How does Xingsheng Selected stand out in China’s community e-commerce?

During the entire epidemic period, compared with the same period last year, the average order volume of Xingsheng Selected stores increased by 3 times, new users increased by 4 times, and GMV increased by 5 times.

For community e-commerce companies such as Xingsheng Selected, the epidemic is a double-edged sword.

On the one hand, stores were closed, delivery personnel could not be on duty, and business stagnation had a great impact on the retention of old users and the growth of GMV. On the other hand, the increased online demand due to the epidemic can bring a large number of new customers to the platform.

Zhou Yingjie, president of Xingsheng Selected, recently told media that at the end of February this year, the opening rate of Xingsheng Selected stores returned to the state before the epidemic. During the entire epidemic period, compared with the same period last year, the average order volume of Xingsheng Selected stores increased by 3 times, new users increased by 4 times, and GMV increased by 5 times.

In the past year, community e-commerce, which has grown wildly as a highly promising market, has ushered in an industry reshuffle. Brands such as Niwonin merged with Nicetuan, heralding the prologue of the integration era of top-tier players; small and medium-sized players were exposed to layoffs, reduced business, and their exposure and say became weaker in the market.

New players are also joining. Recently, Didi aimed at Chengdu and launched the Chengxin Youxuan community e-commerce project to test the waters. The crossover operation of this ride-hailing giant also means that opportunities still exist in this area.

As the origin of community e-commerce, Changsha is also at the center of this industry change. Xingsheng Selected, established in Changsha, has been accelerating its growth. After obtaining Capital Today’s first round of financing in 2018, Xingsheng Selected completed a series of projects involving Tencent, Primavera Capital Group, KKR, Eastern bell Capital and other institutions in 2019 in another round of financing.

On June 29, according to Bloomberg News, Tencent and Primavera Capital Group would provide financing for Xingsheng Selected at a valuation of US$3 billion. Xingsheng Selected did not deny the financing news when responding to the media at the time, but stated that “the information is inaccurate, and the valuation and investor information are not accurate.”

In 2019, Xingsheng Selected’s monthly GMV increased from 300 million yuan to 1.8 billion yuan. After the epidemic, its monthly GMV also increased significantly compared to the end of last year.

How did Xingsheng Selected grow successfully?

In Zhou’s view, Xingsheng Selected can achieve steady growth in GMV because it has done two things right.

The first thing is to adhere to the physical store model to help store owners make money and mobilize their enthusiasm.

There are two modes of community e-commerce: serving mothers or serving users through stores. In contrast, the uncertainty of serving mothers is higher. Players who used the mothers model in the past are also expanding their stores.

Xingsheng Selected’s understanding of offline store model can be traced back to Furong Xingsheng, a supermarket chain founded by Chairman Yue Lihua of Xingsheng Selected.

Twenty years ago, Yue established a wholesale department to supply various small shops. A few years later, Yue established a supermarket chain Furong Xingsheng. Later, based on the business results, he decided to close stores of above 100 square meters and focus on convenience supermarkets of 30 to 80 square meters. Ten years ago, with the rise of e-commerce, Yue began to explore the way out of convenience stores.

From 2014 to the first half of 2016, the team has explored three models, from the self-delivery of store owner, to setting up front-end warehouses, setting up a distribution team, and then turning the warehouses into small warehouses and distribution stations. But because it failed to solve the problem of customer acquisition and costs, three attempts ended in failure. After losing tens of millions, this founding team was disbanded, with mainly the core technical staff stayed.

Zhou and another co-founder, Liu Huiyu, did not leave. They insisted that they could make it happen. After spending more than half a year working closely with the store owner, they discovered that the store owners have several demands: they don’t want to invest extra manpower and capital; they don’t want to stock up; they hope to collect money immediately; they hope to increase the number of customers.

In June 2016, the prototype of Xingsheng Selected, a community e-commerce company, was born, focusing on fresh food not sold in convenience stores, and allowing store owners to sell goods to surrounding residents through WeChat groups, where residents are allowed to collect goods by themselves, which increased store traffic. This also solves the problems of customer acquisition, inventory and last-mile delivery.

Zhen Fund participated in Xingsheng Selected’s Series A financing in October 2018. The team’s “offline-store gene” is one of the reasons for Zhen Fund’s investment.

“The team’s understanding of the husband-and-wife shop, or familly-run stores, established the core business model of Xingsheng Selected.” Yin Le, investment director of Zhen Fund, told the media at the time that the essence of community e-commerce is to obtain low-cost customers through stores. Then they complete the last mile service closed loop. How to quickly expand stores is the key to its GMV growth.

Xingsheng Selected has fully mobilized the enthusiasm of husband-and-wife shop owners, and these shop owners have strong store development capabilities.

Xingsheng Selected has established a mechanism for training and serving store owners. This is actually the “common practice” of each community e-commerce company, and Xingsheng Selected believes that it has a refined degree of customer service. Its service team of hundreds of people can respond to the needs of store owners in a timely manner. “The store owner’s money in Xingsheng Selected is the most stable and the most worry-free.” Zhou said.

The second thing is to have a self-built logistics system to ensure the quality of goods and the timeliness of next-day delivery. Based on the accumulation of more than ten years in logistics, Xingsheng chose to build a three-level logistics distribution system of “central warehouses – grid stations – stores”.

Suppliers cooperating with Xingsheng Selected only need to deliver goods to Xingsheng Selected warehouses, and all the remaining work will be completed by Xingsheng Selected’s logistics system. Xingsheng prefers to control the quality of goods in various steps such as sorting, packaging, transportation, and del
ivery to ensure user experience.

In Zhou’s view, self-built logistics cost more, but logistics is an infrastructure that can bring a better consumer experience, with short-term investment but long-term return. According to reports, Xingsheng Selected’s logistics system has undergone five upgrade iterations, and the cost for each delivery has dropped significantly.

Such a system can quickly respond to emergencies such as the epidemic to ensure the supply of goods. “During the epidemic, fresh meat was no longer available in Wuhan. We transported them from Hunan with a total of 2,000 tons of materials. When stores were closed, we cooperated with property companies to deliver the materials to the communities.” Zhou said.

This logistics system has also reached the rural areas and solved the “last mile” problem of rural e-commerce. Ordinary e-commerce orders in these areas are often not intensive enough, and the cost of sending a single express to a resident’s home is too high. In contrast, the frequency of ordering fresh food is high, and the centralized delivery to a certain store in the village also reduces logistics costs.

Disclaimer: This is an article created by Michael Liang for Chinasdg.org. You can find the original article here: https://chinasdg.org/2020/08/08/how-does-xingsheng-selected-stand-out-in-china-s-community-e-commerce/.

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