Nice Tuan Fueled with USD 80+ Million by Alibaba, Investors
Nice Tuan has completed a new round of funding -- yet another event for the ‘community group buying’ segment of the Chinese retail market. The field is maturing these days, with deep-pocket investors and stronger players.
Nice Tuan (十荟团), one of the top players (or maybe survivors) in community group buying, has announced a new round of funding of USD 88.3 million. Investors include Joy Capital (愉悦资本), Yingce Capital (渶策资本), Qiming Venture Partners (启明创投), Alibaba (阿里巴巴), Zhen Fund (真格基金) and China Growth Capital (华创资本). People in charge of the announcement said the proceeds will be used to strengthen its supply chain, as well as the base technology, and to accelerate its business in low-tier cities.
Founded in April 2018, the company focuses on distributing fresh groceries and daily necessities in the tier-two and tier-three cities, where the group buying model has been growing.
The group buying retail concept was created by Jack Ma in 2016. It has brought a revolution to retail, both online and offline. With over 6.8 million mom-and-pop stores in China, almost 100 community group buying companies emerged to directly service consumers in the two years after 2016. They operate on an e-commerce model, helping people living in close communities, leveraging the WeChat mini program platform to make a bridge between vendors and customers.
However, due to a combination of reasons such as intense cash flow, venture capital’s more prudent attitude and management issues, most of these companies died last year in the throes of the recession.
According to a news release from ebrun.com on March 2019, Nice Tuan ranked fourth in monthly GMV after Xingsheng Selected (兴盛优选), Shixianghui (食享会) and Niwonin (你我您). The top four community group buying companies in China generated revenue of CNY 370 million, CNY 210 million, CNY 200 million, CNY 150 million respectively. The company that ranked fifth was named Songshu Pinpin (松鼠拼拼), which was stuck on the brink of bankruptcy.
Facing a stiffer challenge, Nice Tuan announced a merger with Niwonin (the third largest community group buying company) in August 2019, marking the first case of the merger in this sector. After this merger, the monthly GMV of Nice Tuan surged to CNY 500 million. It has since claimed territory in more than 50 cities in China and become more competitive than five months before.
What Nice Tuan does to differentiate itself from competitors may lie in two key details. First is that it creatively combines an efficient three-level distribution channel that significantly lowers the delivery cost, which is crucial in order fulfilment and affects profitability. Second is that it values the influence of community KOLs more than others. These play an important role in building trust in community networks and maintaining a higher retention rate among community customers.