Didi’s ChengXin Youxuan Shrinks Service Area
Chengxin Youxuan, a community group-buying grocery unit backed by Chinese ride-hailing platform Didi, began to scale back its business operations to nine provinces in only three regions, LatePost reported on Tuesday. The adjustment is still in progress and is expected to be completed before September 15. More changes are not being ruled out.
In the future, Chen Ting, CEO of ChengXin Youxuan, An Tai, head of channel business, and Lai Chunbo, head of performance, will manage these three regions respectively. The proposal took only one week to be put forward and subsequently settled. Some employees of the community group-buying platform believed that many of the markets in most Chinese provinces have been taken over by Duoduo Grocery (previously referred to as Duo Duo Maicai) and Meituan Youxuan. The remaining nine provinces with less robust market potential still leave some room for Chengxin Youxuan to explore.
Since 2020, offline retail has been impacted by the epidemic, which promoted the community group buying model to achieve profitability in some areas. In this context, Didi started the community retail unit in Chengdu, Sichuan Province in April 2020, and then quickly scaled the platform to serve the whole country.
Before this adjustment, the number of ChengXin Youxuan’s daily orders reached about 6 million yuan, achieving an average daily turnover of 40 million yuan ($6.2 million) to 50 million yuan. According to sources of LatePost, ChengXin Youxuan invested no less than 20 billion yuan in the past year.
At present, ChengXin Youxuan has only about 10,000 employees. From June to December last year, the number of its employees expanded from 0 to 16,000. However, in July this year, 30% of them were laid off. The current cutback will also lead to layoffs, but sources said the company has not yet worked out a specific plan.
According to sources, because Didi purchased $3 billion of Chengxin’s convertible bonds in May, the grocery platform has sufficient cash and cash equivalents at present, and the company is still looking for opportunities so it not simply close its doors.
Retail platforms are facing stricter supervision this year. In March, China’s top market regulator fined five community group-buying platforms a total of 6.5 million yuan for price dumping. Targets included Chengxin Youxuan and rival platforms backed by Pinduoduo, Meituan, and Alibaba. On September 6th, the market regulator once again mentioned the investigation of illegal activities such as low-price dumping and price fraud in the field of community group-buying.
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LatePost said that due to the supervision and high temperature in the summer months, orders of Meituan Youxuan and Duoduo Grocery both declined by one third to one quarter in the second quarter. Other platforms have gone bankrupt, such as Tongcheng Life and Tencent-backed Shixianghui, while still others, such as Nice Tuan, and Jingxi Pinpin backed by JD.com, have seen their businesses scaled back. Meicai has been reducing its operations and laying off employees, Chinese media Jiemian reported on September 3rd.