This article was co-authored by Eliam Huang.
Consumers in China are increasingly embracing second-hand goods, buying everything from used cars to “lightly used” lipstick. This new habit is reflected in the rising “re-commerce market,” which is predicted to reach RMB 1.25 trillion (around $178 billion) in 2020, rising by 70% from RMB 742 billion in 2018, according to data firm MobData.
MobData includes second-hand car trading as a subcategory of re-commerce, as well as relatively smaller items, such as fashion, beauty and electronic products. However, other sources exclude cars, making their numbers not strictly comparable. In this article, we’ll focus on the non-car side of the market.
The re-commerce market is dominated by two marketplaces associated with Alibaba and Tencent. Alibaba’s Idle Fish (Xianyu), a spin-off from Taobao, is by far the biggest, while Tencent-backed Zhuanzhaun is a clear second place.
Mobdata’s RMB 1.25 trillion would be almost 46% of the RMB 2.7 trillion sharing economy market estimated for 2020 by the Sharing Economy Work Committee of the China Internet Association. The sharing economy market also includes ride sharing (e.g., taxis), co-working spaces, and Airbnb-style apartment rentals.
Second-hand takes off online
The increasing popularity of re-commerce is driven by growing customer demand for product variety, sustainability, and affordability: Consumers want to possess the latest in clothing trends, while budget constraints are a consideration for most shoppers. In a survey of Chinese consumers born after 1985, 60% of respondents said they would buy pre-owned goods to take advantage of cheaper prices, according to results released on Jan. 9 by research company CBNData.
A growing emphasis on reuse and recycling also encourages the trend. China Beijing Environment Exchange estimated that transactions on Alibaba owned re-commerce platform Idle Fish helped to reduce 100,000 tons of carbon emissions between 2014 and 2018, although it does not spell out the methods used to reach the estimate.
The online apps and platforms have driven a surge in second-hand shopping. There are around 99 million users of resale-focused apps as of August 2019, according to data firm Getuiand the China Internet Network Information Center. Leading apps include Alibaba’s Idle Fish and Tencent-backed Zhuanzhuan, with MAUs totaling around 24.4 million and 11.4 million, respectively, as of March 2019, according to research firm Bida.
The majority of users on these resale apps are young and from higher-tier cities—around 89% of the users are under 34 years old, and 58% are from tier-1 and tier-2 cities as of August 2019, according to Getui and data firm Jiguang. We also note that majority users on these platforms buy small item goods, such as beauty and fashion products, although the platforms also carry big-ticket items such as used cars.
Alibaba’s Idle Fish, launched in 2014, is an integrated C2C pre-owned goods marketplace. It originally designed as a channel on Taobao dedicated to second-hand goods. Now it is a standalone app, but users can search Idle Fish in both Taobao and Alipay.
Users on Idle Fish can exchange ideas and information about pre-owned goods that they are looking to buy, as well as posting pre-owned items for sale. Idle Fish lets users create virtual communities called “fish ponds” to consumers to share ideas among each other. “Fish ponds”—communities based on interests, location or institutions—allow users to mingle, share news, and transact. For instance, a fish pond for fans of traditional Chinese clothing has 48,000 members as of Feb. 20.
Alibaba reported 60 million active sellers on Idle Fish during the 12 months ending Sep. 30, 2019, and 1.3 million active interest-based communities. The platform shares cross-platform accounts with Alibaba’s other marketplaces Taobao and Tmall. Currently, users can buy or sell on Idle Fish without paying a commission.
Some of the most popular sellers on the platform are celebrities. More than 100 celebrities have joined the platform to sell used beauty and fashion products, such as second-hand bags, clothes, footwear and cosmetics. Celebrities such as Zhang Yuqi, Zheng Shuang, and Ying Caier joined Idle Fish since 2018, attracting 20 million fans, according to representatives of the platform (in Chinese). Chinese actress Zheng Shuang has 2.6 million followers on Idle Fish as of February 20, 2020. She sold the Hermes notebook whose original price was about RMB 550, at RMB 150 on the platform. Shoppers view celebrity sellers as good sources of authentic and lightly used goods, so you usually have to be quick to snap such a deal.
58.com, one of China’s online classifieds and listing platforms, launched the Zhuanzhuan re-commerce marketplace in 2015. Zhuanzhuan works as a marketplace, allowing individual users (C2C) and businesses (B2C) to list and sell pre-owned goods to other users. It also operates a direct sales model—the platform sources pre-owned goods from users, as well as providing cell phone quality inspection services to improve the user experience.
Zhuanzhuan also partners with home appliance company Haier to provide quality inspection and maintenance solutions for household electrical appliances that are sold on the platform either by direct sales, third-party B2B, or C2C.
In order to establish trust on the platform, Zhuanzhuan gives users the option of importing their WeChat contact list. Users can then see what their own WeChat friends are selling on the platform.
Zhuanzhuan sells mainly 3C (computer, communication, and consumer electronics) products. Around 86% of consumers on Zhuanzhuan and other re-commerce platforms said they focus on mobile phones when browsing re-commerce platforms, and 52.5% of users buy and sell second-hand mobile phones on these platforms, according to a 2019 report by Zhuanzhuan and 36Kr. This is partly due to the frequent updates of phones in the market. However, nearly 57% of respondents also said they have purchased new phones first-hand in the last two years.
Re-commerce is poised to gain more traction in 2020, as Chinese consumers increasingly pursue price-effective buying options and concern for sustainability. With the popularity of re-commerce platforms, such as Idle Fish and Zhuanzhuan, consumers have more opportunities and conveniences to buy and resell pre-owned goods.
More sales of used goods may cut into sales of new goods. Consumers are likely to grow more discerning about the relative merits of new and used. When similar products at a discount through re-commerce, they may not want to pay the premium for new.
However, we also see these platforms to provide opportunities for brand-name products—perhaps by encouraging customers to update their wardrobes more frequently while selling old clothes. For instance, luxury brand Stella McCartney offered a $100 store credit to customers who consigned old products from the brand to resale platforms.