Source | Bohu Finance (bohuFN)

01 Xianyu's new businesses with a 'community' facade

At Xianyu's 10th anniversary this year, Ji Shan, the general manager of Xianyu, mentioned that Xianyu had adjusted its platform positioning years ago in line with internal ecological changes, becoming a "young people's interest trading community" and no longer merely a "second-hand item trading platform."

"The core of Xianyu is C2C, but I believe its spirit and culture are encapsulated within the shell of a 'community,'" said Ji Shan.

In the first half of this year, Xianyu launched several new businesses, including offline circular stores, clearance stock sections, and Xianyu resumes. Upon closer inspection, these new businesses are all centered around the positioning of "young people's interest trading community," using the shell of a 'community' to engage in new modes of interaction and transaction with young people.

In the public's perception, Xianyu is a platform for trading second-hand and idle goods, with physical transactions being the primary mode. In the old version of the Xianyu app, users could only post physical items. However, in the new app version, Xianyu has added features such as Xianyu resumes and a "side hustle" entry, supporting non-physical transactions like skill services and job recruitment.

After the launch of the "Xianyu Resume" function, many users can be seen selling their personal skills on the platform. Post-2000s workers teach others how to brew a good cup of coffee, 985 law graduates teach criminal law, and some people even urge employers to work diligently within an eight-hour workday... These new transaction models not only break traditional norms but also have the potential to further deepen Xianyu's positioning as a "young people's interest trading community."

Additionally, since the end of January this year, Xianyu circular stores have opened in Hangzhou and Shanghai, providing users with a full range of idle consignment services.

The Observer noted that this cross-border move from online to offline and from light assets to heavy assets is one of the few business model explorations within Alibaba this year. "As far as we know, offline expansion is currently a 'certain' strategy for Xianyu: within the next three years, Xianyu's offline stores will continue to expand, and the team will continue to explore how to make this model viable," the report stated.

According to reports, to celebrate its 10th anniversary, Xianyu plans to launch a "Bargain Store" section, focusing on bargain hunting and differentiating itself from traditional e-commerce. With C2C at its core, it aims to expand into small B-side sellers dealing with slightly flawed, near-expiry, or 99% new items. This also implies that Xianyu will undertake more management and operational work for small B-side sellers in the future.

The continuous rollout of new businesses by Xianyu clearly reflects Alibaba's high expectations.

02 Xianyu's priority continues to rise within Alibaba

In 2014, Xianyu was born in an Alibaba tea room, officially launching with the concept of "letting your idle items come alive."

As a platform popular among young people, Xianyu's user growth has maintained a high rate, with a compound annual growth rate of nearly 30% in the past two to three years. Currently, Xianyu has accumulated over 500 million registered users.

According to the latest report by research firm QuestMobile, Xianyu's MAU (Monthly Active Users) reached 162 million in April, representing a year-on-year increase of 19.1%. Ji Shan previously revealed the platform's core indicator, stating, "Xianyu's goal this year is very clear: to surpass 200 million MAU." This means it is less than 40 million users short of its target.

Furthermore, QuestMobile's "2023 China Internet Core Trends Annual Report" revealed that Xianyu was once again selected as the "No.1 in User Scale" in the "TOP 50 Internet Apps in China 2023" category. With its increasing penetration among the new middle class, Xianyu was also named the most popular mobile shopping app in the "Favorite Apps of China's New Middle Class" list.

In stark contrast to Xianyu's popularity, Alibaba has undergone numerous policy changes over the past year, appearing passive in the competition among e-commerce platforms. Following Pinduoduo's lead in implementing full refunds, Alibaba recently began "loosening" its full refund policy. Since last year, the system of allocating search weight based on "Five-Star Price Competitiveness" has been weakened, reverting to allocation by GMV... Behind these changes lies Alibaba's tumultuous year.

Xianyu, with its "active users," has obviously become an important lever for Alibaba and continues to receive internal attention. In November last year, Xianyu became one of Alibaba's first batch of strategic innovation businesses, alongside 1688, DingTalk, and Quark, earning the nickname "Alibaba's Four Little Dragons." For strategic innovation businesses, Alibaba has stated that it will break past positioning limitations within the group and invest continuously over a 3-5 year period. In December of the same year, Xianyu was upgraded to a first-tier business within Taobao Group.

It is certain that Alibaba has high expectations for Xianyu. However, it remains uncertain whether Alibaba can give Xianyu enough time to develop and whether Xianyu can grow into the image Alibaba desires.

Since taking the helm at Alibaba, Joseph Tsai and Yongming Wu have clearly stated that core businesses should be the focus, while non-core businesses must have the ability to "self-finance." This implies that Xianyu must have a clear path to commercialization in order to continuously receive group investments.

As an insider at Xianyu put it, today, the Alibaba Group will invest more in Xianyu, and at the same time, Xianyu should also explore stronger earning capabilities. In the short term, the group does not expect Xianyu to contribute profits, but the profits earned by Xianyu must serve as ammunition to drive further growth, forming a virtuous cycle.

Currently, for Xianyu, how to construct a stable idle trading business model may be a major breakthrough.

03 Can Xianyu fulfill Alibaba's expectations?

It is understood that currently, second-hand transactions abroad rely primarily on high commission fees, reaching up to 10-25%, while domestic second-hand transactions have remained free for many years.

Xianyu's recent announcement may further change this situation. On July 26, Xianyu issued a public notice announcing that it will charge all sellers a basic software service fee of 0.6% (with a maximum single fee of 60 yuan). This fee will only apply to sellers who have completed more than 10 transactions and accumulated sales exceeding 10,000 yuan in the same calendar month, with an additional 1% software service fee charged on each subsequent transaction's actual transaction amount exceeding this threshold. This change will take effect on August 9 and be officially implemented on September 1.

This approach, on the one hand, increases Xianyu's revenue sources, albeit at a relatively low rate. On the other hand, by charging software service fees, it may help purify the market and curb the proliferation of merchants on the platform.

A healthy platform environment is precisely what Xianyu needs at present.

Recently, some netizens have discovered on Xianyu that some sellers are using the guise of selling household appliances, bicycles, and other products to conduct obscene transactions on the sly. Notably, this is not the first time Xianyu has been exposed for such suspicious activities.

It can be seen that in the face of massive transaction information and a complex online environment, Xianyu's regulatory capabilities appear inadequate. In the view of industry insiders, the reason why Xianyu has struggled to ban obscene transactions for many years lies partly in the low entry barrier for sellers, who only need a mobile phone number, Taobao, or Alipay account to register and log in. Another reason is the inadequacy of the platform's review and punishment mechanisms.

In the opinion of legal experts, as a third-party open trading platform, Xianyu should conduct supervision and review at the source when sellers list their products. Preventing all products with illegal or Violation of regulations tendencies from being posted in the first place is the most basic regulatory responsibility that the Xianyu platform must bear.

In the future, the issue of platform regulation will continue to hang over Xianyu's head like the Sword of Damocles. It remains uncertain whether the 0.6% technical service fee will bring further commercialization benefits.

Xianyu has many new features, but whether these features can blossom alongside ideal commercialization and compliance management remains to be seen.

Reference materials:

1. Beijing News: Xianyu plans to charge all sellers a basic software service fee of 0.6%

2. Jiemian News: Xianyu awaits a 'turnaround,' aiming for 200 million monthly active users this year

3. The Observer: Aiming for 200 million monthly active users, Xianyu still wants high growth

4. Lanjing News: Interview with Xianyu General Manager Ji Shan | Xianyu's next stage of business targets young people

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