China's tech corporations are dashing to ship grocery buying options

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Almost all of the largest Chinese internet companies have established themselves in the online grocery business. News came just this week that Alibaba was co-directing the $ 196 million C3 round of Nice Tuan, the two-year grocery group's fourth year of buying.

People in China shop almost anything online, including groceries. At first glance, grocery e-commerce seems to have caught on primarily with digital savvy folks who rely on the convenience of e-commerce and don't mind paying a little extra for delivery. However, many older shoppers still prefer to visit traditional wet markets, where ingredients are generally cheaper.

Now, tech companies in China are making efforts to attract food buyers of all ages. A new business model that receives a lot of money is that of Nice Tuan, known as Community Group Buying.

In conventional grocery e-commerce, an intermediary platform like Alibaba typically connects individual shoppers with a number of retailers and offers door-to-door delivery, which usually arrives in China within an hour.

By comparison, a community group purchase relies on an army of neighborhood managers – often housewives seeking part-time work – to promote products to neighbors and count their orders in group chats, usually through the popular WeChat Delivery boy. The managers then place the group orders with suppliers and have the items delivered to collection points in the community, e.g. B. in a local supermarket.

It's not uncommon for stacks of shopping bags to be picked up in corner shops these days, and the model has inspired overseas Chinese entrepreneurs to follow suit in America.

Even in China, where e-commerce is ubiquitous, the majority of grocery shopping is still offline. That changes quickly. According to research firm iiMedia, the young grocery group purchasing segment is growing by over 100% year over year in 2020 and is expected to reach a market size of 72 billion yuan ($ 11 billion).

It sounds like grocery grocery shopping and self-picking is a step back into a world where convenience on your doorstep is the norm. But the model has its charm. Sending SMS orders in a group chat is more unfriendly to the elderly who may find Chinese ecommerce apps often overlaid with busy buttons and tricky sales rules. With bulk orders, sales managers may get better bargains from suppliers. If a group buying company is ambitious, it can always add last mile supplies to its offering.

Chinese tech giants are clearly optimistic about online groceries and diversifying their portfolios to ensure they have a skin in the game. Tencent is an investor in Xingsheng Youxuan, Nice Tuan's main competitor. Grocery delivery service Meituan has its own grocery section that offers both the traditional digital grocer and the WeChat-based group purchase model. E-commerce upstart Pinduoduo is similarly supporting grocery group purchases. Alibaba itself already operates the Hema supermarket, which operates both online and offline markets.