Community Group Buying’s Decline: How Meituan Lost Its Grocery Gamble

What Is Community Group Buying and Why Did It Boom in China?

Community group buying (CGB) refers to a model where residents in a neighborhood collectively purchase groceries and daily necessities at bulk discounts, with a local coordinator (a “group leader”) handling orders and next-day pickup for the group. This model took off spectacularly in China around 2018–2020, driven by the promise of ultra-low prices and convenience. Platforms eager to tap lower-tier cities and suburban markets offered steep subsidies – for example, one platform sold a 500g pack of eggs for only ¥1.99 (about $0.30), below wholesale cost, exemplifying the fierce price wars . The strategy worked to rapidly attract users (including many elderly and rural consumers new to e-commerce) with the lure of “low price + convenience.” By 2020, China’s community group-buying platforms were fulfilling over 100 million orders per day, and the market size surpassed ¥100 billion (∼$14B) . The COVID-19 pandemic further accelerated this boom – during city lockdowns, group buying became a lifeline for household supplies, cementing its popularity.

Behind the frenzy, however, cracks were already showing. The explosive growth led to a “hundred regiment battle” of competing startups and tech giants, all burning cash to grab market share. Homogenized offerings and subsidy-fueled expansion meant platforms competed not on service or quality, but on who could offer deeper discounts . This set the stage for an eventual reckoning once regulators and economics caught up with the industry.

Meituan’s Entry with Meituan Youxuan: Rapid Rise and Strategic Intent

Meituan – known for food delivery and local services – jumped into community group buying in mid-2020 with a new unit called Meituan Youxuan (“preferred selection”). The strategic intent was clear: Meituan saw CGB as a massive new growth avenue beyond food delivery, especially to penetrate China’s smaller cities and rural markets. Community group buying was initially touted as a “perfect solution” for bringing fresh grocery e-commerce to low-tier cities , aligning with Meituan’s mission to meet everyday consumer needs. By leveraging its huge existing network of delivery riders and merchants, Meituan integrated Youxuan into its ecosystem. For example, many Meituan food delivery couriers and mom-and-pop shop owners became group leaders for Youxuan, and the Meituan app funneled traffic to group-buy deals. This synergy gave Meituan an edge – its customer acquisition cost for group buying was reported to be about 30% lower than competitors, thanks to the efficiencies of piggybacking on Meituan’s high-frequency service platform .

Meituan Youxuan expanded rapidly nationwide, and at its peak it was handling a significant volume of orders. In fact, by 2021–2022 Meituan Youxuan and Pinduoduo’s Duoduo Maicai emerged as the two dominant players (a duopoly) in China’s community group buying arena . Meituan’s group-buy GMV (gross merchandise volume) reportedly reached the “hundred-billion-yuan level” at its height. However, after the initial land-grab phase, Meituan began pulling back from aggressive expansion. According to company disclosures, Meituan’s new initiatives segment (which includes Youxuan) accumulated ¥77.7 billion (~$11B) in losses from 2020 to 2022, and Meituan Youxuan’s annual transaction scale shrank from the peak ¥100+ billion range down to about ¥70–80 billion . In other words, growth had stalled and the cash burn was becoming difficult to justify.

Why Meituan Is Shutting Down Most of Its Group-Buying Business

After pouring resources into community group buying for several years, Meituan is now dramatically downsizing and refocusing Meituan Youxuan – effectively exiting most regions. Several key factors drove Meituan to this decision:

• Sustained Losses and Unviable Economics: The community group buying model proved extremely hard to profit from. Meituan’s financials show massive cumulative losses – over ¥80 billion (>$11B) lost on its group-buying operations over a few years . Despite scale, the unit economics remained poor: “the profit per order was under ¥1”, meaning break-even was nearly impossible . High operational costs (from cold chain logistics, labor, warehousing) and thin margins on cheap produce made the business a money pit. After investing huge sums, Meituan saw no clear path to profitability for Youxuan.

• Regulatory Pressure on Subsidies and Pricing: China’s regulators intervened once the subsidy wars spiraled out of control. In March 2021, the State Administration for Market Regulation issued new rules (“Nine Nos”) explicitly banning below-cost selling and other unfair practices in community group buying . This was a turning point that “dropped the regulatory sword of Damocles” on the industry . With predatory pricing curtailed by law, platforms could no longer offer absurdly cheap deals to hook users. Meituan and its rivals abruptly lost their key user acquisition tool (ultra-low prices), and the price advantage vanished, causing many bargain-seeking customers to lose interest . In short, the regulatory crackdown ended the era of “burn cash for growth,” forcing a pivot from growth-at-all-costs to a sustainability focus .

• Shifting Consumer Behavior: Chinese consumers’ habits around online grocery have evolved. During the boom, many consumers flocked to whatever platform had the cheapest offers. But once heavy discounts subsided, loyalty proved thin – users would not stick around without subsidies. Moreover, post-pandemic, consumers started valuing quality and immediacy more. A recent survey found that 60% of users now prioritize product quality when choosing grocery services, while those prioritizing lowest price fell to 30% . The core promise of community group buying – next-day pickup in exchange for slightly lower prices – became less appealing as on-demand grocery delivery (in under 1 hour) became more widespread. The convenience gap narrowed, and users grew less willing to plan purchases a day in advance just to save a small amount.

• Internal Cannibalization by Instant Delivery: Meituan faced a strategic clash between its own businesses. In parallel with Youxuan, Meituan has a thriving instant delivery service (via Meituan app’s “Meituan Flash” and other on-demand retail partners) that delivers goods from nearby stores within 30–60 minutes. Both services ultimately target the same grocery and FMCG needs, but one promised next-day pickup (group buy) and the other offered same-hour home delivery. Notably, around 80% of the product categories popular in community group buy (fruits, vegetables, snacks, daily essentials, etc.) overlap with those in Meituan’s on-demand retail sales . And from a consumer perspective, waiting until tomorrow morning versus getting it now is not a huge difference for most routine needs . This meant Meituan’s two models were effectively competing with each other for the same customers and orders. As one analysis put it, Meituan Youxuan’s shutdown is fundamentally to avoid “left hand vs right hand” internal competition between next-day group buying and instant delivery . Continuing to run parallel grocery businesses with such overlap would only cause resource “internal friction” and duplication. Shutting down the weaker one (Youxuan) to focus on the higher-growth, more efficient instant retail business became the logical choice .

• Structural Flaws in the CGB Model: Beyond Meituan’s specific situation, the community group buying model itself showed structural weaknesses. It turned out to be a heavy-asset, complex operation rather than the light model originally envisioned. To fulfill next-day orders, Meituan and others had to set up multi-layered warehouses (central depots feeding city “grid warehouses” down to local pickup points), incurring high fixed costs in rent, cold storage, and manpower . Night-time sorting of fresh produce and last-mile distribution to hundreds of pickup spots added to the cost. Spoilage and waste were significant – fresh fruits and veggies had high loss rates, which ate into margins . Moreover, community buy platforms found it hard to move beyond just produce and a limited SKU selection, capping each order’s value . And unless an area had very high order density, delivery efficiency stayed low and costs high . All these factors meant that even after the initial user growth, the model struggled to scale profitably. Meituan’s retreat is an acknowledgment that this “heavy” model is unsustainable without endless cash burn.

In essence, Meituan Youxuan became a story of good intentions colliding with harsh economics. The company announced in June 2025 that it would shut down or suspend Meituan Youxuan operations across most of China, exiting all but a few core regions, and reassigning staff to other units . Meituan framed it as a strategic restructuring: consolidating resources into more promising ventures (like instant retail and its core delivery business) and pulling out of persistently unprofitable markets . This marked a definitive end to Meituan’s community group buying experiment at national scale.

How Competing Platforms Approached (and Exited) Community Group Buying

Meituan was far from the only tech giant that jumped on the community group buying bandwagon. In the 2020–2021 boom, virtually every major Chinese e-commerce or on-demand platform launched a CGB service – and most have since scaled back or shut those efforts. Here’s how Meituan’s key competitors fared:

• Pinduoduo (Duoduo Maicai): Pinduoduo, which built its success on group purchase deals in e-commerce, naturally expanded into community grocery buying with Duoduo Maicai. Pinduoduo’s approach leveraged its deep roots in agriculture and rural supply chains. It established a farm-to-table logistics network – for example, working directly with cooperatives so that fresh mushrooms picked in Yunnan could reach customers the next day . This direct sourcing gave Pinduoduo an edge in controlling fresh produce spoilage to under 5%, versus ~8% industry average . Pinduoduo also ran a leaner operation: it adopted a relatively asset-light model, outsourcing much of its warehousing and delivery to third parties, which kept operating costs ~15% lower than Meituan’s more labor- and warehouse-intensive model . By 2023, Pinduoduo’s Duoduo Maicai and Meituan Youxuan were the last two giants standing in an otherwise shaken-out sector . Pinduoduo has continued to persevere in community group buying, but even it has become more cautious. Notably, in 2022 Pinduoduo redeployed significant staff and resources from Duoduo Maicai to build its new international e-commerce app Temu – indicating that Pinduoduo sees higher growth opportunities elsewhere . (According to a HSBC report, Temu already contributed 23% of Pinduoduo’s total revenue in 2023 .) Still, Duoduo Maicai remains operational nationwide, serving the users it acquired, though Pinduoduo is no longer expanding the service aggressively at all costs.

• Didi (Chengxin Youxuan): Ride-hailing company Didi Chuxing made an ambitious foray into community group buying in 2020 with “Chengxin Youxuan” (also known as Orange Heart). Didi had hoped to capitalize on its vast user base and driver network to diversify into local commerce. Chengxin Youxuan expanded rapidly in 2020, operating in dozens of provinces at its height. However, it became one of the earliest casualties of the CGB bubble. In early 2021, regulators’ admonishments about the price wars (and Didi’s own regulatory troubles in its core ride business) put heavy pressure on Orange Heart. By September 2021, Didi began shutting down Chengxin Youxuan’s operations across cities, and by the end of 2021 it had effectively exited the community group buy sector entirely . Didi’s short-lived experiment ended with heavy losses and layoffs, illustrating how difficult it was for even a cash-rich tech firm to crack this market. Orange Heart’s quick demise also foreshadowed the broader shake-out of smaller and non-core players once the golden days passed.

• Alibaba (Taocaicai / Taobao Maicai): Alibaba approached community group buying through several iterations. Initially, its grocery-focused arm Freshippo (Hema) dabbled in community group purchases (via “Hema Jishi”), and Taobao launched a grocery group-buy service (“Taobao Maicai”). In 2021, Alibaba merged these initiatives into a dedicated business called Taocaicai (“淘菜菜”), under its Taobao Deals division, signaling a serious push to challenge Meituan and Pinduoduo. Taocaicai tried to emulate the Meituan/Pinduoduo playbook, but Alibaba faced internal coordination problems. The company’s sprawling structure meant overlapping teams and channels all trying to do online groceries. According to one former Taocaicai employee, a single produce supplier had to interface with three different Alibaba divisions for similar grocery programs – an inefficient and costly setup . This lack of internal synergy kept Taocaicai’s costs high and its execution sluggish . By 2022, Taocaicai was losing momentum. Alibaba began retrenching the business, and in early 2023 it shut down Taocaicai’s next-day pickup service in many provinces, marking a retreat from community group buying. Alibaba has since shifted focus to other grocery retail models (for instance, shipping produce from origin wholesale markets to consumers, and leveraging its Ele.me platform for on-demand grocery delivery) . The Taocaicai brand still exists but on a much smaller scale after these pullbacks.

It’s worth noting that other players also fell by the wayside. JD.com launched “Jingxi Pinpin” for community group buys but folded it by 2021–2022. Startup contenders like Shihuituan, Tongcheng Life (Tongcheng Maicai), and others either went bankrupt or were acquired when the bubble burst . Xingsheng Youxuan, a regional pioneer from Hunan province, managed to survive by focusing on its home turf, but it too faced immense pressure during the price wars. In summary, virtually all the “community group buy” initiatives that exploded in 2020 have either exited or scaled way back by 2023. Pinduoduo’s grocery service is the lone big player still standing in a significant way – and even Pinduoduo has diversified its bets beyond this sector.

A New Era for China’s Retail Platforms: Instant Retail and the End of Subsidy Wars

Meituan’s retreat from community group buying signals broader shifts in China’s online retail landscape. The rise and fall of CGB has ushered in a new phase marked by two major trends: