China’s Marketplaces Now Bet on Recommerce

03/07/2019

Second-hand shopping is quickly becoming a first choice experience in China. And as the number of users on Chinese second-hand trading platforms is rising, even the Dragon’s tech giants now bet on recommerce

 

There is a new trend in town. It is second-hand shopping and in China, the youngest consumers are wild about it. Both luxury shoppers and low-cost buyers have started to prefer circular consumption to give objects and clothes a second life and data confirm that this trend is growing strongly.

According to a recent report by ThredUp, the value of the second-hand market will reach $41 billion globally by 2022, and it will exceed that of fast fashion by 2028. The research also says that resale will gain more and more space in the people’s wardrobe, growing from the current 6% to 11% in 2022.

Recycled goods would seem to have little traction with the typical Chinese consumer, who is often generalized as voracious, status-oriented and thus drawn to brand prestige. However, the younger generations are showing a growing interest in second-hand as the growing popularity of shopping for pre-owned products online confirms.

 

recommerce platforms - Alibaba vs Tencent - cifnews

© Xuehua. In the PRC, the recommerce industry shares a common origin story with other e-commerce platforms: major investments by China’s two tech rivals, Alibaba and Tencent.

 

Today, in China, the second-hand market is still at its early stages but it is maturing fast. The China Center for Internet Economy Research – Beijing-based research think tank – has revealed that the size of this market reached $71.1 billion in 2017 and the figure is expected to double by 2020.

According to a report from big data service provider QuestMobile, from just 1.58 million users in 2014, this kind of recommerce market in China reached almost 40 million people in 2017 and it is expected to reach 67 million this year, almost doubling the growth rate of the users in the overall e-commerce sector. Nevertheless, compared to mature second-hand markets in the West that sometimes account for as much as 10% of total GDP, China’s recommerce market was about 0.6% of total GDP in 2017, based on numbers from National Bureau of Statistics.

This late boom is due to China’s cultural factors. Improved standards of living and higher purchasing power are a recent phenomenon in the Middle Kingdom. Since Deng Xiaoping’s economic reforms, 40 years ago, more than 800 million people were lifted out of poverty. Therefore, after the majority of the population reached a certain wealth and improved lifestyle, the purchase of pre-owned items was seen as a sign of financial struggle and was thus seen as a source of social shame.

 

“We’ve seen a rapid rise in consumption, and accompanying that growth is a huge increase of idle goods that still have value,” said Taobao President Jiang Fan.

 

Today, on the contrary, second-hand shopping is considered smart shopping for several reasons. On one hand, recommerce reflects the willingness to engage in recycling and sustainability. But on the other hand, it also offers better prices and a wider choice of products, which goes beyond the seasonality of the collections.

With the advent of low-cost, houses got full of unuseful objects, and above all, factories constantly produce products with significant impact on the environment. According to reports, China alone throws away almost 20 million tons of textile a year while the equivalent of one garbage truck of cloth is landfilled globally every second. Therefore, the Dragon is working hard on finding solutions to fight climate change and one of the country’s goal is to build an Ecological Civilization through education about recycling.

And here comes Idle Fish, or Xianyu 闲鱼 in Chinese, the marketplace of Alibaba for second-hand goods, which aims to increase recycling and repurposing by rewarding users. Since the launch, the app already recycled over 8,500 tons of unwanted clothes and today, together with Zhuan Zhuan, it holds 90% of the recommerce market share in China. Thanks to apps like Idle Fish, not only Chinese younger consumers can get rid of unneeded things but they can also help to reduce waste by recycling and repurposing.

 

recommerce for second-hand books - dangdang - cifnews

© Unsplash. The trading online of second-hand goods has been booming in China recently, with companies as Dangdang specialized in second-hand books, finding a lucrative niche.

 

For what concerns the possibility to buy products at a lower price, instead, China’s current economic slowdown might have contributed to the rise of recommerce. Faced with skyrocketing house prices and tightening purse strings, hard-pressed first-tier city consumers have started to give second-hand goods a thoughtful second look.

Currently, being the most open and informed shoppers, Millennials represent the majority of buyers, generating 40% of second-hand purchases. And although the big spenders only account for 12% of the consumers, they are expected to double their expenses in five years, to reach $51 billion of market value.

With the advent of the second-hand trend, many platforms similar to Idle Fish are popping up across China and Zhuan Zhuan 转转 is one of them. Currently, the country’s second-hand goods market is in a duopoly featuring Alibaba’s Idle Fish and Zhuan Zhuan of classified listings site, 58.com.

Founded in Beijing in 2015, Zhuan Zhuan was indeed developed by 58.com, which is also known as the Craigslist of China. In less than three years, the Beijing-based company managed to rank second in the recommerce market with 11.4 million monthly active users (MAU), even if Idle Fish still leads the market with its 24.4 million MAU as of March 2019.

Even the e-commerce giant JD.com invested in the second-hand sector acquiring 拍拍 Paipai in 2014, thus bringing JD.com’s superior shopping experience to China’s consumer-to-consumer (C2C) space.

 

The recent rising of recommerce platforms such as Zhuan Zhuan, Paipai, and Aihuishou reflects how China is actively embracing the circular economy, which aims to gradually refocus economic activity away from the consumption of limited resources.

 

Launched in 2006, Paipai was originally a C2C e-commerce platform operating as a subsidiary of Chinese technology giant Tencent. JD.com acquired it as part of a sweeping $215 million deal with Tencent to align the two companies against Alibaba.

The service was, however, shut down in 2016 by Tencent due to the platform’s uncontrollable abundance of fake goods. It was then revived again a year later to sell “quality second-hand goods” with an automatic valuation system and a goods-identification process designed to minimize the risks inherent in the C2C model.

In June, JD.com announced a merger between Paipai and another online electronics recycling platform, Aihuishou 爱回收. After the merger, the new entity will, therefore, ranks third in the recommerce sector. However, JD.com did not reveal details about whether Paipai and Aihuishou will operate as separate entities or as an integrated platform.

Founded in Shanghai in 2011, Aihuishou – which literally means “love recycling” – is an auction style customer-to-business platform that buys second-hand electronic items such as mobile phones and laptops from users and resells them to customers or to recycling companies. It already has a close relationship with JD.com and had partnered with Paipai on consumer electronics recycling.

The deal is expected to bring more “synergy” between the two companies in a bid to further standardize the electronics recycling process and improve efficiency by leveraging on JD’s retail, logistics, and insurance technologies. Moreover, starting from electronic items, the new entity aims to expand its focus to other categories such as books and home appliances.

 

recommerce offline store - aihuishou - cifnews

© Sohu.com. Following an online-to-offline business model, the recommerce platform Aihuishou has set up five operations centers and more than 260 recycling stores across China.

 

Second-hand seems, therefore, to make everybody happy. From price-conscious consumers increasingly focused on sustainability to companies looking for opportunities in both the recycling and the recommerce industries.

Moreover, recommerce in China has opened the door to a unique way in which Chinese consumers shop for pre-owned items. Consumers are now aware that recycling does not mean that waste would disappear. And it all reflects into the cultural shift from a disposable lifestyle to a sharing society composed by a flow of repurposed items.

The rise of a brand-new competition between China’s e-commerce giants over the recommerce market is not only changing significantly the online shopping experience but it is also positively affecting the environment.

In the Dragon, the second-hand is not just a matter of purchasing choices anymore, now, it is a real lifestyle decision.

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