The market lost by Dianping was picked up by Xianyu?

Xianyu is quietly taking over the former territory of Dianping and becoming a money-saving tool in the minds of young consumers. From coffee ordering to parking discounts, Xianyu has attracted a large number of users with its unique discount services. However, the gray industry chain and regulatory problems behind it have also surfaced. How Xianyu balances commercialization and user experience, and whether it can continue to sit firmly at the top of the second-hand market, deserves continued attention.

When eating out or shopping, Pengpeng (pseudonym) opens Xianyu more frequently than Dianping and Meituan.

For example, if she wants to order a cup of coffee at a chain coffee shop, she will first search on Xianyu to see if there is a seller of that brand who can place orders on her behalf. She only needs to tell him/her which store he/she is in and what kind of coffee she wants, and then place the order after the seller changes the price. In this way, she can buy the coffee at a price of about 80% off. "(The whole process) is not much slower than placing an order directly."

Photo provided by the interviewee

If she also wants to wash her hair, get a manicure, or take her children to an indoor children's playground, she can search for coupons on Xianyu at any chain store of some size, and the prices are much lower than the market price or even the group purchase price.

After eating and drinking and finishing shopping, she will open Xianyu to search whether the mall has parking discounts: "Generally, the hourly parking fee in shopping malls in downtown Shanghai is at least 10 to 15 yuan, which is too expensive, but there are very cheap parking payment services on Xianyu."

Pengpeng also said that even when she needs to send a courier, she will choose to ask sellers on Xianyu to place the order on her behalf: "Now the starting price for courier delivery from online stores is more than 10 yuan, but placing the order on someone else's behalf can only cost 5 or 8 yuan."

When paying for virtual products, such as VIP of film and television apps, membership of WeChat Reading, etc., Peng Peng would habitually look for sellers on Xianyu to recharge directly.

She said that recharging membership in this way is cheap on the one hand, but on the other hand, she found that she would only go to these video websites when the TV series and movies she wanted to watch were online, and paying an annual fee was obviously too luxurious.

"(After having Xianyu) I feel like I will never buy full-priced products or services again." Pengpeng sighed, "Now I have to check Xianyu before buying anything."

Xianyu has suddenly become an online version of a large discount store, and increasingly cost-conscious young consumers enjoy the fun of shopping and saving money in it.

So the question is, why are the things sold by these sellers on Xianyu so cheap?

1. Is it an internal purchase or an insider?

Zhao Ning (pseudonym) was also cheated when parking in a shopping mall. After asking someone to pay the parking fee on his behalf, he still couldn't get his car out.

After negotiating with the property management, he found out that the seller he placed an order on Xianyu was a security guard at the mall. He used his authority to make money on Xianyu and was discovered by the company. Coincidentally, Zhao Ning was the last "customer" to spend money at the security guard's office.

Such "insider" behavior of flying orders is actually very common on Xianyu. For this reason, many catering stores will monitor their employees through various monitoring methods. "New Consumption 101" once interviewed an IaaS (Infrastructure as a Service) company, whose person in charge said that some catering stores have installed corresponding devices on the plates and tables to detect whether employees are flying orders.

In addition, there are many cases of selling employee rights and benefits on Xianyu.

For example, clothing brands often conduct internal purchases by employees when the seasons change, clearing out out-of-season merchandise at very low prices. Nowadays, such internal purchases have become semi-public thanks to Xianyu.

Image source: Xianyu

However, many brands have tacitly accepted such behavior. Many brands have even opened official, dedicated in-app purchase channels through mini-programs or WeChat stores. On the one hand, this can prevent criminals from taking advantage of the opportunity to sell counterfeit goods and damage the brand image; on the other hand, it can also take the opportunity to launch some new products, increase exposure, increase sales, and drive consumption.

In addition to the "insiders", some people are engaged in the business of reselling points.

Since the concept of "private domain" emerged, almost all brands have established their own membership systems to stimulate consumers to spend more, accumulate points, and then deduct cash or exchange them for better, exclusive products.

The sellers who initially resold their points on Xianyu might really have no use for them and wanted to give up their rights, but now some large-scale sellers who place orders on behalf of others on Xianyu are basically middlemen who collect points accounts through various means and then place orders for consumers.

However, merchants, brands and platforms basically acquiesce to this kind of points circulation behavior.

For example, in Pengpeng’s coffee ordering business, the order price shown on the order screenshot sent to her by the seller is indeed the price she paid on Xianyu; the redemption process of the virtual membership card she purchased is also relatively clear, and it is obvious that it is an official channel...

But such business is still a gray industry in nature. After all, although points can be deducted from cash, they do not have monetary attributes, and the points system of many brands is not perfect. If the redeemed products and services are circulated too much in the market, it will in turn disrupt the pricing system of brands and stores.

A certain Shanghai chain shampoo brand has received many negative reviews on Dianping.com, many of which were caused by conflicts due to staff in non-directly-operated stores refusing to recognize coupons and vouchers purchased by consumers on Xianyu.

Although these services, such as placing orders on behalf of others, issuing discount coupons, and purchasing virtual memberships, are cheap, they are also prone to disputes because they are not guaranteed. Xianyu is just a platform, and although it can intervene, the extent of its intervention is still limited, and disputes often occur.

2. Being deceived is inevitable

On August 15, the gaming live streaming platform Douyu issued an announcement stating that many consumers had recently fallen victim to phishing scams when purchasing video memberships on Xianyu - they scanned the QR code and followed the steps to activate Douyu Live's password-free payment, and within a minute, hundreds to thousands of yuan were transferred away in multiple transactions.

Douyu said that the platform immediately blocked the relevant payment accounts complained by users and launched an internal special investigation.

Image source: Douyu

In addition to using platform loopholes to commit fraud, many Xianyu sellers also "sell dog meat under the guise of sheep meat". For example, when Pengpeng bought a video membership, he clearly bought a monthly membership, but in the end, he only recharged a 3-day trial membership.

Although she got her money back after complaining to Xianyu’s customer service, from now on, she will pay more attention to the seller’s years of operation, credit rating and dispute rate to determine whether the seller is a scammer.

Image source: Xianyu

However, whether it is placing an order on behalf of others, purchasing coupons or virtual items, it is difficult to provide a verification system online to "verify the identity" of consumers like purchasing physical items.

And Xianyu may not have the time to take care of these for the time being.

In the past year, more than 100 million people have listed their idle treasures on Xianyu, and more than 4 million idle items are posted on Xianyu every day. Last year alone, 30 million new users born after 1995 flocked to Xianyu, and the products sold and purchased by these new users are also diverse.

This means that the difficulty of supervision has increased significantly.

Since last year, Xianyu has begun to raise the entry threshold for sellers and has officially entered the commercialization process: In June 2023, Xianyu announced the implementation of a charging policy for specific merchants. If a user completes more than 10 orders in a month and the cumulative transaction amount exceeds 10,000 yuan, the excess will be charged a service fee of 1% of the actual transaction amount of each order.

However, in August of the following year, Xianyu announced that it would charge all sellers a basic software service fee of 0.6% (with a maximum charge of 60 yuan per transaction). The new regulations took effect on August 9 and were officially implemented on September 1.

Whether professional or non-professional sellers, they all regard this regulation as "Xianyu is driving people away." After all, genuine second-hand items themselves do not have much profit, and some even sell products at a discount of 10% or 20%. Even for professional sellers, most of them have meager profits.

It is worth mentioning that Xianyu did not welcome professional sellers such as manufacturers, stores, and brands at the beginning. If they were discovered, their accounts would be directly blocked. However, with the changes in the strategic positions of Xianyu and 1688 in the Alibaba Group, Xianyu's pure C2C identity has become blurred.

A large number of small B players have poured in and become an important part of the basic base of Xianyu sellers, providing consumers with a more stable source of goods compared to ordinary sellers.

Now, small B sellers are also starting to consider new options - using content on social media platforms such as Xiaohongshu and Douyin to better attract consumers and generate more traffic. In addition, these platforms are also using commission reductions or commission exemptions to lure small and medium-sized businesses to join and reduce store opening costs.

Although Xiaohongshu, Douyin, etc. are also facing regulatory pressure, complaints about Xiaohongshu and Douyin selling counterfeit goods are common on the Black Cat complaint platform.

Xianyu’s response is to continue to focus on content and operations, such as adding new products such as Xianyu games, Xianyu queuing, Xianyu live broadcasts, as well as launching and widely promoting the Xianyu WeChat local community... Whether these measures are effective remains to be seen.

3. The second-hand market, the war breaks out again?

In recent years, Xianyu has also been optimizing its sales mechanism and identification standards for second-hand books, clothes, luxury goods, electronic devices and other products with higher transaction frequencies or higher prices.

However, for demanding consumers, these products usually have more segmented and professional channels, such as Duozhuayu and Zhuanzhuan online, and second-hand stores offline, etc. Xianyu does not seem to have built a very high service "moat", and is more focused on using traffic to attract consumers and sellers.

In a sense, Xianyu is at a critical juncture of development and is still exploring different business models. In this regard, Xianyu General Manager Ding Jian said in July this year that Alibaba does not expect Xianyu to contribute profits in the short term, and the core goal of Xianyu this year is to exceed 200 million MAU (monthly active users).

At the beginning of this year, Xianyu began to explore the offline store model, and established two community stores in Hangzhou and Shanghai. Users can directly pack the items they want to sell and send them to the store, and Xianyu is responsible for sorting, pricing and sales.

Xianyu circulation store in Shanghai, photo provided by the interviewee

However, there are still many pitfalls in offline second-hand goods stores. Duozhaoyu, which mainly operates second-hand book business and also sells second-hand clothing, is a good example.

In July last year, Duozhaoyu apologized to its users for "opening five stores and closing four stores". Maozhu, the founder and CEO of Duozhaoyu, once admitted that due to the wrong site selection, there was not much natural customer flow after the Sanlitun store was located in the Institute of Mechanical and Electrical Engineering. Maozhu believes that site selection is very important for second-hand stores.

"New Consumption 101" speculates that this may be because the supply of offline second-hand stores is unstable and the operating costs are higher. If the customer base is more unstable, the revenue capacity can be imagined.

Therefore, most second-hand stores and vintage stores in China maintain a small and beautiful operating model that only radiates to the surrounding areas, and have failed to form a scale like Japan where there are second-hand stores everywhere.

So, can Xianyu's model of supplying goods to offline stores online work? This also requires time and market verification.

Then again, young consumers don’t want to know about the twists and turns involved in charging service fees and operating platforms.

Pengpeng and Zhao Ning both said that they would open the Xianyu App every day just to sign in and earn Xianyu coins, which can be used to deduct cash from subsequent purchases.

For young people, finding cheaper products and services is the only reason they choose Xianyu...

No matter how the sellers complain, they will still have to move closer to where the traffic gathers - can Xianyu and Alibaba grasp such "huge wealth"?

Do emerging interest e-commerce platforms that excel in content, such as Xiaohongshu and Douyin, have a chance to share the huge second-hand transaction market?