China community group buying's bleak winter deepen as industry leader Nice Tuan...

China community group buying's bleak winter deepen as industry leader Nice Tuan downsize operation to stay survive

China community group buying's bleak winter deepen as industry leader Nice Tuan downsize operation to stay survive

Aron Chen

posted on August 24, 2021 11:06 pm

Chinese community group buying sector is suffering another major blow.

Chinese community group buying sector is suffering another major blow after a major player-Nice Tuan announced massive layoffs to downsize operations in multiple cities.

Nice Tuan has informed some of its supplier about the company’s decision to cease operation in Changchun, the capital city of Jilin province, Ji Nan, the capital city of Shandong province, Taiyuan in Shanxi province, Fuzhou and the Hubei cities Xiangyang and Jingzhou.

A Nice Tuan staff member, speaking under anonymity, said the company notified him of the decision on Tuesday morning during a team meeting and forced him to leave immediately in the afternoon without paying severance . The company had started transferring inventory to other cities by the next day.

Chen Ying, founder of Nice Tuan, made an urgent alert to inform employees about upcoming layoffs via an internal letter named “the company need a self-renovation to focus on the long-term value of users”.

“In short term, we will greatly restructure some local businesses that has low work-efficiency, some of our regional operations will be integrated into Alibaba’s MMC to achieve synergy and pursue long-term development.” Chen Ying said.

The integration between Nice Tuan and Alibaba’s MMC is not really surprising considering the fact that Alibaba is looking to expand its community group buying business. Already, the e-commerce giant integrated the community group buying business of Lingshoutong and Hema Jishi to form a new community group buying business unit dubbed “MMC” in March. Apart from that, Alibaba has been actively participating the four out of Nice Tuan’s total seven funding round in the past.

Founded in 2018, Nice Tuan was one of early player of community group buying sector in China, it has raised more than USD1.2 billion in funding up to date. In March 31, the Beijing-based community group company secured USD750 million in series D financing round led by Alibaba, DST Global, GGV Capital.

At the time, Nice Tuan’s businesses covered about 1,600 counties and its daily orders had achieved 15 million. Community group buying, which allow citizens in a single community to order in bulk at discount prices, prevailed during the Covid-19 pandemic. However, the golden growth period for China’s community group buying model did not last long.

In December, 2020, China’s state media People’s Daily published an option article questioning whether it was morally good for China’s big tech to make profits by selling vegetables. The model has been accused of squeezing out tiny retailers, which could result in hurting the livelihood of millions of people working in China’s traditional wholesale and retail networks. Soon after the article published, China’s market regulator summoned tech giants including Alibaba, Tencent, JD, Meituan for their monopoly business practices such as bring down the price to squeeze out tiny retailers.    

In March, SAMR fined the group buying platforms of Didi Chuxing, Meituan, and Pinduoduo as well as Nice Tuan for price dumping and fraud. In May, Nice Tuan was fined 1.5 million yuan by SAMR again for failing to rectify such business practices.

Amid an increasing scrutiny of community group buying business and tougher regulation, it is hard for startup to stay financial healthy. The move of Nice Tuan to downsize operation comes just one month after its rival Tongcheng Life filed for bankruptcy.