The solution to second-hand e-commerce

In recent years, second-hand e-commerce has developed rapidly, and some relatively large companies such as Xianyu and Zhuanzhuan have emerged. However, the entire industry is not yet standardized. The problems of opaque second-hand information and unclear standards still need to be explored by the entire industry.

Writer Oscar Wilde once said: There are many things that we would throw away if we were not afraid that others would pick them up.

But the "Queen of Storage" Marie Kondo uses her "Datsu-sare-ri" theory to tell people: If we are reluctant to throw away many things because we are afraid that others will pick them up, we will definitely lose more things invisibly.

When the concept of "letting go" meets the concept of circular economy, the resulting consumption pattern is second-hand transactions: their trash may be my treasure. If you don't need it, I'll take it over.

In the past, second-hand goods were often associated with "depreciation", but nowadays, with the popularity of low-carbon environmental protection and practical concepts, the slow iteration of digital product performance, and the influence of second-hand e-commerce's proposition of "re-creating value", buying and selling second-hand goods is becoming a popular consumer choice.

In Europe and the United States, buying and selling second-hand goods has gradually become a social consumption habit. In 2021, the scale of second-hand e-commerce transactions in Europe has reached 75 billion euros and is still growing rapidly. In 2022, 81.7% of Americans (over 200 million people) have bought second-hand goods.

In China, the coverage of second-hand transactions is also expanding from real estate, cars, and luxury goods to various 3C products and daily necessities. At present, around the long-tail market, second-hand e-commerce has formed a "3+N" pattern, 3 is Xianyu, Zhuanzhuan, and Aihuishou. Second-hand transactions of digital electronic products represented by mobile phones are the common focus of the three major second-hand e-commerce platforms.

In May this year, Xianyu announced that its users exceeded 500 million; during the Double 11 period, Zhuanzhuan B2C's cumulative payment GMV, orders, number of users and other indicators all achieved double-digit growth; in August, Aihuishou's parent company Wanwu Xinsheng officially announced that it had achieved operating profit under non-GAAP terms for four consecutive quarters, turning losses into profits after more than 10 years of operation, all of which show the booming development momentum of China's second-hand e-commerce.

However, the product attributes and model characteristics determine that second-hand e-commerce will face many challenges in its development.

Just recently, two pieces of news related to second-hand e-commerce have attracted public attention: First, Zhuan Zhuan was exposed by a blogger for its "yin-yang test report", claiming that the quality inspection reports of the same mobile phone purchased and recycled were inconsistent. Zhuan Zhuan then responded by explaining that "the 'non-standard' characteristics lead to objective differences in quality judgment from person to person", and said that "if the user experience is harmed, it should be punished." Second, Apple's officially authorized second-hand partner Aifengpai was exposed for "free recycling" and "maliciously lowering the price" - the estimated price of 4,200 yuan was "cut down" to 0 yuan, and Aifengpai did not respond to this.

Earlier, in August this year, Aihuishou also attracted media attention because users questioned its "malicious price-cutting".

It can be said that pricing disputes and price-cutting doubts have become problems that second-hand trading platforms cannot avoid.

Here, "buy at a low price, sell at a high price, and make a profit from the difference" is not the problem. The crux of the problem lies in how to solve the two major pain points caused by the non-standardization of second-hand goods: opaque information and unclear standards.

How to solve these two difficult problems requires more exploration by the industry.

01

It is not difficult to see that in the public opinion encountered by second-hand e-commerce, the platform's "buying low and selling high to make a profit from the difference" is a very common complaint.

The same second-hand mobile phone was bought for more than 3,000 yuan in a store on the same platform, but was resold for nearly 2,000 yuan in another store, which means a loss of about 1,000 yuan. This is indeed a profit from the price difference.

From the consumer's perspective, making a profit from the price difference is pure extortion: the value of the product has not changed, so why is there such a big price difference between the purchase and recycling stages?

In the context of many Internet platforms putting "eliminate price difference" on their public screens and creating an ultra-short chain model "from manufacturer to consumer" for this purpose, public opinion's tolerance for "making money from price difference" is bound to become lower and lower.

From the perspective of service providers, "price difference" is an inevitable accompaniment of the C2B2C model. Although the goods seem to have no loss between the purchase and sale, the services behind them (including quality inspection, quality assurance, preservation, after-sales service, etc.) all require costs.

At present, given that the C2C model (user to user, the platform only provides an intermediary matchmaking role) has too many uncontrollable factors and is very likely to cause disputes, the second-hand e-commerce model has shifted from C2C ​​with shallow platform involvement to C2B2C with deep platform involvement (the platform recycles old machines from users while selling second-hand products to users), which has become a major trend in the development of the industry.

The reason is that in transaction scenarios, the organized B-end is usually easier to gain trust than the scattered C-end - if something goes wrong, you can hold the company responsible, but it is difficult to find an individual to defend their rights. Take the sale of second-hand mobile phones as an example. In the C2B2C model, there is both platform brand credit endorsement and offline stores as transaction scenarios, which objectively reduces the risk of users and helps to improve user trust.

▲ Screenshots of the three APP pages of Xianyu, Zhuan Zhuan, and Ai Huishou.

At present, the monetization methods of second-hand e-commerce platforms are nothing more than transaction commissions, advertising promotion, value-added service charges and profit from the price difference. The costs to be covered usually include the various human and material expenditures required from the supply of goods, the establishment of an evaluation system, the development of testing technology, traffic acquisition, information matching to the complete fulfillment service.

Wang Chao, founder of Wenyuan Think Tank, believes that unlike used cars, where the high profit from a single transaction can maintain the intermediate costs of second-hand transactions, the profit that can be earned from selling a used mobile phone is only 5%-10%. Taking into account recycling, testing, storage, distribution and depreciation, each link in the middle has a cost, which increases the difficulty for second-hand e-commerce platforms to make money.

Because of this, "buy low and sell high" is almost a universal business model for second-hand e-commerce platforms. Earning the difference has become a practical strategy for platforms to expand their revenue sources to make up for multiple costs such as online operations, external platform traffic, and offline store expenses.

From a market perspective, it is understandable that second-hand e-commerce platforms make a profit from the price difference, provided that they clearly mark the price and do not force sales. Second-hand products are not new products, and the parties involved in the transaction often have very different perceptions of non-standard goods. The only way to solve the trust problem is through platform guarantees. Although some platforms have previously claimed that they "make a profit from the price difference without middlemen", in essence, the platforms themselves act as middlemen.

However, making a profit from the price difference under the C2B2C model naturally faces the contradiction between the platform and users' opposite expectations of price: users hope to buy at a lower price and recycle at a higher price (in reality, when users sell second-hand mobile phones, they generally tend to think that they are selling them cheaply or that the price has been suppressed; when buying second-hand mobile phones, they tend to think that they are buying them expensively or that the price has been raised), while the platform thinks the opposite.

Considering the openness of the market environment, this is equivalent to putting a tight ring on the platform: they cannot lower the recycling price as much as they want. After all, users can vote with their feet and choose the neighbor who offers a higher price or simply not sell it. The same applies when selling. The user's psychological acceptance must be considered, and the balance between platform profit and user acceptance must be struck.

02

Making money from the price difference is not the problem; the problem lies in the chronic problems of information opacity and uncertain standards.

The non-standard characteristics of second-hand 3C products bring complexity and flexibility to valuation, which is the core issue behind the suspicion of price reduction.

Unlike new products that are produced according to a unified process and can be standardized, second-hand products are typical "orphan items". The same product often has different recycling and selling prices due to factors such as length of use, presence or absence of signs of damage, as well as the timing of circulation, new machine releases, changes in supply and demand, etc.

As far as the quality inspection process is concerned, second-hand e-commerce platforms are not without "machine testing", but "human testing" is still an irreplaceable link at present.

The Beijing Youth Daily reported, citing the views of recycling industry professionals, that "mobile phone testing is divided into two aspects: quality and function. In terms of function, the health of the battery and whether non-original parts have been replaced can now be determined by machines. But in terms of appearance quality, it is currently impossible to use fully automated equipment on a large scale due to high costs. As long as it is manual, mistakes are bound to be made. Take scratches for example. Not only do they look different under different light, but some are in different locations and may be different in thickness, length, depth, etc. Therefore, it is inevitable that there will be differences when different people make judgments." In his opinion, it is difficult to achieve absolutely no mistakes in quality inspection with current technology.

When facing questions about price reduction, both Zhuan Zhuan and Ai Huishou mentioned two situations: 1. The difference in test results is due to subjective differences in the quality judgment of different store clerks. 2. If the original defects of the second-hand phone are omitted, the price difference will be borne by the platform.

Some practitioners pointed out that standardized quality inspection is not a "master key". Just as new products have yield issues, there are also errors in the inspection of second-hand products, especially in the judgment of subjective inspection items such as scratches, color, and bumps.

An insider of Zhuan Zhuan once introduced that when it comes to screen scratches, Zhuan Zhuan’s inspection standards divide scratches into five levels from shallow to deep, namely: none, subtle, mild, obvious and severe.

However, if the classification and grading standards are set too detailed, it will lead to difficulty in judgment and confusion when distinguishing different levels. Therefore, professionals believe that the Zhuanzhuan incident was caused by "setting the standards too detailed and confusing themselves" and "digging a hole for themselves."

Adding information transparency and subtracting standard complexity are the keys for second-hand e-commerce platforms to overcome the pain points of non-standardization of second-hand products.

03

The differences in test results and the resulting price-cutting controversy caused by the "subjective factors" of human testing items are not a reason for public opinion to deny the rationality of the second-hand e-commerce industry, nor are they a basis for the industry to retreat on the road of transparency and standardization. On the contrary, they are urging the second-hand e-commerce industry to continue to push forward transparent and standardized services - although differences in test results are inevitable, in any case, it is better to have standards than not, and to have tests than not to have them. However, some services can be improved, and some standards are not "standard" enough.

Therefore, both public opinion and the second-hand e-commerce industry should not throw the baby out with the bathwater and expect to use "no standards" to deal with the problem of "non-standardization", but should improve the standards as much as possible.

In the past, second-hand transactions were a fragmented private market, and the attitude held by the regulatory authorities was "development first, then governance." Over the years, although second-hand e-commerce platforms have driven the improvement of transparency and standardization in this field, the emergence of various disputes is a reminder that transparency and standardization are far from being over.

Under the C2B2C model, it is normal to buy at a low price and sell at a high price, but we cannot create an information black box and use industry barriers to "force out" potential second-hand transaction buyers. This requires second-hand e-commerce platforms to make targeted improvements in terms of transparency and standardization.

Whether it is second-hand housing or second-hand car transactions, the road to industry standardization is a process of continuously improving the visibility of rules and continuously strengthening the clarity of standards. Second-hand 3C products are no exception, and the leading platforms have already made targeted efforts.

In response to the problem of no quality assurance for second-hand goods, the practice of second-hand e-commerce platforms issuing quality inspection reports is clearly an improvement compared to the previous high-gray recycling industry chain from stores to scalpers, communications markets, and Huaqiangbei.

But each platform has its own "standards". According to the Securities Daily, an Aihuihui staff member said: "We don't have a unified standard. We will make a comprehensive price based on the appearance of scratches, bumps, and other basic functions such as configuration, battery, and screen display." Zhuanzhuan said that its first official quality inspection system in the second-hand industry includes self-customized inspection standards. The quality inspection process includes 367 processes and 75 major items such as function, color, and water ingress.

▲ Second-hand e-commerce platforms have improved the standardization of second-hand 3C product testing.

In response to the issue of blurred pricing for second-hand goods, Aihuishou said that it uses big data and artificial intelligence technology to optimize pricing strategies, and provides a pricing benchmark for the industry by analyzing thousands of mobile phone models, millions of transactions, and the purchasing behavior of millions of consumers and small businesses. Zhuan Zhuan also said that it launched the "Zhuan Zhuan Second-hand Goods Price Guidance System" based on AI smart valuation and dynamic price adjustment systems, and currently adopts the highest overall recycling price standard, and both are working hard to improve pricing standardization.

At present, the recycling prices of old phones on Zhuan Zhuan and Ai Huishou are generally higher than those on the official recycling channels of Apple and Xiaomi.

Regarding the problem of staff artificially suppressing prices during the inspection of second-hand goods, Aihuishou’s door-to-door service staff once explained: “There is no deliberate price-cutting behavior. The higher the price of the recycling machine, the higher our commission.” Zhuanzhuan revealed that the recycled goods are not sold directly from the store, but returned to the local quality inspection warehouses for quality inspection and other links before being “put on the shelves”. The price difference has nothing to do with the specific staff. Professionals also mentioned to the media that large recyclers do not recycle mobile phones like individual stores and then sell them at a higher price. Instead, they conduct segmented assessments on recycling and sales, and the commission of recycling personnel is proportional to the recycling amount.

Even so, second-hand e-commerce platforms still need to continue to make up for their shortcomings, such as trying to avoid using high estimated prices on the APP to attract users and exacerbate the "psychological gap", and providing a more comprehensive explanation for the differences in test results.

04

Wherever there is a pain point, there should be a solution. From the questioning of the "Yin Yang Test Report", we can see that the "information asymmetry" concerns aroused by the non-standardization of second-hand goods have become the reason for the lack of user trust. At this time, it is particularly important to use a tilted protection mechanism for user rights to fill the trust gap.

After all, second-hand 3C products are an area where price differences are frequent. Users are worried that the platform will take advantage of information gaps to cheat them. The best "patch" is to give them the right to regret, so that they can have enough time to evaluate whether "second-hand is not expensive."

After the incident, Zhuan Zhuan launched the same "7-day no-reason return" service for second-hand goods in its offline stores as in its online channels, becoming the first 3C product platform outside of Apple's direct stores to support offline seven-day no-reason return and exchange. It also clearly stated that the recycling business allows users to terminate the transaction at any time, which is quite targeted.

Expanding the service system under the user-oriented approach to make up for the asymmetric game dilemma brought about by the non-standardization of second-hand goods will be the key for second-hand e-commerce platforms to gain more user trust.

After all, nowadays, the public's mentality of "it's not that we can't afford new products, but that second-hand products are more cost-effective" is strengthening the social and psychological basis for the sale of second-hand goods. There is no reason for second-hand e-commerce platforms to miss such an opportunity.

If the trust dilemma that comes with the non-standardization of second-hand goods is the "knot", then adjusting the service standards to the same frequency as user needs as much as possible may be the best "solution".

Author: She Zongming

WeChat public account: Digital Force Field (ID: shuzilichang), resist entropy increase and salvage fun.