When Xianyu started to become “Taobao-like”

As the Xianyu platform began to charge service fees from sellers, this second-hand trading platform that started with a C2C model seems to be gradually shifting in a more commercial direction, triggering widespread discussion on the future development direction of the platform.

"Xianyu will never charge transaction commissions!" said Xianyu founder Chen Weiye in 2018.

Six years later, the "sickle" of transaction commission was swung towards Xianyu merchants.

Xianyu announced that starting from September 1, the platform will charge all sellers a basic software service fee of 0.6% (up to 60 yuan per order). For sellers who generate more than 10 completed orders and a cumulative transaction amount greater than 10,000 yuan within a month, a software service fee of 1% of the actual transaction amount of each order exceeding that will be charged.

Xianyu said that the charging is to ensure the continuous provision of related services and continuously optimize service quality and product functions. In the future, it will also increase investment to improve the platform's services and give back to sellers for their support.

There is no doubt that charging commissions means that Xianyu’s profit “arsenal” has added new “ammunition”. This is also a direct reflection of the pressure on each sub-business to be self-sufficient after the major adjustments of the Alibaba Group.

In November 2023, Xianyu became Alibaba's strategic innovative business together with 1688, DingTalk, and Quark. The group stated that it will continue to invest in strategic innovative businesses in a cycle of 3-5 years; in December, Xianyu was upgraded to become a first-level business of Taotian Group.

Behind the strategic position upgrade is greater pressure for profitability and growth. Some e-commerce professionals believe that when Alibaba, led by Joseph Tsai and Wu Yongming, refocuses on its core e-commerce business, Xianyu is a key part of it; the introduction of software service fees is also in line with Alibaba Group's expectations.

With a heavy mission to fulfill, under the group’s macro-strategy, Xianyu is beginning to become more like Taobao, but is this the optimal solution?

From second-hand to community

In addition to saying that "Xianyu will definitely not charge transaction commission", Chen Weiye also said that in China, second-hand goods are not considered an industry.

Compared with new product sales, second-hand goods are highly non-standardized. The quality, circulation and after-sales of new products are all endorsed by brands or platforms, and consumers' purchasing behavior is highly certain.

However, due to the long identification period for product defects and quality and the lack of uniform standards, second-hand goods invisibly increase the trust and communication costs.

Taking mobile phones as an example, although the platform provides many identification details on screens, accessories and performance, consumers still have different understandings of "90% new" and "95% new", not to mention that sellers may also falsely report defects.

"Platform establishment rules and compliance transactions between buyers and sellers" - the seemingly simple C2C second-hand e-commerce model often leads to many compliance issues due to the existence of the above problems.

Xianyu has been involved in pornographic scandals many times since 2019. This year, Xianyu has been exposed to have hidden pornographic services in some second-hand air conditioner and bicycle transactions, which has greatly increased the platform's regulatory costs and damaged its credibility.

The compliance difficulties behind the "pornography scandal" are the inevitable result of the openness and non-standardization of the second-hand trading model.

In addition, compared with overseas markets, due to the strong domestic consumer goods manufacturing capabilities, the price difference between new and second-hand goods is not very large, and consumers' demand for second-hand goods is not strong enough. Transactions are often concentrated on a few relatively high-net-worth products, such as 3C and luxury goods. This means that the pure C2C second-hand industry is extremely limited in scale.

Faced with numerous difficulties, second-hand e-commerce companies have begun to transform.

Since 2018, Zhuan Zhuan has begun to transform into vertical second-hand transactions and focus on 3C categories; at the same time, in 2020 and 2023, it successively merged the second-hand mobile phone platform "Zhaoliangji" and invested in the fashion second-hand platform Hongbulin.

In 2019, Aihuishou, a subsidiary of Wanwu Xinsheng, merged with Paipai, a second-hand platform under JD.com. The two parties started in-depth cooperation. Aihuishou obtained traffic from JD.com and received the platform quality inspection endorsement from JD.com, and fully transformed into a C2B2C model.

Adding a platform to the second-hand transaction model between individuals, opening up new traffic entrances and improving transaction certainty is the transformation direction of most second-hand e-commerce companies, but Xianyu has chosen another path: communityization.

In the early years, Xianyu launched a community section called "Fish Pond" based on interest themes. In "Fish Pond", users communicate with each other and trade idle second-hand items; at the same time, Xianyu found that for every interest-based transaction order on the platform, there are about 40 conversations between users.

A large number of transactions with strong community attributes have emerged, further strengthening Xianyu's direction of developing interest communities.

In 2022, Xianyu set a dual-wheel drive strategy of "community + transaction"; at the end of August this year, Xianyu's homepage was revised, with multiple interest channels such as "2D", "Playing with Mobile Phones", and "Playing with Cars" set up at the top.

The focus on community also allows Xianyu's user stickiness and transaction volume to continue to increase. In 2023, Xianyu's average daily transaction volume exceeded 1 billion yuan, more than 4 million idle items were posted on Xianyu every day, and 30 million new users born after 1995 flocked to Xianyu throughout the year.

Xianyu's "community browsing" attribute has been continuously strengthened and attracted a large number of young users. It has also become a unique existence in Taobao's e-commerce, because Taobao has always lacked the "browsing" attribute. This is also in line with Alibaba's strategic investment strategy for many years: provide ecology and demand traffic.

The more personalized community attributes allow Xianyu to be unique in the second-hand e-commerce industry, but when profitability becomes the "sword of Damocles" and a large number of professional second-hand sellers pour in, Xianyu also begins to "change."

Becoming more like Taobao

The community is well done, but Xianyu also has "anxiety disorder".

Internally, although Xianyu’s president Ding Jian said that “Ali does not expect Xianyu to contribute profits in the short term, and the goal this year is still growth,” the actions and data speak for themselves.

The second quarter financial report of this year shows that the net revenue of Alibaba Group increased by 4% year-on-year, but the revenue of the entire Taobao Group decreased by 1% year-on-year, and the non-GAAP net profit decreased by 9% year-on-year. After Jack Ma called for "returning to Taobao", the growth pressure of Taobao e-commerce is not small.

Externally, competitors are rapidly advancing in the second-hand industry.

According to the Wanwu Xinsheng Group's financial report, the company's non-GAAP operating profit in the first quarter of 2024 reached 80.22 million yuan, which is the seventh consecutive quarter that Aihuishou has achieved operating profit. At the same time, while Xianyu only opened its first offline store this year, Wanwu Xinsheng already has 711 self-operated stores.

Short video platforms are also accelerating their entry into the second-hand e-commerce market. In May 2021, Kuaishou announced its investment in Wanwu Xinsheng; in March 2022, the "Second-hand Goods" channel was officially launched on Douyin Mall.

Nowadays, on Douyin and Kuaishou, various second-hand stores provide store addresses, product price information and contact information through short videos, and realize second-hand product transactions through live broadcasts. Categories include mobile phones, computers, luxury goods, etc.

The entry of giants also proves that the domestic second-hand e-commerce market still has huge potential.

According to iResearch, the market size of China's idle high-end consumer goods retail industry was 16.2 billion yuan in 2016, and after 2020, thanks to the rise of live e-commerce, the market size grew to 51 billion yuan. It is expected that by 2025, the market size will reach 208 billion yuan.

In addition to the support of new models, the growth of Generation Z's interest in consumption has also driven new developments in second-hand e-commerce. For example, in the two-dimensional market, since the main consumers are students with relatively weak economic capabilities, second-hand transactions are their main form of purchasing two-dimensional products.

Data shows that there are currently more than 14 million active 2D users on Xianyu, including about 7,500 certified 2D players covering sub-sectors such as model toys, Cosplay, and traditional Chinese style.

Xianyu felt the competitive pressure and also discovered opportunities. After all, C2C second-hand transactions are limited by the market ceiling. In order to better meet the emerging second-hand transaction needs, introducing more professional sellers is an inevitable trend.

After the author’s experience, he found that when searching for “baby stroller” on Xianyu, many of the recommended products were marked as official direct shipments, authentic flagship store products, and there was also a product flow entrance that directed traffic to Taobao for ordering.

It is an indisputable fact that compared with individual sellers, B-side merchants have more secure products and after-sales service, and are more capable of paying for the platform, whether it is spending advertising fees to buy volume, buying slots, or transaction commissions.

Ding Jian also stated in an interview that Xianyu will explore ways to monetize traffic and accelerate the construction of advertising product capabilities.

But the platform ecosystem of more commercial products will obviously make individual sellers feel unhappy.

Some individual sellers told the media that Xianyu's fees increased transaction costs, but the platform did not mention the corresponding new services. "Suppose I sell a stroller for 50 yuan with free shipping, and I have to give 0.3 yuan to the platform, it always feels not worth it."

New problems have emerged. Individual sellers are an important fulcrum for Xianyu to maintain its interest community attributes. They are willing to maintain an active frequency of interaction with individual buyers, but if Xianyu wants to become more like "Little Red Book", the priority of profit goals must be put back.

After the influx of professional sellers, Xianyu's commercial ecology including advertising and transaction commissions has been improved, and the platform has opened up a path to make money from the small B-end, which has created greater profit possibilities, but the community attributes will inevitably be affected, and Xianyu has become more like "Taobao".

Recreating the "Second-hand Taobao" was not Xianyu's strategic positioning when it started.

When Xianyu was first founded in 2014, Chen Weiye imagined that Xianyu would be like the "Fengling Ferry" described by Jin Yong, where Guo Xiang and Yang Guo first met. Chen Weiye hoped that when users come to Xianyu, it would be like coming to the "Fengling Ferry", where they can open their hearts and trade goods freely without any restraint.

Today, when competition in second-hand e-commerce is becoming more inward-looking and the pressure of group profitability is greater, if Xianyu still wants to become the "Fengling Ferry", then balancing community and commercialization and continuing to improve compliance supervision is the best strategy.

Source｜DiGe.com Author｜Han Zhipeng This article is written by the author of Operation Party [IT Friends], WeChat public account: [IT Friends], original/authorized to be published on Operation Party, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.