(Yicai) June 24 -- Meituan Optimal, the community group-buying arm of the Chinese on-demand services platform, has ceased operations in multiple provinces across China. The move is designed to eliminate the middleman in a shift to a business-to-consumer e-commerce model, according to industry expert Zhuang Shuai.

A community group-buying leader in Changzhou told Yicai that when she opened Meituan Optimal’s mini-program yesterday, a notice informed her: “Due to business transformation and upgrading, services in your community will be halted on June 23.” Sources at Beijing-based Meituan confirmed the information.

These intermediaries organize group purchases and handle the receipt and distribution of goods. Though not employed by Meituan, they earn commissions based on agreed-upon percentages tied to sales and transactions.

Due to persistent losses, Meituan Optimal has been making changes in its business model over the past two years, with investment focused on building supply chains and urban distribution warehousing, Zhuang said. The chances of the community group-buying model continuing is now low, he added.

The suspension was not a surprise, according to the group leader in Changzhou, who pointed out that a number of internet platforms have already shut down their community group-buying services. The person, who has done the job for more than five years, said orders have declined over the past year, and commission-based income has dropped.

Leading ride-hailing services provider Didi Chuxing launched its community group-buying business in June 2020, with e-commerce titans such as PDD Holdings, Meituan, and JD.Com following suit. But since the middle of 2021, several platforms began to scale back, primarily due to the lack of profitability after heavy investment. Now with the suspension of Meituan Optimal, the tech sector’s embrace of this business model appears to be ending.

Meituan's community group-buying business had a net loss of over CNY8 billion (USD1.1 billion) in the first three months of 2021. That swelled to CNY9.2 billion in the second quarter and CNY10.9 billion in the third quarter.

Zhuang said the community group-buying business model faces an uphill path to profit, hindered by a shrinking core customer base of mainly older shoppers, competition from live-streaming e-commerce, and the complexity and cost of managing the group-leader layer.

E-commerce platforms have pivoted away. JD.Com, Meituan, and Alibaba Group Holding's Taobao are now doubling down on their instant retail models, which Zhuang said have proven sustainable, highly profitable, and synergistic with their food delivery and B2C e-commerce operations.

Editors: Tang Shihua, Martin Kadiev