ENT-23-068-CE 2023-11-30

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ATRenew: How to Pursue Future

This document is authorized for use only in Global Strategy and Innovation by Jin Jun at School of Management at Zhejiang University on April 30, 2024.
Growth

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Headquartered in Shanghai, ATRenew Inc. (“ATRenew”) was China’s
largest transaction and service platform for second-hand consumer
electronics. The company recycled used products and disposed of them
in an environmental way while handling B2B transactions and sales.
ATRenew was the first in its industry to go public, listing on the New
York Stock Exchange (NYSE: RERE) in June 2021. The company’s largest
shareholder was JD.com, one of China’s largest e-commerce sites.
Professor Meng Rui, Senior In 2021, ATRenew booked over 31.2 ① million transactions worth
Case Researcher Qiong Zhu
and Research Assistant Xinjie some ¥32.5 billion and total revenue of ¥7.8 billion, up 32.2%, 65.8%, and
Liu of China Europe 60.1%, respectively, from the previous year (see Exhibit 1). Despite a net
International Business School loss, ATRenew recorded a quarterly non-GAAP② operating profit of ¥9.7
developed this case with the million in Q4, its first since listing. In Q1 2022 when some physical stores
helpful cooperation and temporarily closed due to the Covid-19 pandemic, the company still
support of the case company.
For the sake of confidentiality, turned a non-GAAP operating profit of ¥3.9 million.
the author may have revised
financial indicators and key While ATRenew was growing, leading one-stop re-commerce
figures relating to the case platforms like Alibaba’s Xianyu (Idle Fish) and Zhuanzhuan doubled
company. They do not affect down on second-hand electronics, encroaching on the blue ocean that
case discussions or decisions. ATRenew had created. In 2020, ATRenew held a 5.7% share of the second-
The case aims to provide the
hand consumer electronics market, closely followed by latecomer
basis for classroom discussion
rather than illustrate effective Zhuanzhuan with 5.5%.1
or ineffective handling of a
management situation. In such circumstances, what path should ATRenew take to sustain
business growth? Should it compete within the existing market space or
Copyright © 2023 by CEIBS try to break into new categories?
(China Europe International
Business School). No part of “We most recently discussed this question in our management
this publication may be meetings,” said Kerry Chen, founder and CEO of ATRenew, in May 2022.
reproduced, stored in a
retrieval system, or transmitted
in any form or by any means
without permission. To order The Second-hand Market
copies or request permission to
reproduce materials, contact ATRenew’s mission of “Giving a second life to all unused goods”
[email protected], dovetailed neatly with the nature of reselling: capturing the maximum
www.chinacases.org. remaining value of unused commodities, knowledge, and time.2

① ¥= CNY = Chinese yuan renminbi; ¥1 = approximately US$ 0.1568 on December 31, 2021
② Generally Accepted Accounting Principles (GAAP or US GAAP) are a collection of commonly-followed accounting rules
and standards for financial reporting.
 ATRenew: How to Pursue Future Growth ENT-23-068-CE

While re-commerce was already the norm in the west, China’s second-hand market was still in its
embryonic stage. However, younger consumers— 180 million born in the 1990s and 160 million in
the 2000s3—emerged as the largest consumer group in this market.4
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China’s second-hand market also benefited from favorable government policies. These included
The 14th Five-Year Plan for the Development of a Circular Economy, released by the National Development
and Reform Commission (NDRC) in July 2021. The document encouraged people to buy and sell
second-hand goods online, even designating the “regulation of the second-hand market” a strategic
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priority. 5 The Guiding Opinions on Accelerating the Creation of the Waste Materials Recycling System,
jointly issued by the NDRC, the Ministry of Commerce, and five other authorities in January 2022,
emphasized improving second-hand transaction management and addressing intellectual property
problems for reselling. 6 The People’s Procuratorate of Shenzhen set out the Shenzhen Municipal
Guidelines on Criminal Compliance of Intellectual Property Rights in the Electronic Product Renovation
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Industry (Draft) in April that same year. 7 A law for the refurbishment of second-hand products
followed.

China’s second-hand market expanded at a breakneck pace from approximately ¥ 300 billion in
2015 to over ¥ 1 trillion in 2020 and was expected to hit ¥ 3 trillion by 2025.8 Data from 2020 data
showed electrical equipment and electronics comprised the largest proportion of used items traded
nationwide, contributing 41% to the annual sales volume (see Exhibit 2).

Second-hand Electronics
In China, the gross merchandise volume (GMV) of second-hand 3C① products reached ¥ 252
billion in 2020, up from ¥51 billion in 2015. This market was forecast to hit ¥1 trillion by 2025, with
mobile phones the biggest contributor.9 From 2014 to 2020, privately owned mobile phones exceeded
two billion units, with about 524 million handsets becoming unused in 2020 alone. Nevertheless, only
2% were recycled②. The rest were stored or disposed of improperly, becoming electronic waste③.10

The low recycling rate resulted from user mistrust or, more specifically, a lack of reliable,
convenient recycling channels. They also needed quality testing and rating standards for phones, a
fair and just pricing mechanism, as well as privacy protection and quality assurance.11

Digging deeper, the second-hand electronics market was highly fragmented and crowded. The
industry chain was so extensive (see Exhibit 3) that transaction prices often represented a 60-80%
premium. 12 In 2020, the top three market players—ATRenew (8.7%), Zhuanzhuan (3.3%), and
Huishoubao (0.4%)—contributed 12.4% of the overall transaction value. 13 They started life as
facilitators of online transactions. But that year, the online business was not yet mainstream, with
only 10-20% of reselling and 10% of recycling conducted online.14

Leading Platforms
Most major players in the online second-hand ecosystem were e-commerce platforms④, including
Xianyu and Zhuanzhuan, home to most monthly active users (MAUs) (see Exhibit 4). Together, they
held a 90.9% share of the second-hand e-commerce market in 2020,15 with smaller players active in
vertical segments. For example, ATRenew and Huishoubao were two leading electronics-focused
marketplaces.

① 3C products refer to computers, communication products, and consumer electronics.

② China recycled 10% of its 3C products.
③ In addition to batteries, the resin and metal used in mobile phones, if discarded without any pre-treatment, can mean a waste
of resources and significant harm to the environment.
④ The second-hand e-commerce platforms mentioned herein facilitated transactions of idle goods (excluding pre-owned cars
and houses).

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

Xianyu
Launched in 2014, Alibaba-backed Xianyu was an online C2C platform for trading unused items.
In 2019, Xianyu created a B2C channel called Xianyu Youpin, allowing brand owners, distributors,
and recyclers to sell quality second-hand electronics, home appliances, and other standardized

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products to consumers. Notably, all merchants offered policies like “seven-day unconditional returns
and exchanges” and “180-day quality assurance.” In 2020, Xianyu Youpin evolved into Xianyu
Wuyougou, providing consumers with more reliable proprietary or licensed products, including

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quality inspection reports from third-party testers. Xianyu planned to strengthen its offline presence
by establishing stores in 20 cities and facilities in 50 cities between 2021 and 2023.16

Huishoubao

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Huishoubao formed in 2014 as a recycler of mobile phones and other digital devices. In September
2018, it secured strategic investment from Alibaba in its C1 funding round, and a strategic partnership
followed.17 It then unveiled “Xianyu Station · Huishoubao” stores that offered services from trade-
ins and phone repair to data transfers and privacy cleanup. Huishoubao also developed its own
privacy tool. It sold recycled products to consumers (15-20%) and downstream intermediaries
(around 80%).18 The former took the high-quality products.

Huishoubao launched Tiangong Tester, an AI-powered tool that could automatically test a phone
within seven minutes with a maximum error rate of 1%. This tool would enable the company to cut
manual testing costs by 90%.19

In April 2021, Huishoubao designed “Yanji Inspector” for mobile phone recyclers in collaboration
with Shalou① in September 2020. Yanji Inspector is a mobile inspection device about the size of a
cigarette lighter.

Zhuanzhuan
Established in 2015 and backed by Tencent and 58.com,② Zhuanzhuan was an online second-hand
marketplace that listed all kinds of used items. Zhuanzhuan shifted focus to electronics in late 2019,
expanding its partner network to Zhaoliangji. Founded in 2015, Zhaoliangji was a direct selling
platform specializing in slightly used electronics, with a proven track record in phone quality testing
and valuation. It accepted returns and exchanges up to seven days after purchase. In 2020,
Zhuanzhuan acquired Zhaoliangji. In the second quarter of that year, Zhuanzhuan and Zhaoliangji
were China’s two leading players in the second-hand mobile phone space by daily active users
(DAUs).20

Zhuanzhuan created a B2B platform called Caihuoxia at the end of 2019. Caihuoxia employed its
own used phone rating and inspection standards and pricing model. It mainly targeted mobile phone
recyclers and distributors. By October 2021, Caihuoxia had achieved a 450% year-on-year increase in
GMV while charging half as much as competitors.21

ATRenew
ATRenew set itself on a completely different path. While leveraging the internet to break into the
second-hand electronics market, it created the segment’s first end-to-end platform. It focused initially
on recycling (via its Aihuishou C2B platform) before venturing into distribution (via its PJT
Marketplace B2B platform) and retail (via its Paipai B2C platform). By 2020, ATRenew had combined
Aihuishou, PJT Marketplace, and Paipai into one integrated platform (see Exhibit 5).

① Shalou is known for its inspection software that works seamlessly with iPhones.
② 58.com is an online classifieds firm that provides local life services concerning housekeeping, reselling, recruitment, real
estate, vehicles, etc.

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 ATRenew: How to Pursue Future Growth ENT-23-068-CE

After examining the quality of items recycled through Aihuishou, ATRenew would sell high-
quality items (nearly 20%) directly to end users through Paipai before marketing inferior products
(over 70%) to downstream vendors through PJT Marketplace. It left third parties eligible to process
renewable resources with the remaining end-of-life items. ATRenew would also ensure compliance
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and environmental friendliness throughout dismantling and disposal. The company could reap
profits from the price difference ① and processing fee while delivering on its environmental
proposition. Selling recycled mobile phones helped cut 464,000 tons of carbon emissions② in 2021,
equivalent to growing 150,000-plus hectares of forests in a year. Having third parties recover useful
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materials from recycled electronics saved 35.7 tons of electronic waste.

Aihuishou
Online to Omnichannel Recycling
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ATRenew set up Aihuishou in 2011, two years after its founding team embarked on their
entrepreneurial journey. Before this, ATRenew experimented with a C2C second-hand trading
model, which ultimately failed. Kerry realized that the company was spreading itself too thinly across
many areas. With the launch of the iPhone4 in 2010, he sensed a business opportunity. “China has
many mobile phone users, assuring a stable supply of pre-used mobile phones,” he said. “There are
also many participants in different links of the value chain, impeding market efficiency. This might
present an opportunity for us to integrate resources.” Later, ATRenew built a re-commerce platform
for buying second-hand mobile phones from users and selling them to retailers.

In just two years, however, this operating model was unsustainable. Online marketing incurred
high costs without translating into traffic conversions. As Kerry put it, “Offline scenarios, not online
traffic, should drive phone recycling demand. Specifically, physical stores bring footfall, while face-
to-face communication builds consensus and trust to strike a deal. The store adjacent to the new
mobile phone sales store is the best scenario. Once users get a new phone in store, they will probably
consider selling the old one.”

Opening brick-and-mortar stores required massive investment. Despite the capital markets’
lukewarm attitude, International Finance Corporation (IFC)③, an investment firm under the World
Bank Group, invested in Aihuishou in July 2014. Later, Aihuishou’s operated stores (see Exhibit 6)
popped up in shopping malls in first and second-tier cities. From 2015, Aihuishou’s franchise stores
appeared in third and fourth-tier cities. According to Kerry, the company refrained from opening
operated stores in lower-tier cities due to insufficient resources.

In 2014, Aihuishou agreed on a strategic partnership with JD.com to pioneer trade-ins. In 2019,
the company’s stores started offering one-stop services, including trade-ins, mobile phone data
transfers, and data cleanup.

Buoyed by JD.com’s new handset sales, Aihuishou significantly expanded its network of stores.
The company also extended its scope of business to begin supplying screen protectors, repairs, as
well as parts and accessory replacements. As a result, Aihuishou-operated store raked in ¥600,000 in
monthly sales on average after six months of operations, with a net profit margin exceeding 3%.

① ATRenew could make a profit by processing recycled 3C products and later selling them at higher prices.
② ATRenew believed that the level of emissions reduction hinged on the used mobile phone’s production date and quality. Big
data suggests that the earlier its production date (or the lower its quality) was, the less likely it was that the owner would
continue to use it. Leveraging its platform to find people willing to use the phone, ATRenew captured the value of the
presumed “idle or discarded” product, while at the same time mitigating carbon. CO2 emissions reductions ATRenew
achieved were the cumulative result of all its resold phones.
③ IFC is the largest global development institution focusing on the private sector in developing countries. On April 12, 2019,
the Operating Principles for Impact Management were launched in Washington, D.C.

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

The more substantial offline presence led to increased online orders: more and more users placed
orders online and received the corresponding services in-store. Online orders in Aihuishou stores
comprised 48% of orders in 2018, compared to 42% in 2015.22

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By Q1 2022, Aihuishou had penetrated 214 Chinese cities, with 598 company-operated stores and
825 franchise stores.

As Aihuishou expanded its footprint, its trade-in business boomed. In the first half of 2021, users

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involved in trade-ins tripled. 23 In addition to JD.com, the company also teamed with Xiaomi,
Huawei, and Vivo to promote trade-ins on their official websites, apps, and authorized resellers. The
formula worked as more users walked into Aihuishou stores or used Aihuishou’s self-service kiosks
(see Exhibit 7) at authorized resellers of Xiaomi/Huawei/Vivo handsets. By Q1 2022, Aihuishou had
over 1,800 of these kiosks.

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Upscaling User Experience
Aihuishou incorporated “convenience, safety, and price transparency” into its value proposition
to win users' trust. Accordingly, it adopted a more transparent pricing model, arranged payment on-
site, and provided privacy protection for users.

Traditionally, used phone prices varied depending on the model and condition. A lack of
standards often resulted in intense bargaining, forcing prices down. In light of this, Aihuishou set
standards to ensure transparency.

In 2014, it developed quality inspection standards, including 49 patents and a rating system,①
with reference to historical data on average transaction prices for used phones with varying degrees
of scratches and different years of usage. The company designed a pricing mechanism considering
ratings, market supply and demand, and operating costs.

These measures differentiated Aihuishou from traditional recyclers. When users accessed
Aihuishou’s recycling page, they answered six or seven multiple-choice questions about the brand,
model, service life, and condition. “These are the most basic but essential questions,” said Wang
Yongliang, President of ATRenew. “They can make users understand the underlying logic behind
our pricing.”

The estimated price of a used phone would show up on the recycling page instantly after the user
answered all the questions. Users who found the price acceptable could take their phone to the nearest
Aihuishou store or send it to the company’s operations center for quality inspection and rating before
receiving a final offer. At stores, if the user agreed to sell the phone at the given price, an employee
would verify the user’s identity before transferring or erasing their phone data and arranging
payment. The entire process took about 20 minutes. However, Aihuishou would make a down
payment at the operations center after verifying the user’s identity and pay the balance upon receipt
and inspection of their handset.

Aihuishou also introduced stringent privacy cleanup standards for its data-erasing system,
AiQingChu. Users could enjoy privacy protection as the company would erase user data from
recycled mobile phones at both offline stores and operations centers. In March 2021, Aihuishou
promised to compensate users 100 times the recycling price in the case of a data leak.

Aihuishou sought to handle every user complaint, with a response time typically under 24 hours.
In 2021, the company recorded a satisfaction level with complaint handling as high as 98.5%. Most
Aihuishou stores received at least four-star ratings on Meituan, with users frequently using terms
like “professional,” “convenient,” and “reasonably priced” to refer to Aihuishou’s services.

① According to data from 2021, ATRenew had 36 ratings for used mobile phones collected from business clients, and six ratings
for those of individual consumers.

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 ATRenew: How to Pursue Future Growth ENT-23-068-CE

PJT Marketplace
By the end of 2017, Aihuishou had already built a large customer base. Its business model meant
buyers needed to pay the full amount before the platform sent them the products, because demand
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outstripped supply at that time. To maintain or even expand the current customer base, Aihuishou
would need to increase its product supply. So, it opened up the platform to those looking to sell used
phones.
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ATRenew’s board of directors initially voiced objections. Opponents argued that Aihuishou
should seek steady growth by expanding brick-and-mortar stores instead of risking losing customers
with a new platform fraught with uncertainty. However, Aihuishou’s management team asserted
that the current business model would limit the platform’s development. The only way to grow
uninterruptedly was to open up and bring merchants in as partners. On this basis, they could offer
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standardized services to boost trading efficiencies.

“PJT Marketplace did not appear out of thin air. It was built upon a solid foundation of resources
and competencies,” said Wang. Before creating this new platform, Aihuishou had already
accumulated significant buyer resources that could attract electronics merchants. It had a well-
established system covering quality inspection, rating, and pricing. The platform also built city-level
operations centers in Changzhou, Dongguan, Tianjin, Chengdu, Wuhan, and Hong Kong (China). In
2017, Aihuishou built an automated processing line in Changzhou to deliver, inspect, sort, and store
non-standardized second-hand electronic products. This line capped sorting errors at 0.01%, reducing
the sorting time threefold. Phone quality inspection accuracy exceeded 99%, while labor costs fell
40%. The Changzhou operations center’s sales per unit area thus increased 300%. “These standards
and capabilities could serve as a powerful platform enabler,” added Wang.

In 2018, Aihuishou invested the USD 150 million it raised that year in creating PJT Marketplace.
Hundreds of employees went to different places as local representatives to promote the new platform.
PJT Marketplace offered friendly policies to both sellers and buyers. Specifically, it provided sellers
with quality inspection, rating, storage, logistics, and agency services. These served as a reliable
endorsement for sellers’ products, helping them close deals at a reasonable price. The platform also
protected buyers’ rights. A three-day refund or replacement policy was available for buyers, as well
as shipping services.

PJT Marketplace introduced a trading system based on algorithm-driven pricing and bargaining.
The pricing model automatically generated a price baseline. Then, buyers and sellers could negotiate
until they reached a mutually agreed number.

Wang was proud of PJT Marketplace’s performance. “PJT Marketplace has become a pricing
benchmark in the industry,” he said. “This means our standards are recognized across the industry.
We are enabling more people to divide up the pie.”

In 2020, PJT Marketplace became China’s largest B2B pre-owned 3C trading platform with a 10.8%
market share, followed by Caihuoxia with 1.8%.24

PJT Marketplace’s revenues mainly came from commissions and service fees.① Its overall fee rate
rose from 0.5% in 2018 to 4.6% in 2021. Services contributed 0.4% of revenues in 2018, rising to 14.5%
in 2021. PJT Marketplace also controlled goods sourcing. In 2021, about one-quarter of PJT
Marketplace’s products came from the Aihuishou platform, while the rest came from third-party
merchants. By the end of 2021, registered sellers on PJT Marketplace reached 150,000.

As PJT Marketplace’s business grew, sources of products on this platform became increasingly
complicated. Therefore, ATRenew raised investment in automation. In 2021, the company upgraded

① PJT Marketplace charged commissions from both sellers and buyers. The service fees included quality inspection fee,
shipping fee, and storage fee.

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

its automated processing line in Changzhou, enabling fully automated inspections. This move cut
inspection costs by 20% and increased efficiency by 18%. The company also opened 116 city-level
warehouses in China to provide convenient services to nearby merchants. Some city-level
warehouses possessed automated inspection capabilities. Turnaround time for products on PJT

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Marketplace averaged three days, compared to ten days for competitors.

Paipai

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Paipai, a former JD.com subsidiary, was a re-commerce platform that traded over 100 product
categories, including luxury goods, electronic devices, and clothes. In June 2019, Paipai merged with
ATRenew.

ATRenew had previously attempted to build its own B2C platform. However, the platform’s

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customer base was too small, and the business remained modest.

Merging with Paipai meant JD.com became a major strategic shareholder in ATRenew, with used
products in JD.com’s second-hand warehouse① becoming accessible to ATRenew.

The merger made Paipai an additional B2C trading platform for merchants on the PJT
Marketplace. Different selling models were available on Paipai, including agent-selling or POP
(Platform Open Plan). For merchants choosing the agent-selling model, Paipai provided diversified
services, including quality inspection, rating, and pricing. The company also charged commissions
from merchants, with the ratio based on the services it provided.

ATRenew opened a flagship store on the Paipai platform—Paipai Selection—with brick-and-

mortar stores under the same name. By the end of 2021, most products on Paipai were still sold via
the POP model, though Paipai Selection had started livestreaming on Kuaishou.

“It’s hard to operate our flagship store on Paipai, because we don’t have enough supply. We must
focus on solving this problem,” said Wang in May 2022.

Most Paipai customers came from JD.com. They were most interested in 3C products. Paipai
provided a seven-day refund guarantee and 180-day quality assurance. From 2019 to 2021, the annual
number of users closing deals on Paipai rose from 3.6 million to 5.5 million.

Integrated City Model

In addition to combining the C2B, B2B, and B2C businesses into one integrated platform,
ATRenew crafted its “Integrated City Model” in December 2021. In Kerry’s words, “This model
marks our platform’s extension into different cities. This can help us improve the platform’s
penetration rate in local markets.” Before rolling out this model, the platform’s penetration rates were
lower than 5% in over 70% of the cities where it operated.

ATRenew built a Big Front-end Department to implement this model, managing all frontline
teams for the C2B, B2B, and B2C businesses. The company also set up a new position: City-Level
General Manager. This role coordinated resources from the above three lines of business in different
cities.

“We previously had these three business lines in different cities without forming synergies. Now,
we can link all the dispersed, disconnected points in a city, sourcing and facilitating transactions

① Products in the JD.com second-hand warehouse include:

1. Intact products sold by JD.com but returned under the 7-day money-back guarantee;
2. Intact products with broken outer packaging;
3. Previously unqualified goods that were returned by customers and then repaired or replaced by the manufacturers.

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locally in an efficient and cost-effective manner,” said Wang. “Our B2C, B2B, and C2B businesses can
now share the same customer base.”

ATRenew selected 22 cities to pilot the new model. By Q1 2022, business growth in 16 cities
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exceeded the company average. Some pilot cities even saw 30% greater growth. Particularly
noteworthy were the year-on-year growth rates achieved in the pilot cities. These were 120% for the
C2B business and 200% for the B2B business. Registered merchants on PJT Marketplace hit 300,000,
representing a year-on-year increase of 39%.
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Nevertheless, some outsiders still voiced concerns about its feasibility. “This arrangement can lead
to higher demands on the company’s internal circulation. It is not easy to effectively connect users,
inspectors, and merchants. It is also challenging to coordinate among external stakeholders. In
addition, under this model, city-level operations can have a greater impact on the company’s overall
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performance.” An industry observer said.25

However, Wang felt ATRenew’s biggest challenge was talent cultivation, especially for positions
like city GMs at operations centers. “Most of our employees are good at their jobs, but doing other
jobs is challenging. They don’t have comprehensive knowledge or skillsets. We can only train them
during practice.” Another daunting task for the company’s management team was internal
collaboration. “Shortly, we will undergo a major organizational transformation,” added Wang.

Strategic Choices for the Future

As leading one-stop re-commerce platforms broke into the second-hand electronics space, fierce
competition ensued. ATRenew was at a strategic crossroads, forced to choose between consolidating
its position in the existing market segment or expanding into new categories.

Option 1: Focus on Pre-owned 3C Products

Kerry believed the unsaturated market for used electronics had tremendous potential, while the
efficiency and industry chain ecosystem still needed improving. As a used product market pioneer,
ATRenew had a first-mover advantage when choosing business priorities.

For example, ATRenew used the Integrated City Model for recycling to accurately control goods
sourcing in different cities. It also created Device Hero, a portable machine for convenient device
inspection, helping small merchants inspect the quality of pre-owned devices and facilitate pricing,
recycling, and reselling. “Device Hero is a physical representation of ATRenew’s standards and
capabilities. We hope it can bring new business opportunities to PJT Marketplace. This does not mean
we require users to place their goods on the platform after using Device Hero. Users can always make
their own choices. All we want is the transactional data,” said Wang.

The small merchant group was large but dispersed. Their recycling demand comprised over 60%
of the total market demand.26 Such colossal market potential attracted competitors like Huishoubao,
who launched “Yanji Inspector.”

ATRenew’s offline business was also growing as it attracted more customers. For example,
customers who sold their used products might then need new ones. ATRenew started device trade-
ins at physical stores. The company purchased new devices and sold them to customers. Sometimes,
customers could buy a new trendy handset unavailable elsewhere. Despite the potential of this
business, Wang remained rational about it. “This is not something we want to promote strongly; I
think there is still a long way to go,” he said. “We must ensure the phone brands are happy about us
selling their products.”

ATRenew saw new opportunities in its sales business as China introduced new policies and
regulations on consumer electronics’ maintenance and refurbishment. For example, a used mobile

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

phone could only sell for ¥ 1,600 without refurbishment, while a refurbished one could be ¥ 500
higher. “We didn’t have refurbishment services in the past,” he said. “Thus, only one-fifth of goods’
sources qualified for retail. But refurbishment services would free up many other sources, and we
could add these refurbished devices to the Paipai Selection store. We may also sell them overseas.”

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said Kerry.

Since the pre-owned electronics arena presented enormous opportunities, both one-stop and
electronics-focused re-commerce platforms with huge traffic swarmed into the market. Facing

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increasingly fierce competition, should ATRenew continue focusing on this space?

Option 2: Expand the Product Range

In early 2022, ATRenew started recycling luxury handbags, wristwatches, and photography gear

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in 10-20 of its big offline stores. Just like mobile phones, these products have relatively high residual
value. “We have opened a new subsidiary—Zhiyao. This new company focuses on luxury goods
recycling,” said Wang. “We are investigating the duplicability of the previous business model in this
new business, which could represent a new blue ocean. We want to find synergies with our main
business and fuel future growth.”

ATRenew needed to train its employees with new skills and knowledge to develop this new
business. This was a challenge because the company had already faced difficulties in talent cultivation
and synergistic business development under the Integrated City Model. ATRenew’s top management
had to consider if luxury recycling would exacerbate its talent shortage or add complexities to
business management.

While ATRenew had already gained an advantage in pre-owned electronics, top management did
not rest on its laurels. They sought long-term development by investing more resources and efforts.
They knew that competitors were growing rapidly. Mindlessly rushing into new business meant the
company had to divert resources from its main business, potentially harming overall performance.

All in all, the management had to revisit the trade-off between the advantages of developing new
business and those of competing within existing market space so the company could achieve
sustainable growth.

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 ATRenew: How to Pursue Future Growth ENT-23-068-CE

Exhibit 1: ATRenew Financial Results (2019-2021)

(In thousands of ¥)
2019 2020 2021
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¥ % ¥ % ¥ %

Revenues 12,200,000 19,600,000 32,500,000

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Operating revenues 3,931,000 4,858,000 7,780,000

Net product revenues 3,730,206 94.9 4,244,023 87.4 6,654,893 85.5
Net service revenues 201,652 5.1 614,176 12.6 1,125,382 14.5
Operating expenses
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Merchandise costs (3,176,401) (80.8) (3,610,434) (74.3) (5,735,393) (73.7)

Fulfillment expenses (658,149) (16.7) (666,317) (13.7) (1,062,066) (13.7)
Selling and marketing expenses (566,792) (14.4) (740,542) (15.2) (1,206,649) (15.5)
General and administrative expenses (140,874) (3.6) (177,542) (3.7) (433,629) (5.6)
Technology and content expenses (142,858) (3.7) (151,536) (3.1) (264,560) (3.4)
Cash flows from operating activities (410,800) (412,900) (1,018,000)
Net loss (704,888) (470,618) (816,547)

Source: ATRenew annual reports.

Exhibit 2: Trade volumes of Pre-owned Goods (2015-2020)

(in billions of ¥)
Electric equipment Daily necessities, Furniture, apparel,
Luxuries
and electronics books, and others and fashion items

Trade YoY Trade YoY Trade YoY Trade YoY

volume growth volume growth volume growth volume growth
2015 41.12 82.91 78.4 7.53

2016 100.62 144.7% 149.4 80.2% 141.81 80.9% 8.54 13.4%

2017 167.36 66.3% 209.76 40.4% 183.85 29.6% 9.81 14.9%
2018 244.78 46.3% 262.11 25.0% 222.07 20.8% 11.04 12.5%
2019 332.94 36.0% 292.49 11.6% 244.44 10.1% 13.53 22.6%
2020 434.9 30.6% 337.9 15.5% 264.38 8.2% 14.82 9.5%

Note: Contribution to the 2020 annual trade volume by category:

Electric equipment and electronics: 42.34%;
Daily necessities, books, and others: 32.12%;
Furniture, apparel, and fashion items: 25.13%;
Luxuries: 1.41%.

Source: Chyxx.com, “2020 Analysis of Trade Volume, Market Size, and Prospects of China’s Second-hand Market,” August
13, 2021, accessed on June 14, 2022, http://www.d1kc.com/post-856.html.

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

Exhibit 3: Pre-owned Consumer Electronics Industry Chain

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Source: ATRenew.

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Exhibit 4: Number of MAUs of Major Second-hand E-commerce Apps

E-commerce apps June 2021 October 2020 October 2018

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Xianyu 55,893,000 52,811,000 22,212,000
Zhuanzhuan 16,189,000 15,335,000 13,794,000
Zhaoliangji 3,910,000 1,167,000 714,000
Aihuishou 480,000 223,000 177,000
Paipai 286,000 207,000 287,000
Tiebaobei 257,000 360,000 103,000

Source: (1) “Xianyu Has over 50 Million MAUs This June Whereas Zhuanzhuan Has Less Than 2 Million,” bigdata-research.cn,
September 7, 2021, accessed on June 14, 2022, http://www.bigdata-research.cn/content/202109/1194.html;
(2) “Second-hand E-commerce App Ranking List (October 2020),” bigdata-research.cn, December 16, 2020, accessed on
June 14, 2022, http://www.bigdata-research.cn/content/202012/1115.html;
(3) “BigData-Research: Xianyu Focuses on Creating a Second-hand Ecosystem While Zhuanzhuan Commits Itself to
Providing Standardized Services,” bigdata-research.cn, December 7, 2018, accessed on June 14, 2022,
http://www.bigdata-research.cn/content/201812/795.html.

Exhibit 5: ATRenew’s Integrated Platform

Source: ATRenew.

11
 This document is authorized for use only in Global Strategy and Innovation by Jin Jun at School of Management at Zhejiang University on April 30, 2024.
The authorization allows 16 copy permissions. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without permission.
To order copies or request permission to reproduce materials, contact [email protected], www.chinacases.org.

Source:
Source:

ATRenew.
ATRenew.
ATRenew: How to Pursue Future Growth

Exhibit 6: Aihuishou Physical Store

Exhibit 7: Aihuishou Self-Service Kiosks

ENT-23-068-CE

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ATRenew: How to Pursue Future Growth ENT-23-068-CE

Endnotes
1 Jin Duan and Jie Di, “ATRenew Stock Prices Hint at the Potential of Second-hand E-commerce,” Chinaventure.co
m, November 8, 2021, accessed on June 14, 2022, https://www.chinaventure.com.cn/news/78-20211108-365392.html.

The authorization allows 16 copy permissions. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without permission.
2 Forecast Thinktank, “Why ‘Resale Economy’ Became a Major Global Consumption Trend,” ThePaper, February 16, 2022,

accessed on June 14, 2022, https://www.thepaper.cn/newsDetail_forward_16720351.

3 “Characteristics of Chinese Consumers Born in the 1990s,” Huxiu.com, November 18, 2020, accessed on June 30, 2023,

https://www.huxiu.com/article/394408.html.

This document is authorized for use only in Global Strategy and Innovation by Jin Jun at School of Management at Zhejiang University on April 30, 2024.
3 Mo Jie, “Changes in Consumption Habits Are Evident in the Rise of ‘Resale Economy,’” Gmw.cn, July 29, 2021, accessed on

June 14, 2022, https://news.gmw.cn/2021-07/29/content_35035161.htm.

5 Mwqc, “A Survey of Internet-based Recyclers: Research Paper on Reselling and Low-carbon Life,” NetEase, Augus

t 24, 2021, accessed on June 14, 2022, https://www.163.com/dy/article/GI5LNFGG05315Y1B.html.

6 “Seven Authorities Encourages the Creation of ‘Flea Markets,’ Driving Second-hand Transactions,” People.com, January 21,

2022, accessed on June 14, 2022, http://finance.people.com.cn/n1/2022/0121/c1004-32337044.html.

To order copies or request permission to reproduce materials, contact [email protected], www.chinacases.org.

7 “Second-hand 3C Recyclers Like Aihuishou Benefits from Shenzhen’s Policy of Encouraging the Reselling of Properly

Refurbished Mobile Phones,” Tencent, May 26, 2022, accessed on June 14, 2022,
https://new.qq.com/omn/20220526/20220526A06EW500.html.
8 Zhang Min, “The Chinese Second-hand Market Worth Over RMB 1 Trillion, with Young People as the Largest Consumer

Group,” Chinanews.com, December 7, 2021, accessed on June 14, 2022, https://www.chinanews.com.cn/cj/2021/12-

07/9623909.shtml.
9 Yan Jiu, “2020 Analysis of the State of China’s Second-hand Consumer Electronics Industry: Pre-owned Mobile Phones Are

Among the Most Actively Traded,” Huaon.com, February 6, 2022, accessed on June 14, 2022,
https://www.huaon.com/channel/trend/781713.html.
10 Zhao Tianyu, “Where Should 500 Million Idle Mobile Phones and 2 Billion Privately Owned Phones Go?” Tencen

t, March 16, 2022, accessed on June 14, 2022, https://new.qq.com/omn/20220316/20220316A020RN00.html.

11 Happenings on the internet, “Is ATRenew, a Recycler with a GMV of RMB 32.5 Billion, in a Profit-making State?”

Niaogebiji.com, April 11, 2022, accessed June 14, 2022, https://www.niaogebiji.com/article-110600-1.html.

12 Arfgc, “Why ATRenew Stocks Were Highly Sought-after When Other Overseas-listed Chinese Stocks Met with a Lukewarm

Reception?” Sohu.com, August 20, 2021, accessed on June 14, 2022, https://www.sohu.com/a/484518919_355012.
13 “As Competition in the Second-hand 3C Market Becomes Fiercer, Can ATRenew Turn a Profit?” Sina.com, March

14, 2022, accessed on June 14, 2022, https://finance.sina.com.cn/stock/hkstock/ggscyd/2022-03-14/doc-imcwiwss599

7480.shtml.
14 Lu Ming, “Aihuishou Experiences High Levels of Anxiety,” ThePaper, June 7, 2021, accessed on June 14, 2022,

https://www.thepaper.cn/newsDetail_forward_12995412.
15 Ye Xiaoan, “Together, Xianyu and Zhuanzhuan Hold a 90.9% Share of the Second-hand Market Worth RMB 1 Tr

illion,” Qianzhan.com, March 23, 2021, accessed on June 14, 2022, https://xw.qianzhan.com/analyst/detail/329/210
323-e82994b5.html.
16 Lin Beichen, “Xianyu Plans to Open New Stores in 20 Chinese Cities in the Next Three Years, But Can Online and Offline

Integration Help to Turn the Company Around?” Sina.com, December 2, 2020, accessed on June 14, 2022,
https://finance.sina.com.cn/chanjing/gsnews/2020-12-02/doc-iiznctke4346724.shtml.
17 “2018 Xianyu Press Conference: Xianyu, Whose Annual GMV May Hit RMB 100 Billion, Forms a Strategic Partne

rship with Huishoubao, Ifeng.com, September 7, 2018, June 14, 2022, https://finance.ifeng.com/a/20180907/1649209
0_0.shtml.
18 Nan Qidao, “An In-depth Look at the RMB 100 Billion Worth of the Used Phone Market,” Jiemian.com, Novemb

er 3, 2017, accessed on June 14, 2022, https://www.jiemian.com/article/1723949.html.

19 “Huishoubao Launches an AI-powered Tester to Disrupt the Used Mobile Phone Market,” Tencent, September 21,

2020, accessed on June 14, 2022, https://new.qq.com/omn/20200921/20200921A0HQ1D00.html.

20 “Competition in the Re-commerce Arena Becomes Fiercer During the Pandemic: Zhuanzhuan Reinvents Itself and Gains

Popularity,” Tencent, December 25, 2020, accessed on June 14, 2022,

https://new.qq.com/omn/20201225/20201225A0GU2H00.html.
21 “Zhuanzhuan’s Caihuoxia: Working with Merchants to Build an ABC Distribution System That Covers All Links i

n the Used 3C Product Distribution Chain,” Mydrivers.com, October 19, 2021, accessed on June 14, 2022, https://
news.mydrivers.com/1/789/789860.htm.
22 Big Data from Aihuishou: Drastic Changes in the Market for Recycling in the Past Three Years,” Sohu.com, Janua

ry 5, 2018, accessed on June 14, 2022, https://www.sohu.com/a/214819513_398736.

23 “2021 JD.com Research Report on Circular Economy: Users Involved in a Trade-in Tripled,” Tencent, December 3, 2021,

accessed on June 14, 2022, https://new.qq.com/omn/20211203/20211203A01ND100.html.

24 Jin Duan and Jie Di, “ATRenew Stock Prices Hint at the Potential of Second-hand E-commerce.”
25 “With Revenue Growing and Loss Decreasing, ATRenew May Have Been Thrown a Lifeline” Sina.com, Novembe

r 22, 2021, accessed on June 14, 2022, https://t.cj.sina.com.cn/articles/view/6792477066/194dcf98a02700vio5.

26 Nan Qidao, “An In-depth Look at the RMB 100 Billion Worth of the Used Phone Market.”

13