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ByteDance and Kuaishou venture into China’s red-hot group-buying sector

Written by Song Jingli Published on 

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Latecomers have to be able to endure large-scale losses, says Haitong’s Natalie Wu.

Two of the major short video and livestreaming platforms, ByteDance and Kuaishou, are preparing an entry into the grocery group-buying sector, Chinese media outlet LatePost reported on Wednesday.

Kuaishou could be planning an investment into the sector, according to the report. At the end of October, the company sent a team to study the supply chain management and market penetration of Xingsheng Youxuan, a Changsha, Hunan-based startup. Soon after, it dispatched another crew to Changsha to carry out due diligence checks on a slew of companies, including Xingsheng.

ByteDance, on the other side, has been incubating a grocery group-buying business internally, which was initially named Jinri Maicai (Jinri means ‘today,’ while Maicai refers to ‘buying vegetables’). The company also conducted market research in the city of Linyi, in the Shandong province, and Shijiazhuang, in the Hebei province.

Prior to Kuaishou and ByteDance, ride-hailing firm Didi launched Chengxin Youxuan (Youxuan meaning ‘a good selection’). Pinduoduo unveiled Duoduo Maicai and Meituan launched Meituan Youxuan. While the different services vary to some extent, neighborhood group-buying typically involves people teaming up on a platform to buy the same products, picking them up themselves at a physical location, or getting it delivered a few hours later or on the following day.

“This seems like a last chance for internet companies in the consumer-facing sector,” Li Chengdong, founder of the Dolphin think tank told KrASIA. In China, the fresh produce market is widely believed to be worth more than RMB 1 trillion (USD 150 billion) and e-commerce penetration has been picking up quickly, largely boosted by the COVID-19 pandemic.

“There is a threshold in the retail e-commerce sector—once a company can generate RMB 10 billion (USD 1.5 billion) in sales, the business model makes sense due to the potential to scale up,” Zhuang Shuai, founder of Bailian Consulting, told KrASIA. Xingsheng, founded in 2014, has surpassed RMB 10 billion in gross merchandise value in 2019, according to its website.

The giants are ready to pounce

Zhuang said that this milestone has signaled the internet giants that they can actually come in. For him, the group-buying platforms are not only competing with peers, but also with established and mature retailers such as the supermarket chain operators Yonghui and Walmart.

“Only companies that can endure large-scale losses may survive and stand out in the future if they enter the sector as late as now,” Natalie Wu, managing director of equity research at Haitong International, told KrASIA.

“The chance for ByteDance to excel is slim”, said Dolphin’s Li, adding that ByteDance has been expanding into many areas, but hasn’t gained as much e-commerce experience as Meituan and Pinduoduo.

Neither ByteDance or Kuaishou have replied to KrASIA’s requests for comment.

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