Xingsheng Youxuan, which chose a protracted struggle, has taken another major step back. Even after successfully enduring the summer off-season and approaching the peak season for community group buying, it has not changed its city closure plans. Since August, Xingsheng Youxuan has been closing cities one after another. First, it gradually contracted business in some provinces to provincial capitals, then shut down the remaining provincial capital operations in some provinces. Now, Xingsheng Youxuan has successively withdrawn from five provinces: Shanxi, Jiangsu, Zhejiang, Hebei, and Anhui, and operations in Shandong and Shaanxi have also been significantly reduced. "The city closures were not sudden; we received advance notice. Mainly, the daily order volumes in these closed cities were too low and not competitive, so we pulled out early," one Xingsheng supplier told Liangxin Insight. "But it was somewhat surprising that even provincial capitals were closed." Liangxin Insight learned from multiple insiders that the GMV and order volumes in the recently closed provinces were very low, "roughly accounting for only 5%-10% of total orders, and these are not core markets for Xingsheng." Xingsheng Youxuan gave a similar response to Liangxin Insight: "These provinces are areas with short entry times and small scale, with cumulative GMV accounting for only a single-digit percentage of the total." Since the entry of internet giants, withdrawing from cities has become a common self-rescue move for many community group-buying players, but the impact of Xingsheng's recent closures has not caused industry panic like a 'butterfly effect' as with other companies, but rather like a stone thrown into the center of a lake—silent. Investors reacted similarly. On one hand, the cities being withdrawn from are not core markets; on the other hand, it means this community group-buying unicorn is no longer receiving as much attention. Several primary and secondary market investors who have long followed the community group-buying industry told Liangxin Insight: "We haven't paid attention to Xingsheng for a long time," and they feel "the industry landscape is already clear; the mainstream players in the future will be Meituan and Pinduoduo, so there's no need for high-density tracking like before." Despite repeated model iterations and financing efforts, the outside world can strongly sense Xingsheng's efforts to survive, but it still cannot stop external concerns about Xingsheng. It must be admitted that the power of internet giants in the community group-buying track is unimaginably strong. A former senior executive at a leading community group-buying platform, after long-term research, found that Pinduoduo has actually figured out some of Xingsheng's success factors, such as supply chain layering and fulfillment capabilities, and has already experimented with them in its community group-buying business. As one of the earliest entrants in the community group-buying track, the model Xingsheng Youxuan has run is being referenced, but its living space has been continuously squeezed. The recent consecutive city closures have become evidence supporting this view. Within a year of the internet giants' entry, they covered and established a foothold in the national market, directly leading to Xingsheng's retreat from some of the city territories it had painstakingly added nationwide over the past two years. Moreover, multiple insiders close to Xingsheng in various places also revealed to Liangxin Insight that in Xingsheng's core provinces, such as Guangdong and Hubei, daily order volumes have mostly fallen behind Meituan or Pinduoduo, and even behind Taocaicai. Now, Meituan and Pinduoduo, the two leading players, have entered a new phase of jostling for position, while Xingsheng Youxuan, in the cold wind, is struggling to move forward. Founder Yue Lihua once admitted at an internal meeting that he knows how much money is in the account; if necessary, he will first shrink operations to at least ensure survival. Survival has also become Xingsheng's main theme this year. 01

An Expected Contraction

Xingsheng Youxuan, once ambitious, has now begun a major retreat. According to Liangxin Insight, currently, Xingsheng Youxuan has not only completely withdrawn from five provinces—Anhui, Zhejiang, Jiangsu, Shanxi, and Hebei—but also closed many cities in the northern provinces of Shandong and Shaanxi, including group points and grid warehouses. These areas are mostly new markets that Xingsheng had recently opened with heavy investment. Suppliers with sharper senses had already pulled out before the city closures. One core supplier of Xingsheng, due to "the order volume in many northern cities being too small to cover costs," proactively terminated cooperation in multiple northern cities. In his view, "cutting losses in cities with high loss rates in time is a good thing for Xingsheng." Several northern group leaders who simultaneously operate multiple community group-buying platforms attribute Xingsheng's low order volume to "too low app traffic." Many residents in northern cities had never heard of Xingsheng before, and without price advantages, Meituan and Pinduoduo are more popular. Although Xingsheng only began its city withdrawal in August, the "signal flare" had been released since the second half of last year. In September 2021, two months after Xingsheng received a new round of financing, it internally launched a marketing plan called "Panshi Plan" (Rock Plan), which allowed its own BD to expand the national market and maintain store operations. According to a report by LatePost, the person now in charge of the "Panshi" project is Xiong Wei, former vice president of Dingdong Maicai, who was responsible for user growth and client operations at Dingdong. The launch of the "Panshi Plan" marked an important turning point for Xingsheng. An insider close to Xingsheng introduced that the so-called "Panshi Plan" is actually a new independent store expansion system proposed by Xingsheng. Before this, Xingsheng had for years only used the store expansion model of the third-party service company Shoude. Before the internet giants entered, one reason Xingsheng could sit firmly in the top position in the community group-buying industry was that it had cultivated a group of high-quality group leaders with high loyalty and community marketing capabilities. This led to the later wave of competition among major internet platforms to poach Xingsheng's group leaders. The marketing plan used to cultivate these high-quality group leaders was the Shoude system. Under the Shoude system, a "qualified" BD must first become a group leader, pass the threshold test of "30 orders per day for more than 7 days," and then successfully develop three group leaders, among other tests, before they could develop their own downline. The more orders the stores under a BD developed, the more commission they earned. Thus, under this incentive mechanism, in the early years, Xingsheng created a large number of high-quality group leaders and BD teams for itself. At that time, Xingsheng's group leaders not only received high commission income but also received Shoude's salary (customer acquisition commission). However, after internet giants like Meituan and Pinduoduo entered, Xingsheng's Shoude system began to become difficult to apply. As the number of group points in each city approached saturation, most group points had mediocre order volumes, and group leader commission rates were lowered, yet they were expected to take on more functions such as picking, storing, and checking goods, making their motivation increasingly insufficient. This vicious cycle was played out daily in many provinces, making the Shoude system increasingly difficult to advance, but it was not until the second half of 2021 that Xingsheng began to launch the Panshi Plan. From "Shoude" to "Panshi," from closing groups with fewer than 10 orders to closing groups with fewer than 3 orders, from third-party expansion companies to establishing its own BD team, Xingsheng has been adjusting, but it cannot keep up with the internet giants. After the Panshi Plan was launched, Xingsheng immediately stopped opening new cities and closed inefficient group points with daily orders below 3 in existing areas, announcing to all employees that "everything is centered on order operations!" However, the dual advancement of the Panshi and Shoude systems did not significantly improve Xingsheng's market share. Data obtained by Liangxin Insight shows that in the first quarter of this year, about 50% of Xingsheng's orders came from Hunan, about 30%-35% from Hubei, Jiangxi, and Guangdong, and the remaining provinces accounted for about 15% or less of cumulative orders. For reference, before the recent city closures, Xingsheng had opened business in 17 provinces. Accompanying the "Panshi Plan" was a new internal slogan. Following "User Experience, Run at Full Speed," Xingsheng added the eight-character policy "Reduce Costs, Increase Efficiency, Deepen and Penetrate." However, few people know that "reduce costs and increase efficiency" was not proposed by Xingsheng for the first time. A former Xingsheng employee recalled to Liangxin Insight, "In the second half of 2019, there was a period when Xingsheng's loss rate was high and financing became difficult, so at that time, Xingsheng put cost control first." The outcome, as the outside world later saw, was that Xingsheng won completely over other startup platforms that time, and in the following year, it received multiple rounds of high financing. But when "reduce costs and increase efficiency" was mentioned again this time, the competitive environment Xingsheng faced had become so severe that it was on the brink of conflict, and the final result is hard to predict. After all the twists and turns, Xingsheng, which a year ago was still learning from internet giants to burn money for growth, has begun to return to its original "starting point." 02

Pressure Concentrates on Core Markets

In mid-September, Hunan was still as hot as summer. Pickup points with the "Xingsheng Youxuan" sign could be seen in cities and remote villages, scattered across streets and alleys, tenacious and vibrant. But this vibrancy seems increasingly hard to see outside Hunan. (Image source: provided by interviewee) Data obtained by Liangxin Insight shows that in March this year, Xingsheng's national daily orders were about 6.7 million, with Hunan, Hubei, Jiangxi, and Guangdong accounting for nearly 70%. Now, after withdrawing from several provinces, the order pressure seems to have shifted to core provinces such as Hunan, Hubei, Guangdong, and Jiangxi. Some suppliers in certain categories have already felt subtle changes. "In September, Xingsheng suddenly started pressing down on prices for some products, which rarely happened before," and what made this major supplier even more dissatisfied was that Xingsheng "not only pressed prices but also raised quality requirements." He can understand that "Xingsheng wants to provide consumers with a high-quality differentiated experience," but using 'beauty contest' selection standards without allowing suppliers to raise prices is really hard to bear. Can these few core markets still allow Xingsheng to stabilize its "backyard"? What intensified the supplier's dissatisfaction was, "With so few orders and such harsh requirements, we don't need these orders anyway." According to a report by LatePost, in the first quarter of this year, Xingsheng achieved profitability in Hubei, Hunan, Jiangxi, and Guangdong. But switching to the order level, Hunan's daily orders were only about 2 million, and Hubei's about 700,000, which are the two provinces with the highest daily orders for Xingsheng. Moreover, in Guangdong, Meituan Youxuan's daily orders remained stable at 4 million, while Xingsheng's orders were about one-eighth of that. Order volumes in core markets are shrinking sharply. According to a former Xingsheng employee, in October 2020, Xingsheng's daily orders in Wuhan alone were 1.2 million; by February 2022, Hubei's daily orders had shrunk to just over 700,000. One reason for the decline is price differences. Several users in Guangdong, Hubei, and other provinces believe that Xingsheng has no obvious price advantage compared with Meituan Youxuan and Duoduo Maicai. Xingsheng has not established national centralized procurement like Pinduoduo and Meituan, but relies more on regional procurement. According to industry expert notes from Jiuqian Zhongtai, Xingsheng's centralized procurement is only about 3%, which means procurement costs cannot be controlled, and for community group-buying users who are "price-sensitive," this is a fatal flaw. Moreover, the high overlap with Meituan's customer base also hinders Xingsheng's development into a national platform. A report by Orient Securities once concluded: "Different platforms have different resource endowments, goals, and specific strategies, leading to user differentiation, which may ultimately result in stratification of platform users and competitive landscape." Meituan, which focuses on user experience and product quality, and Xingsheng, which hopes to attract middle-to-high-end customers, have increasingly overlapping user bases, and the overlap in competitive markets is also increasing. A middle manager at a community group-buying platform told Liangxin Insight that in June this year, the gap between Meituan Youxuan's repurchase rate in Changsha and Xingsheng's had become very small. This is a dangerous signal for Xingsheng. Due to low order volumes and revenue not covering costs, many old suppliers have also chosen to reduce their cooperation scope with Xingsheng. Some Hunan suppliers admitted, "Except for Hunan, the order volume in other provinces is so low that even we suppliers can't bear to look." Therefore, he and some local Hunan suppliers who had followed Xingsheng out early also withdrew one after another, even though Xingsheng provided them, as old suppliers, with a green channel for free use of local large warehouses for 15 days. In fact, Xingsheng has not failed to fight head-on with giants in core markets. For example, in 2020, when giants and startups were fighting fiercely, Xingsheng proposed a goal of developing 1 million group leaders by 2021. To achieve this goal, Xingsheng sharply increased the number of central warehouses, at one point opening five central warehouses simultaneously in Guangdong. In addition, it required suppliers to rent shared warehouses near the central warehouses and build their own cold storage; otherwise, they could not continue to list products on Xingsheng. To continue cooperation, many suppliers paid out of pocket to build cold storage. But expanding the number of central warehouses greatly tests the platform's ability to coordinate and manage details. If order density is insufficient, forcibly expanding the number of central warehouses will instead increase the burden on the fulfillment chain. The central warehouse connects suppliers and procurement upstream, and processing warehouses, grid warehouses, and group points downstream. The operational efficiency of the central warehouse directly affects suppliers' evaluation and attitude toward the platform, as well as fulfillment timeliness. However, at that time, Xingsheng, which focused more on traffic and capital logic, did not pay too much attention to these aspects. This made suppliers who were forced to follow Xingsheng's expansion speed miserable: "At that time, we had to deliver goods to five large warehouses every day, which was extremely troublesome." The market could not support infrastructure investment, naturally leading to greater losses. Some suppliers' goods in the Chaoshan area of Guangdong sold only a few orders per day. One supplier joked: "It's not even as much as what a supermarket auntie sells." The counterattack miracle did not happen, and Xingsheng had to proactively close nearly half of its large warehouses. Even in its home base of Hunan, no one knows whether Xingsheng can continue to develop. To protect its home base, Xingsheng's model in Hunan has always been the most evolved and fastest iterating, and it is not easy for internet giants to surpass it. For example, in 2021, on the product side, Xingsheng invested heavily in infrastructure in Hunan—fresh meat segmentation warehouses and live fresh processing warehouses, making hot fresh meat and live fresh fish unique categories for Xingsheng. In particular, freshly slaughtered pork has become Xingsheng's new best-selling king. Unlike other fruit and vegetable fresh products, Xingsheng's self-operated freshly slaughtered pork requires completely rebuilding a full-chain quality control and fulfillment system, which is very time-consuming and costly. Therefore, only in Hunan can you see Xingsheng's latest generation logistics system: RDC central warehouse + fruit and vegetable PC warehouse + hot fresh meat PC warehouse + conventional shared warehouse. The battle for and defense against internet giants has greatly consumed Xingsheng's vitality. In March this year, Xingsheng had already lost its position as the number one in order volume in Central China (Hunan, Hubei, and Jiangxi). Now that the core home base is under greater pressure, how long can Xingsheng hold on? 03

Hard-to-Replicate Core Barriers

A year ago, news of Xingsheng's listing was frequent; a year later, such rumors have disappeared. In addition, Xingsheng has not received funds from the primary market for over a year, orders in non-core provinces are sparse, and order volumes in core provinces have dropped significantly... Along with this, the capital market's enthusiasm for startups has cooled. Voices favoring this longest-surviving unicorn are becoming fewer. Now there are two voices in the market: one is that Xingsheng still has money in its account and can hold on; the other is that there is not much money left. The former refers to the total amount, while the latter refers to the available funds after deducting necessary expenses such as "supplier payments, deposits, group leader commissions, and employee wages." Discussions about how much money remains and how long it can last are surrounding Xingsheng. Just two years ago, it was the darling of the community group-buying track. Two years ago, Xingsheng became an ideal model in the eyes of internet companies. From having its business model copied, to employees being poached with high salaries, to competitors conducting disguised research, new players almost turned Xingsheng upside down and tried to replicate its myth in Hunan across the country. Over time, these internet players gradually realized that they simply could not replicate Xingsheng's model in Hunan, and even Xingsheng itself failed to replicate the Hunan model in other regions. In the eyes of the outside world, Xingsheng's biggest asset is the mature logistics-supply chain system in Hunan that can sink to counties, towns, and villages. From central urban areas radiating to village-level, more than half of Xingsheng's orders in Hunan can be delivered to villages and towns, with next-day pickup. But the barrier of this system is built on Xingsheng's early layout in Hunan, heavy financial investment, and long operating time. In other words, if giants had not entered, Xingsheng might have had the hope of replicating a second or third "Hunan" by slowly advancing the Hunan model across the country. But reality has no "ifs," and Xingsheng's core asset now only appears in Hunan. What needs to be understood more is that giants do not lack the ability to imitate Xingsheng's logistics-supply chain, but as entities backed by listed companies, they have begun to focus more on optimizing UE cost models, increasing average order value, and pursuing profitability indicators. Replicating the Hunan model would require too much time, money, and manpower, making it not cost-effective. But some effective actions are being referenced by other players in the industry. A founder of a community group-buying platform found that Pinduoduo has already taken some actions similar to Xingsheng, such as differentiated product selection based on understanding of local consumers. For example, if selling chili peppers in Hunan, other community group-buying platforms would directly find famous domestic chili varieties like Wuhu pepper, while Duoduo Maicai would find local chili varieties that local users love, precisely meeting user needs. Besides external giant impact, Xingsheng's corporate genes and organizational structure are also reasons why it is difficult to replicate the Hunan model in other provinces. As a startup founded in Hunan, Xingsheng's core senior management has always been from the Furong Xingsheng lineage. After leaving Hunan, this corporate gene actually limited Xingsheng's expansion pace. An interesting phenomenon is that many suppliers have found that "whether outside or inside Hunan, the most commonly used dialect in Xingsheng's offices is Hunan dialect; Hunan dialect is almost Xingsheng's official language." Moreover, the provincial heads in multiple provinces are all "direct lineage" transferred from Hunan. This underlying gene also helped Xingsheng consolidate a stable group of Hunan suppliers in the early days. When Xingsheng expanded to regions outside Hunan, late-coming suppliers often had limited space and found it hard to gain more share. A major Xingsheng supplier told Liangxin Insight, "Procurement will definitely find local suppliers when doing business outside Hunan, but in high-volume areas like Guangdong and Hubei, there must be old suppliers directly sent from Hunan. Even if sales data is good, local suppliers are sometimes squeezed out by Hunan suppliers." This is completely opposite to the result-oriented internet platforms. As a result, more suppliers ultimately voted with their feet and left Xingsheng. For a company, starting first does not directly equal victory. Xingsheng, which is like a "top student" among community group-buying startups, has to face the cruel reality now. At present, the problems facing this community group-buying unicorn have shifted from how to replicate the Hunan myth in other provinces and when to list, to how long it can resist the giants and how long the funds in its account can last. For Xingsheng, the current situation is severe, and these questions are too difficult to answer, but it must rise to the challenge and strive not to become cannon fodder of the era like other community group-buying unicorns. Note: The header image in this article is from Xingsheng Youxuan's official website.