The overall future of China’s second-hand consumer electronics industry is promising, but it also requires the platform itself to maintain a high degree of strategic focus.
The history of formal commercialization of China’s second-hand consumer electronics (3C) industry can be traced back to 2011, when a company called Ai Huihui broke the tradition and pioneered the Internet + recycling model, filling the gap in China’s 3C recycling field.
With the acceleration of mobile phone product iteration, more and more capital values this field, and many 3C recycling platforms have sprung up in the following years.
After ten years of development and changes, China’s second-hand 3C market has formed a new pattern. Ali’s busy fish, Jingdong train all freshmen (love recycling), 58 lines around to become the head of the three major players, the whole industry has three race pattern.
In the past year, the three head platforms have their own latest developments. Xianyu stepped out of the comfort zone and transformed from an idle platform to a content community; Wanwuxin went public in the United States and became the first domestic second-hand trading platform; Zhuanzhuan experienced a downturn, adjustment, and reorganization, and finally completed a new round of financing on June 17.
From the perspective of historical development, the second-hand 3C industry is still in the early stages of development, and the listing of all new things is a milestone event in the industry, which is the first time to push this blue ocean track to the capital market.
The focus of capital will inevitably cause the entire industry to burst into flames, and in the development process, players will inevitably be eliminated by the market. How should investors decide on the second-hand 3C track? Where is the future investment direction?
01 The hot battle in the blue ocean market
Second-hand 3C may be the world’s largest second-hand transaction category except for second-hand houses and second-hand cars.
Different from the high market penetration rate of second-hand houses and second-hand cars, the second-hand 3C industry started late in China, and the industry has only developed for ten years. According to CIC data, from 2015 to 2020, the market size of China’s second-hand 3C industry will increase from 51 billion yuan to 225.2 billion yuan, with a compound annual growth rate of 34.5%.
(Data source: CIC)
Looking to the future, CIC predicts that the ceiling of China’s second-hand 3C industry is expected to touch the trillion level within five years. In the next five years, this track will maintain a compound annual growth rate of 30.8%, reaching 967 billion yuan by 2025. Obviously, the second-hand 3C industry is an industry with a very low penetration rate, and there is still a large number of blank markets waiting to be tapped.
The hot track has attracted a large amount of concentrated capital injection. According to the data from the enterprise search , there are currently 42,000 “second-hand e-commerce” related enterprises in China. The last four years have been the peak of registration of “second-hand e-commerce”. In 2020 alone, there will be an increase of 8,600, a year-on-year increase of 14.3%; in the first five months of this year, an increase of 4,100, a year-on-year increase of 49.3%.
Although there are many players entering the game, the concentration of the entire industry is constantly increasing. At this stage, domestic second-hand 3C e-commerce is mainly divided among the three leading platforms of Xianyu, New Life, and Zhuan.
According to CIC data, the GMV of second-hand 3C products of Xianyu, New Life, and Zhuan will be 32 billion yuan, 18.1 billion yuan, and 10.4 billion yuan respectively in 2020, an increase of 33.3%, 73.8% and 9.5% respectively over the same period last year.
Among them, Xianyu is the platform with the largest transaction scale, while Wanwuxin has the highest transaction scale growth rate among the three platforms. In contrast, the growth rate of Zhuanzhuan not only lags behind the other two, but even significantly lower than the industry growth rate.
From the perspective of mode, it can be roughly divided into two categories: C2C mode and C2B2C mode. The C2C model tends to be more open, the platform provides scenarios, and the buyer and seller communicate directly to return the transaction to the most primitive state; the C2B2C model adds platform endorsement, and the platform acts as an intermediary to undertake quality control, quality assurance and after-sales service, but applicable The categories are limited.
Xianyu started by relying on the C2C model, involving all major categories including 3C; the newly listed Wanwuxin is a typical representative of the vertical platform, successfully opening up the entire 3C transaction industry chain. Zhuan Zhuan’s model is more embarrassing, in the middle of the two, the prospects are still unclear.
For the second-hand 3C industry, the attention of capital makes the entire market more active, but this does not mean that all companies can sit back and relax.
Especially after the successful listing of Wanwu Xinsheng, more and more second-hand 3C companies may work hard for their listing goals while ignoring the sound development of the company. If the company does not go public in the end, it may be abandoned by capital, which is the biggest risk that currently exists in this sunrise industry.
The prelude to the midfield battle has been kicked off. What enlightenment can investors get from the top players?
02 Xianyu: From idle platform to content community
As the country’s largest second-hand comprehensive trading platform, Xianyu’s advantages are well known.
Ali is the top-tier e-commerce business in China. Although the e-commerce industry has been fiercely competitive in recent years, it still has the two trump cards of Taobao and Tmall, plus the vertical e-commerce platforms such as 1688, Koala, and Fliggy . The status of China’s e-commerce business is still unbeatable, with the strongest traffic advantage.
Xianyu is a product incubated by Alibaba in 2014, mainly to open up the entire closed loop of e-commerce and bind users through the transaction of idle items. In 2016, Alibaba merged Xianyu with the auction business. Make Xianyu the largest comprehensive second-hand e-commerce trading platform in China.
Since its establishment, Xianyu’s strategic significance is greater than its commercial significance. Alibaba did not hope to make much money from Xianyu, but regarded it as an important part of accumulating users. With the existence of Xianyu, Ali can form a complete closed loop of e-commerce, gather a large number of users, and build an indestructible moat.
Based on this background, Xianyu did not focus on commercial realization.
Especially in the past year, “communization” has gradually become the direction of Xianyu’s transformation.
At the end of October 2020, Xianyu officially issued an announcement, and the live broadcast business, fish pond business and other important entrances in the past have been cancelled. As of August 2020, Xianyu has over 400,000 fish ponds of various types.
After the fish pond was cancelled, Xianyu set up a “play” to replace it. “Huiwan” is a new first-level menu at the bottom of the Xianyu APP homepage, which allows a large number of social users to display the content. Re-focusing on community business can not only make users more active, but also effectively increase browsing time, thereby accumulating more valuable data information.
In recent years, the rise of new consumption has cultivated a large number of emerging brands. As many businesses have said, it took 30 years to make a brand well in the past, but now it may only take three years. The emerging e-commerce platform represented by Xiaohongshu has become an incubator for these new consumer brands. Xianyu walks out of the comfort zone, explores the transformation of the content community, and effectively imitates the meaning of Xiaohongshu.
But unlike Xiaohongshu, the owner of Xianyu has its own trading system, and the C2C model allows it to produce a real trading experience. By sharing the way that other people’s desire to buy, to drive more pay accessible to.
Transforming the content community, Xianyu is equivalent to stepping out of the comfort zone and shifting from a passive tool-based platform to an active content community.
03 New Life (Love Recycling): Open up the ecological closed loop
The newly listed Wanwuxin is the second-hand trading platform with the fastest growth rate of domestic GMV in the past year.
According to the prospectus, as of the end of March 2021 (the past 12 months), Wanwu Xinsheng Group has sold more than 26.1 million second-hand products on the entire platform (excluding JD spare parts warehouse business), a year-on-year increase of 46.6%.
At the same time, the company’s full platform GMV was 22.8 billion yuan (excluding JD spare parts library business), a year-on-year increase of 66.1%. On this basis, the company achieved overall revenue of 5.68 billion yuan, a year-on-year increase of 49.4%.
As the first player in China to enter the second-hand 3C track, the exploration and practice in the past ten years has given all new students their own understanding of the development path of the industry. Chen Xuefeng, founder of Wanwu Xinsheng, believes that second-hand 3C, like second-hand housing and second-hand cars, is a supply-driven industry.
Based on this characteristic, in fact, the core competitiveness of the second-hand 3C platform mainly has two points: one is the transaction scenario; the other is the supply chain. Among these two points, supply chain capabilities are particularly important.
Compared with Xianyu and Zhuanzhuan, Wanwuxinsheng has continuously invested a lot of resources in the supply chain system. Specifically, Wanwuxin has established an integrated business chain that connects the upstream and downstream of the industrial chain including recycling, testing and rating, distribution and retail, radiating C-end, B-end, and overseas markets.
On the recycling side, Wanwu Xinsheng has the largest consumer electronics recycling platform in the country, Aihuihui.
At present, the recycling scene of Aihuihui has covered online and offline. On the online side, Aihuishou has already connected the vertical channels of e-commerce and mobile phone manufacturers such as JD.com, Huawei , and Xiaomi . In terms of offline, as of the end of June 2021, Wanwu Xinsheng Group operates more than 800 offline stores nationwide. The recycling category is concentrated, and mobile phones account for nearly 70% of the share.
On the detection and rating side, the New Life has continuously improved detection accuracy and operational efficiency through automation and intelligent technology, and compressed the circulation time of a single machine within 3 days.
Sales end, all freshmen have to shoot machine hall and patted the two core platforms , Taste brand, market respectively for the B and C-terminal end market.
Beat machine hall is the largest second-hand 3C products B2B trading platform, gathering 11 Chaoguo million to the family. Paipai is the country’s largest second-hand B2C retail platform, fully undertaking all the second-hand sales business of Jingdong Mall.
From the recycling end to the testing and rating end to the sales end, Wanwu Xinsheng has established a complete supply chain system, thus opening up the “C2B+B2B+B2C” integrated cargo circulation platform. After years of cultivating the second-hand 3C industry, Wanwuxin has accumulated a wealth of experience and data in quality inspection and certification, and the accumulated ability over the years is a strong endorsement.
The new C2B2C model of all things has made the second-hand transactions of 3C products gradually standardized, transparent and efficient. The future competition of second-hand 3C platforms will not be the competition of single-point capabilities, but the competition of the comprehensive capabilities of integrated platforms.
For the transaction of non-standard assets such as second-hand mobile phones, a complete supply chain is required. The front-end supply chain guarantees the efficiency of customer acquisition and the delivery experience, and the back-end supply chain guarantees cost control and the quality of goods, completing the overall closed-loop transaction.
Although the complete supply chain system has increased the new assets of all things, it has also greatly increased its voice in the industry.
On July 15, Goldman Sachs, Bank of America, and Huaxing all gave a buy rating in the first coverage report of the New Life Group, with 12-month target prices of 20.8, 20.0, and 19.0 USD/ADS respectively. Among them, Goldman Sachs analysts are optimistic about the supply chain infrastructure services provided by New Life and the company’s ability to define industry standards; the Bank of America report also mentioned that they are optimistic about New Life’s market position and industry infrastructure capabilities.
04 Turn around: strategic drift, the way forward is unknown
Almost at the same time when Wanwuxin went public, Zhuanzhuan also announced the completion of the latest round of D1 financing, with a financing amount of US$100 million, led by Xiaomi. This financing was only two months after Zhuanzhuan’s last financing. Frequent financing in the capital market and the eagerness to go public has been overwhelming, but financing cannot cover up the problems of the transfer itself.
The strategy is fluctuating. Although it has repeatedly received investment, it is still exploring the road ahead. Specifically, Zhuanzhuan made three mistakes in the past: strategic drift, lack of supply chain, and fragmented positioning.
Zhuanzhuan was established in 2015 and was first upgraded from 58.com ‘s 58.com second-hand channel. In 2017, Zhuanzhuan received a US$200 million investment from Tencent and accessed the WeChat wallet “Nine Palace” portal in the following year . As a result, WeChat traffic became Zhuanzhu’s core competitiveness.
There is no need to say more about the traffic advantage of Tencent Social. JD.com has achieved rapid growth after accessing Tencent’s “Jugongge” portal; Tongcheng Yilong has always established its advantage by harvesting Tencent’s traffic dividend after accessing the “Jugongge” portal . Compared with them, Zhuan Zhuan can be said to be a poor hand.
At first, forwarding hopes to rely on Tencent’s traffic to fight against Xianyu, so in the early stage, it started a full-category C2C strategy to fully benchmark Xianyu.
However, it is difficult to convert pure traffic into transactions, especially after Xianyu established a “fish pond” community culture in 2016, it directly had a fatal impact on the transfer.
Due to the pressure of survival, Zhuanzhuan began to abandon the entire category in 2018 and changed to specialize in the vertical category. It has successively launched projects such as transferring books and cutting customers to enter the field of second-hand books and second-hand trendy products, but never found a breakthrough.
According to the data of iResearch Consulting, during the year from June 2018 to May 2019, the number of monthly active independent devices transferred dropped from 13.18 million to 6.52 million, and the number of users was cut in half; in contrast, Xianyu’s data at the end of May 2019 The number of users is 14.34 million, twice that of Zhuan Zhuan.
In 2019, Zhuanzhuan started the third transformation road, focusing on the second-hand 3C market. In May 2020, it acquired the second-hand mobile phone B2C platform “Looking for a beautiful machine” and transformed into a second-hand 3C vertical e-commerce company. However, the number of monthly active users transferred after the acquisition has continued to decline, and the decline in the last two years has reached 40%.
Although the development of Zhuanzhuan began to focus more and more after the acquisition of “Looking for a Beautiful Opportunity” , Zhuanzhuan still achieved such a performance with the support of Tencent’s strong traffic. The frequent drift of strategy has made the market full of doubts about its future development.
At the same time, as the entire mobile Internet is facing a peak in traffic, the cost of acquiring customers for low-frequency vertical e-commerce has become more and more expensive. No growth. If it wants to grow, it will consume resources on a large scale, and it will not be possible to build a supply chain capability.
And for the subsequent growth, if only to establish the flow amount of on, regardless of how to provide better services to users, so no matter how much the user is unable to retain. Because users did not experience the “AHA moment”, there is no reason to continue using platform services.
For second-hand 3C vertical platforms, the core value it provides to users is how to quickly resolve trust issues and facilitate transactions. In essence, the second-hand 3C vertical platform is still a competition in the supply chain. This cannot be established overnight. It requires long-term accumulation of the platform.
From the new life of everything, investors are well aware of the importance of the supply chain to second-hand 3C, but this is exactly what Zhuan has lacked for a long time. The supply chain is a heavy model. In the past, Zhuanzhuan was a completely asset-light operation platform. It is obviously not realistic to catch up with the accumulation of many new things in just two years.
In order to catch up quickly, Zhuanzhuan chooses the mode of self-operating and joining in the inspection service. The advantage of this model is faster speed, but the disadvantage is that the quality of franchisees cannot be controlled and quality problems are prone to occur.
Compared with standardized commodity transactions, solving the trust problem is more critical and more complicated for facilitating second-hand transactions. Therefore, the core value of the second-hand 3C platform is to consolidate the foundation of the supply chain, establish trust transactions, and provide a place where buyers and sellers can deliver trust.
But for now, it is obvious that Zhuan Zhuan has not focused on this aspect, and the lack of supply chain makes it lack of core competitiveness.
Finally, there is a very obvious positioning deviation after the transformation. The current positioning of Zhuanzhuan is “the only independent consumer-oriented integrated second-hand e-commerce company in China”. But in fact, Zhuanzhuan is essentially doing a second-hand 3C vertical business, but it is telling stories about the entire category.
The reason is that from the data point of view, it is impossible to benchmark the new life in the second-hand 3C vertical business within a short period of time. You can only choose to “avoid the edge” and tell the story of benchmarking idle fish to the capital market.
However, strategic cleverness may become the biggest constraint to the transformation, because both in the eyes of consumers and investors, there are obvious cognitive differences between second-hand 3C platforms and second-hand all-category platforms. Enterprise transformation is not as simple as acquiring a company, but to truly build core competitiveness and contribute value to users and the industry.
It is a good thing to transfer and obtain financing repeatedly, but compared with the urgent listing, how to find the future development direction is the core issue that the management should consider. In many cases, being fast is not a good thing, and laying a solid foundation is often more important.
05 Inspiration from the second half
By 2025, China’s second-hand 3C market is expected to reach the trillion mark. With the rapid growth of the industry, the entire industry is expected to compete in the second half more fiercely.
In June 2018, Japanese second-hand trading platform Mercari was listed on the Tokyo Stock Exchange. The stock price soared 76% on the first day, and the stock price has doubled since then. Mercari is the largest C2C platform in Japan. Its model is similar to Xianyu, but the user experience has been completely exploded by Xianyu.
The reason why Mercari is so popular in the market is mainly because it is a lucrative business in second-hand trading in Japan.
The Japanese economy used to grow at a very high rate. When people’s income grew, consumption became the only reason. Therefore, at one time, Japan was one of the countries with the strongest consumption power in the world. However, after the bursting of the Japanese property market bubble, the economy of the entire society stagnated, which directly led to people having to sell the things they bought before to “recover blood.”
In addition, Japan itself has strict regulations on the disposal of old objects, which has led to a very developed second-hand recycling industry in Japan, which also gave birth to a unique platform such as Mercari. It is reported that Mercari accounts for more than 70% of the overall Japanese second-hand e-commerce market.
The success of Japan’s “xianyu” Mercari shows that the C2C model is feasible. On the other hand, the listing of Wanwu Xinsheng has also been recognized by the market, which shows that the C2B2C model focusing on vertical markets can also be successful.
From the perspective of Mercari and the new life, strategic focus is the most important. Especially for companies that have not yet been listed, while eager to expand in scale, it is more important to accumulate the core competitiveness of the company. Whether it is a second-hand vertical e-commerce or a second-hand integrated platform, it should maintain strategic focus.
On the other hand, continuous strategic focus will also enable capital to have a more accurate understanding of the development of the enterprise, and both investors and users will prefer what they know.
On the whole, China’s second-hand recycling industry can be expected in the future, and the entire market will continue its rapid growth trend. But at the same time, with the continuous injection of capital, the concentration of the industry will continue to increase, and only excellent companies can gain greater market advantages.
Who can be the ultimate winner in this industry? Although there may be no conclusion in a short period of time, maintaining strategic focus affirms its necessary capabilities. As far as the platform is concerned, it must not swing from side to side and drift strategically.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/the-midfield-battle-of-second-hand-consumer-electronics-the-influx-of-capital-the-division-of-the-three/ Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.