Xianyu increases its service fee, whose business is being affected?

Xianyu recently announced that it will charge sellers a service fee, a decision that has sparked widespread discussion and controversy. From questions about service quality to the chaos in the community ecosystem and the impact on sellers of specific categories, this change has affected the interests of many parties and also had an impact on the competitive landscape of the second-hand e-commerce industry.

Recently, Xianyu announced that it will charge a basic software service fee of 0.6% for all sellers (up to 60 yuan per transaction). At the same time, for sellers who have more than 10 orders and a cumulative transaction amount of more than 10,000 yuan in the same natural month, a software service fee of 1% of the actual transaction amount of each order will be charged. The change will take effect on August 9 and will be officially implemented on September 1.

The news sparked heated discussions, with many netizens expressing their dissatisfaction on social platforms. Why did Xianyu break its promise of not charging fees? What impact will this have on the community ecology?

1. Who is hurt by the 0.6% service fee?

"He's like a thug collecting protection money," "A big boss crowdfunded a substitute APP, and I invested ten yuan," "The main thing is that the refund does not include the handling fee, which is particularly unreasonable," "Six thousandths is not much. As a seller, I have to sell the items to make my money back, and as a buyer, I want to save money and buy second-hand items. Guess if I can afford that little bit of money?"... These are netizens' comments on the move after the news that Xianyu would collect service fees from all sellers came out.

On Xiaohongshu, you can see many notes such as "Boycott Xianyu's service fee!!!", "Is there any software to replace Xianyu?", and "Are you willing to pay 0.6%?". It is not difficult to find that netizens are dissatisfied with Xianyu's service fee by observing the comments section.

Image source: Xiaohongshu screenshot

Service quality is the main reason why Xianyu charges service fees. Some netizens said that Xianyu's customer service is inactive and like a machine. The small court is a place where users gather to judge after disputes. Sometimes, even if the vote determines that the seller is not at fault, the platform will intervene and ask the seller to return the goods and refund.

Another netizen complained about Xianyu's service quality based on his own experience. The netizen commented, "Whether I am a buyer or a seller, I have never been successful in defending my rights. Every time, the other party wins and then the official Xianyu compensates me for my losses. What I want is that the unethical buyers and sellers receive the punishment they deserve. The customer service is completely encouraging rogue behavior."

The chaotic community ecology is also the reason why users are dissatisfied with Xianyu's service fees. Xianyu has always had "worms", and recently there was news that it used words such as "Giant" and "Apple card removal pin" to conduct improper transactions. At the same time, the presence of Taobao and Pinduoduo merchants and advertisements on the platform have damaged the user experience to a certain extent.

In addition, some netizens think that Xianyu occupies users' funds and charges additional service fees, which is incomprehensible. "I don't want to pay a penny anyway, and they still charge me after my money is transferred to their platform to replenish the funds? And some things are left unpaid for several months (such as performance tickets, deposits, etc.)."

Compared with the commission rates of other platforms, Xianyu’s service fee is not actually that high, but it is a heavy blow to professional sellers who have higher transaction frequency and more products in the platform ecosystem. Professional sellers act as intermediaries. They take goods from one user and sell them to another user, earning a little hard work fee from the price difference between the two.

The existence of professional sellers reduces the communication cost of users, improves transaction efficiency, and activates the soil for second-hand transactions on Xianyu, but at the same time it also squeezes the traffic of individual sellers. Xianyu's action of charging service fees has increased the operating costs of these professional sellers on Xianyu in disguise. From the motivation point of view, it is to make professional sellers return to the real e-commerce platform and make concessions for real individual idle transactions, so that the value of Xianyu as an independent platform in Taotian Group will be more prominent.

Although Xianyu’s service fee is mainly aimed at professional sellers who “cut leeks”, most individual sellers who are idle will not be greatly affected. However, for some special categories, especially users in the circles of handmade, two-dimensional, Hanfu, etc., this policy will still bring a considerable financial burden.

Some Guzi players (Guzi is the transliteration of the English word "goods", and currently refers to badges, standees, dolls and other commodities with IP attributes) said, "What kind of commercial users are those who earn 10,000 or 20,000 yuan a month? Any company with such a small turnover would have gone bankrupt long ago. They are just cutting the leeks of ordinary people. For group leaders like us who follow the official Guzi, we don't make a penny from the actual exchange, but just work together to compete internationally, and it's easy to exceed the monthly quota."

Handmade sellers are also "unable to bear the burden". Handmade products are time-consuming and labor-intensive, and many sellers have relatively low average order values, with an order priced at only 10 or 20 yuan. Not only are their profits already slim, but they also have to take a cut from the platform. This will squeeze the living space of handmade sellers and force them to switch platforms.

Some netizens said, "I follow Kpop, eat grain, wear Hanfu and lolita, play with cotton dolls, trade games, and look for a handmade mother. I feel like this service fee is aimed at me." This shows that the service fee has a greater impact on these groups.

2. Why did Xianyu start charging fees?

Xianyu’s original purpose was to serve as a “regret medicine” for consumers, stimulating users to spend on Taobao and Tmall. At the end of 2018, Xianyu founder Chen Weiye said: “It is inconvenient to disclose the specific profit model of Xianyu, but we will definitely not charge transaction commissions.”

As more and more users sell their unused items on Xianyu, Xianyu's operating costs have gradually increased, but it still has not focused on commercialization. As Wen Zhong, the former head of Xianyu, said in an interview with the media in 2020: "The Xianyu model is close to money, but far from making money."

For Alibaba, although Xianyu is difficult to make a profit, it can provide a guarantee for consumers' impulse purchases, increase the value of traffic, and support the operation of the entire Alibaba product line. Therefore, it has great significance.

At that time, Xianyu had the support of Alibaba, enjoyed the traffic provided by the Taobao ecosystem, and could also use Taobao to endorse the source of second-hand goods, strengthen user awareness, and quickly became a leading player in the industry. Xianyu naturally had the confidence not to charge commissions in the absence of revenue pressure.

In contrast, other players in the second-hand e-commerce track do not have the support of giants behind them. Under the pressure of operations, they have to find their own way to survive. Zhuan Zhuan is one of them.

At the beginning, Zhuan Zhuan and Xianyu were both based on the C2C model. Under the competition from Xianyu, which did not charge commissions, Zhuan Zhuan began to turn to the C2B2C model and tried to occupy the vertical second-hand market. After many attempts, Zhuan Zhuan finally focused on the digital 3C field, perfecting the closed loop of platform inspection, recycling, and self-operation, and exploring the path of monetization step by step.

Xianyu has been sitting back and relaxing for many years with Alibaba behind it, but changes in the external environment have also changed Xianyu's situation. In March 2023, Alibaba's "1+6+N" organizational structure adjustment was implemented, and the six major business groups operated independently and were responsible for their own profits and losses. Against this background, Xianyu, which belongs to Taotian Group, needs to seriously consider its own business model and profitability, and can no longer continue to "lie flat".

Under heavy pressure, Xianyu had to break its promise of "never charging transaction commissions". As early as June last year, Xianyu began to try a charging model and announced a charging policy for specific merchants: once a user completes more than 10 orders in a month and the cumulative transaction amount exceeds 10,000 yuan, the excess amount will be charged a service fee of 1% of the actual transaction amount of each order. Now, Xianyu charges service fees to all users, which is enough to show the pressure on its commercialization.

Not only that, Xianyu also has a new mission. LatePost reported that according to Alibaba’s latest strategic adjustment, “Xianyu is required to double its user base in three years,” which is a big challenge.

At present, Xianyu has established a huge user base. At the product upgrade conference held by Xianyu in May last year, the official announced some platform data for the first time. At that time, the user scale of Xianyu had exceeded 500 million, of which users born after 1995 accounted for 43% and users born after 2000 accounted for 22%. The user structure tends to be younger.

This also means that if Xianyu wants to achieve its new goals, in addition to consolidating its young user base, it must also quickly expand its influence to the middle-aged and elderly consumer groups. With the dual tasks of commercialization and user expansion, Xianyu may have to become "busy fish".

3. Changes in the second-hand e-commerce industry?

While Xianyu's charging of fees to all users has caused dissatisfaction, many users have begun to find other ways. One netizen said, "I have already prepared the certification of Bilibili Workshop. Once the fee is charged, I will go to Bilibili. Xianyu is used to attract traffic. Anyway, I make doll clothes. It is impossible for me to play with plain clothes without Bilibili."

Some netizens even made a bold guess: "There will definitely be a lot of people who will cancel their accounts and leave after September. I still have some balance payments to pay so I can't run away. I will cancel my account and uninstall it once I have collected all the money."

However, some Xianyu users will continue to choose this platform. "I only charge 6 yuan for something worth 1,000 yuan, which I can still afford. The items I buy are basically no more than 1,000 yuan each, so there is no need to worry about a few yuan or cents."

Under the hot topic, more and more apps claiming to be Xianyu alternatives have appeared in front of the public. For example, Qiandao, a second-hand trading platform that focuses on trendy small cards, has gained popularity with the advantage of free handling fees for orders below 10,000 yuan. Wuyuan, an app that has not yet been officially launched, has gained 20,000 followers by being active in the relevant notes and comments section of Xiaohongshu.

Image source: Xiaohongshu screenshot

In fact, in addition to facing these new players, Xianyu also has to accept the challenge of Douyin and Kuaishou. At the end of 2020, Kuaishou E-commerce launched its second-hand business, which attracted more than 1,000 professional anchors in just three months, with cumulative orders exceeding 630,000. In March 2021, Kuaishou E-commerce officially announced its entry into the second-hand e-commerce track and proposed the goal of reconstructing the second-hand trading market with "trust + fun".

Douyin launched the "Second-hand Luxury Goods Festival" in 2020, targeting second-hand luxury goods transactions. Last year, Douyin Mall launched the "Second-hand Goods" channel and launched the "Recycling and Consignment" service, providing consumers with a channel for second-hand goods transactions and starting to consider the second-hand e-commerce market.

In addition, Xianyu also has to face its two old rivals, Aihuishou and Zhuanzhuan, as well as Huishoubao and Shanhuishou, which are backed by vivo and Xiaomi. Panghu, Feiyu and Hongbulin, which focus on the second-hand luxury goods market, are also a considerable pressure on Xianyu.

It is foreseeable that Xianyu's comprehensive increase in service fees will inevitably lead to the loss of some users, but with the advantages of Alibaba's endorsement and platform scale, Xianyu still has strong market competitiveness. However, if Xianyu wants to achieve its commercialization goals, it still needs to work harder.