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  • Greater China

China community group buying platform Tongcheng Life goes bust

  • Larissa Ku
  • 12 July 2021
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Tongcheng Life, a China-based community group buying business incubated by online travel agency Tongcheng-Elong, has announced its bankruptcy, blaming "poor management."

A day earlier, founder and CEO Pengyu He said in a letter to staff that the company was facing its most difficult moment and would make strategic adjustments to pivot from consumer-facing to small business-facing services.

Tongcheng Life raised a $200 million Series C round led by US-listed social media platform Joyy, as recently as June 2020. This followed a $100 million round led by Legend Capital in September 2019. Other investors include Engage Capital, BAI, Tongcheng VC, Welight Capital, GSR Ventures, and Oriza Holdings.

Established in August 2018, Tongcheng Life specializes in community group buying for perishables such as fruit and vegetables, sourcing goods from farmers and distributing them directly to customers. It focuses on lower-tier cities.

The company relied on a WeChat mini-program for marketing and receiving orders, while community leaders in individual neighborhoods were employed to coordinate purchases. Last-mile logistics followed the self-pickup model.

Community group buying started to attract a lot of PE and VC funding from 2019, with Nice Tuan, Tongcheng Life and Shengxian among the major beneficiaries. However, last year, the industry dynamics were changed by the arrival of internet giants such as Meituan and Pinduoduo. This led to an uptick in subsidy-based competition.

Local media reported earlier this month that suppliers from all over the country congregated on Tongcheng Life's Suzhou headquarters, demanding payment.

The company responded with two plans. The first involved paying 40% of the amount due to a creditor within 10 working days, with the rest distributed under court order post-bankruptcy and liquidation. Alternatively, creditors could opt to receive 60% within 10 working days but give up their rights to the remaining 40%.

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