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Economic Observer reporter Chen Qijie Chen Yu has been using Xianyu for more than seven years. He often trades mobile phones, computers and other digital products on the platform, with a cumulative sales turnover of more than 1.6 million yuan. After hearing the news that Xianyu will soon charge all sellers, he said that he would most likely not continue to sell goods on the platform.

At the end of July, Xianyu announced that it would charge basic software service fees to all sellers starting September 1, with the fee standard being 0.6% of the actual transaction amount of a single order, capped at 60 yuan per order. At the same time, for the excess orders of high-frequency and high-value sellers, a software service fee of 1% of the actual transaction amount will be charged.

Xianyu is a second-hand e-commerce platform under Alibaba. The total number of users has exceeded 500 million, the number of monthly active users (MAU) has exceeded 160 million, and the average daily gross merchandise volume (GMV) has reached 1 billion yuan. The rapid increase in the number of users and transaction volume has prompted Xianyu to maintain the platform's operating costs through comprehensive charging.

As one of Alibaba's first strategic innovative businesses, Xianyu has also explored a number of new businesses this year, released a number of online products, and opened two offline stores. These business moves also require Xianyu to generate revenue through a charging model.

Talking about Xianyu's charging policy, several Xianyu users with smaller transaction volumes told Economic Observer that considering Xianyu provides convenient transactions, they can accept full charges. But for high-frequency and high-volume sellers like Chen Yu, they are preparing to leave Xianyu because of the higher handling fee rate under the new policy.

Do users buy it?

After the new charging policy of Xianyu was announced, Economic Observer randomly interviewed 11 Xianyu users, and 7 of them said they could accept comprehensive charging.

Among them, many users with cumulative sales of 10,000 yuan or less believe that Xianyu provides convenient transactions and can understand the policy. A user with a cumulative sales of about 10,000 yuan said that he would sell idle electronic products and sports equipment on Xianyu, but the frequency of use was not high. The purpose of occasionally using this platform was to reduce information asymmetry. Due to the small transaction amount, the policy had limited impact on him.

Several users whose cumulative sales volume ranged from tens of thousands to hundreds of thousands of yuan said that they did not accept the charging policy, but compared to Xianyu, there is currently no better second-hand trading platform in China.

In China, Xianyu's main competitor is Zhuan Zhuan, a second-hand e-commerce platform. According to a report by third-party data agency QuestMobile, in April this year, Xianyu and Zhuan Zhuan's MAUs were 162 million and 22.48 million, respectively, ranking the top two in China's idle trading industry apps.

Zhuanzhuan’s current charging policy is to charge a 0.6% payment channel fee for successful orders in the free market. Compared with Zhuanzhuan, Xianyu’s handling fees for ordinary sellers are not out of the ordinary. However, Xianyu has set a higher handling fee rate for high-frequency and high-volume sellers.

In June 2023, Xianyu began to charge high-frequency and high-value sellers. The rule at the time was that if a seller completed more than 10 orders in a month and the cumulative transaction amount exceeded 10,000 yuan, the excess amount would be charged a software service fee of 1% of the actual transaction amount of each order.

At that time, Chen Yu could still understand the logic behind Xianyu's charging. He believed that it was a reasonable business practice for a second-hand platform to charge service fees. Many of the high-frequency and high-price Xianyu sellers were professional sellers who enjoyed the benefits brought by the platform's traffic, so there was nothing wrong with Xianyu charging fees.

Chen Yu also predicted that Xianyu's charging policy was not strong enough and granular enough at the time, so the effect might be limited. Later, the platform will refine its charging policy, for example, making more detailed distinctions among sellers and charging accordingly.

However, Xianyu's charging policy did not make Chen Yu, who had predicted successfully, happy. Xianyu now charges not only basic software service fees to all sellers, but also additional software service fees for orders exceeding the limit. In total, it will charge high-frequency and high-volume sellers a handling fee of up to 1.6% of the transaction amount per order.

Chen Yu is a high-frequency and high-value seller. According to Xianyu data, in 2022, the average amount of money earned by users on the platform (i.e., average sales turnover per person) was 2,364 yuan. Chen Yu's cumulative sales turnover on Xianyu exceeded 1.6 million yuan, and his average annual sales turnover exceeded 200,000 yuan, far exceeding the average level of Xianyu users.

Therefore, Chen Yu said that when selling goods in the future, he might choose to use Xianyu only to attract traffic, or choose to trade in a WeChat chat group that he created.

Investment and hematopoiesis

In Alibaba's Taobao ecosystem, Xianyu mainly provides consumers with idle, recycled, sold, rented products and other long-tail products. In November 2023, Xianyu's priority in Alibaba was further improved, and it was listed as the first batch of strategic innovation businesses by Alibaba CEO Wu Yongming along with DingTalk, Quark and 1688.

In Alibaba's plan, strategic innovative businesses will be operated as independent subsidiaries, adopting more independent strategies to face the vast market. Alibaba will continue to invest in them within 3 to 5 years.

Independent operation also means that the business needs to have a certain ability to generate revenue. Ding Jian, general manager of Xianyu, 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. However, judging from the fact that Xianyu has twice introduced charging policies for users, it still needs to increase revenue.

Xianyu's revenue is made up of advertising, software service fees and value-added services (such as product recycling, consignment and product testing fees). According to Xianyu, its average daily GMV exceeded 1 billion yuan in March this year.

Guo Tao, deputy director of the China E-commerce Expert Service Center, said that the main reason for Xianyu's full charging is the increase in platform operating costs and the exploration of profit models. As the number of users and transaction volume continue to rise, Xianyu needs to invest more resources to maintain the stable operation and security of the system.

Guo Tao also said that Xianyu needs to pay close attention to market feedback and user demand, and flexibly adjust its charging policies to avoid losing sellers or declining user activity due to excessively high fees.

As a product manager of an Internet company, Chen Yu noticed that Xianyu has made many big moves this year, including adding new products such as Xianyu Games, Xianyu Queuing, Xianyu Live, and launching and widely promoting Xianyu WeChat local communities. He said that the goal of Xianyu's actions is to increase MAU, but this requires a lot of R&D costs and labor costs. It may be for these reasons that Xianyu needs an additional source of income.

In addition to online products, Xianyu is also exploring offline channels, trying to increase user touchpoints through offline entrances. At the beginning of this year, Xianyu opened two community stores in Hangzhou and Shanghai, where users can pack and send the items they want to sell directly to the store, and Xianyu is responsible for sorting, pricing, and sales.

This model is relatively heavy on the online side, and Xianyu's strategy is more cautious. Ding Jian previously said that community stores may not be the final solution for Xianyu's offline stores. There are also campus stores, logistics stores and other forms, and Xianyu will try them all. In the mental part of the entire offline Xianyu circulation store, Xianyu will have a relatively firm investment in the next three years.

(At the request of the interviewee, Chen Yu is a pseudonym)