ETtech Long Read: Why China’s group buying model hasn't clicked in India
At the beginning of 2022, multiple ecommerce platforms were betting on “group buying”, a concept believed to have originated in China, to tap the next hundred million users and push them to buy online.
Under this arrangement, firms sell products at much lower prices to customers provided they place orders as a group. Chinese internet firms such as Pinduoduo had perfected group buying to a fine art, racking up hundreds of millions of users, and Indian startups were hoping to replicate that success here.
Cut to the year end, however, and most of them have either shut this line of business, put it on the backburner, or just moved on.
The community and group buying concept has failed across the board. ET has learnt that fintech Cred has shut its group-buying business, which it started in January. Ecommerce outfits Meesho and Udaan have scaled down Superstore and Price Company, their respective community offerings, and are still in the pilot stage in a handful of cities, sources said.
Cred, Udaan, and Meesho did not respond to queries sent by ET.
Meanwhile, Bengaluru-based Dealshare, which has raised over $393 million in funding so far, the bulk of it last year, has tweaked its collective buying business.
The segment accounted for less than 10% of total sales, CEO and co-founder Sourjyendu Medda admitted to ET. “The original model requires more tech savviness from consumers, and Indian users who belong to that income spectrum are yet to reach that level,” he said.
Pinduoduo, the trailblazer
While the idea of group buying has always existed in the offline world. China’s Pinduoduo, which started out in 2015, took it to a whole new level. It focussed on the grocery category, which had very few participants, and leveraged technology to create a social commerce platform linking farmers with consumers.
Pinduoduo also tapped China’s WhatsApp equivalent WeChat, enabling users to share deals with other users and aggregate demand. This organic sharing aspect saw users flocking to its app in droves and Pinduoduo achieved this without having to spend much on performance marketing.
Until Pinduoduo’s advent, the ecommerce market in China had been dominated by the likes of Alibaba’s JD.com and Taobao. Within one month of launching its app in 2016, Pinduoduo had over 10 million customers.
And in just four years, that number exploded to 585 million active buyers. To put that in context, it took Alibaba more than 15 years to cross 500 million users.
Since then, companies around the world have been trying to replicate Pinduoduo’s success, but with limited success.
In India, group buying is a term that has been loosely used to refer to multiple ecommerce business models. Meesho’s Superstore for groceries, for instance, is largely similar to its core, fashion reseller business. Udaan’s Price Company is like its core business-to-business ecommerce play, where kirana store owners act as middlemen.
Under the community buying system, an intermediary or a middle-man — called a community leader — places large orders on behalf of a “community” or “group” of people in smaller towns and villages.
These community leaders aim to aggregate demand from a particular region, which gives them bargaining power to get suppliers to lower prices of products.
The larger the order size, the higher the bargaining power to lower prices, which makes this concept attractive for people from lower-income communities.
“We will be able to reach areas where there is not a lot of kirana store penetration and the middleman helps reduce the last-mile costs and credit by taking care of it in his books,” said a source associated with Udaan.
“These are people who are micro-entrepreneurs and do not have to transact on a daily basis like the typical Udaan customer. So, we are solving for them differently with a separate app and team. The idea is to graduate these customers to being Udaan customers in future.”
An executive associated with one of the companies in the community buying space said that the Indian market is not conducive to group buying.
Read More at https://economictimes.indiatimes.com/tech/technology/collective-failure-why-chinas-group-buying-concept-has-failed-to-click-in-india/articleshow/96232769.cms