another. Even Xingsheng preferred to provide them with these old suppliers, providing a green channel for free use of local Okura for 15 days.
In fact, it is not that Xingsheng Optimization has not fought head-on with giants in the core market.
For example, in 2020, when giants and startups are in a close relationship, Xingsheng preferred to propose a goal of developing 1 million team leaders by 2021. In order to achieve this goal, Prosperity has increased the number of central warehouses, and once opened 5 central warehouses in Guangdong at the same time.
In addition, it also requires suppliers to rent shared warehouses and build their own cold storage near Okura, otherwise they cannot continue to be high-quality products in Xingsheng. In order to continue the cooperation, many suppliers have built cold storages out of their own pockets.
However, expanding the number of central warehouses will extremely test the platform’s ability to coordinate and manage details.
If the unit density is not enough, the number of central warehouses will be forced to expand, which will increase the burden on the performance link. The central warehouse is connected to suppliers and procurement, and is connected to processing warehouses, grid warehouses, and group sites. The operation efficiency of the central warehouse is directly related to the supplier’s evaluation and attitude towards the platform, as well as the timeliness of contract performance.
However, at that time, more emphasis was placed on the development and optimization of traffic and capital logic, and did not pay too much attention to these aspects. This made the suppliers who were forced to follow the expansion rate of Xingshengyou miserable. “At that time, it was extremely troublesome to send five large warehouses to Xingshengyou every day.”
The market cannot support infrastructure investment, which will naturally bring greater losses. The goods of some suppliers are in some areas in Chaoshan, Guangdong, and only a few orders are sold every day. A supplier said with a smile: “There is not as much as a supermarket auntie.”
The counterattack on the myth did not happen, and Xingsheng Optimization had to take the initiative to close nearly half of the Okura.
Even in the base camp of Hunan, no one knows whether Xingsheng Optimization can continue to develop.
In order to keep the base, Prosperity’s model in Hunan has always been the most evolved and iterative, and the Internet giants are not so easy to surpass.
For example, in 2021, on the commodity side, Xingsheng Preferred has invested heavily in infrastructure in Hunan – fresh meat segmentation warehouse, live fresh processing warehouse, hot fresh meat and live fresh fish, which have become two unique Xingsheng Preferred. category. In particular, freshly slaughtered pork is already the king of new products that is prosperous and preferred.
Different from other fresh fruit and vegetable products, Xingsheng’s self-operated freshly slaughtered pork needs to completely rebuild a full-link quality control and contract performance system, which is very time-consuming and costly. Therefore, only in Hunan can you see the latest generation logistics system of Xingsheng Preferred RDC Central Warehouse + Fruit and Vegetable PC Warehouse + Hot Fresh Meat PC Warehouse + Conventional Shared Warehouse.
The battle and defense battle with the Internet giants has consumed a lot of the vitality of Xingsheng Optimization. In March this year, Prosperity Optimized has lost its position as the number one unit in central China (Hunan, Hubei and Jiangxi).
Now when the core base camp is under more pressure, how long can Xingsheng Optimization last?
Hard-to-replicate core barriers
A year ago, there were frequent listing news for Xingshengyou. Today, a year later, such rumors have disappeared.
In addition, Xingsheng Select has not received funds in the primary market for more than a year, there are few business orders in non-core provinces, and the number of orders in core provinces has dropped significantly… Accompanying this is the cooling of the capital market’s enthusiasm for startups.
The voices that are optimistic about the longest-surviving unicorn are becoming less and less.
Now there are two voices in the market: one is that there is still money in the prosperous preferred account and can survive; the other is that the money is running out. The former refers to the total amount, and the latter refers to the remaining available funds in the account, except for necessary expenses such as “the supplier’s payment, deposit, commission for the group leader, and employee wages”.
Discussions about how much money there is left and how long it can last is surrounding the development of optimal selection. And just two years ago, it was the darling of the community group buying track.
Two years ago, Xingshengyi became an ideal model in the eyes of Internet companies. From plagiarized business models, to employees being hired away with high salaries, to competitors disguising their identities for research, new players almost turned Xingsheng Select upside down, and tried to replicate its myth in Hunan Province across the country.
As time progressed, these Internet players gradually realized that they could not replicate the model of Xingsheng Optimize in Hunan at all, and even Xingsheng Optimize itself could not replicate the Hunan model in other regions.
In the eyes of the outside world, the biggest bargaining chip in the hands of Xingsheng Optimal is the perfect logistics-supply chain system that can sink to counties and towns in the Hunan market. Radiating from the central city to the village and town level, more than half of the prosperous preferred orders in Hunan can be delivered to villages and towns, so that they can be picked up the next day.
However, the barriers of this system are based on the fact that Prosperity has an early layout in Hunan, a large investment of financial resources, and a long operating time.
In other words, if there are no giants entering the game, Prosperity is preferred to follow the Hunan model all over the country and slowly advance, and there may be hope to replicate the second and third “Hunan”. But there is no “if” in reality, and the core bargaining chip for prosperity and optimization only appears in Hunan now.
What needs to be understood more is that the giants do not have the ability to imitate Xingsheng and optimize the logistics-supply chain. They just rely on the main body of listed companies and begin to pay more attention to optimizing the UE cost model, increasing the average price of parts, and pursuing profitability indicators. The time, financial and human resources invested in replicating the Hunan model are too large and not cost-effective.
But some effective moves are being referenced by other players in the industry.
A community group buying platform founder found that Pinduoduo already has some actions similar to Xingsheng Select. For example, it can make differentiated selections based on its understanding of local consumers.
For example, if you want to sell peppers in Hunan, other community group buying platforms will directly look for famous domestic pepper varieties, such as Wuhu pepper, from top to bottom, and Duoduobuicai will find local peppers that users in the local area like to eat. User needs.
In addition to the impact of external giants, Xingsheng’s preferred corporate genes and organizational structure are also the reasons why it is difficult to replicate the Hunan model in other provinces.
As a start-up company founded in Hunan, the core senior management of Xingsheng Selection has always been the Furong Xingsheng Department. After walking out of Hunan, this corporate gene has limited the expansion of Xingsheng Select.
One of the more interesting phenomena is that many suppliers have found that, “Whether outside of Hunan Province or within the province, the dialect used by Xingsheng Preferred in many offices is Hunan dialect, which is the official language of Xingsheng Preferred.” . Moreover, the provincial and district leaders of Xingsheng Select in several provinces are all directly transferred from Hunan to the “direct line”.
This underlying gene also allowed Xingsheng to consolidate a group of stable Hunan suppliers in the early stage. When Xingsheng was expanding to areas outside Hunan Province, the suppliers who entered the market often had limited space, and it was difficult to obtain too much more share.
A major supplier of Prosperity Selection told Wired Insight, “Procurement will definitely look for local suppliers when doing business outside Hunan Province, but in areas with high orders such as Guangdong and Hubei, there must be old suppliers sent directly by Hunan. Even if the sales data is good, sometimes local suppliers will be squeezed out by Hunan suppliers.”
This is in stark contrast to the result-oriented Internet platforms. As a result, more suppliers voted with their feet and left Prosperity.
For a company, starting first does not directly equal victory. Prosperity, a “top student” among community group buying startups, has to face the harsh reality of today.
Right now, this community group buying unicorn is facing problems from how to replicate the Hunan myth in other provinces, when to go public, and how long can it resist giants? How long will the funds in the account last?
For Xingsheng Select, the current situation is very serious, and these questions are too difficult to answer, but it must rise to the challenge and strive not to become the cannon fodder of the times like other community group buying unicorns.
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