Community group-buying company Xingsheng Youxuan secured a USD 300 million investment led by the Ontario Teachers’ Pension Plan, valuing the company at USD 12 billion. The latest financing builds on a USD 3 billion dollar raise in February from investors, including Sequoia Capital and Tencent, that valued the company at USD 8 billion.
Xingsheng Youxuan did not offer a comment to confirm its latest valuation.
Founded in 2013, Xingsheng Youxuan was one of the earliest entrants into the community group buying sector and competed against internet giants like Meituan and Pinduoduo, raising a total of USD 5 billion over eight rounds. In 2020, the gross merchandise value of goods sold on the company’s platform reached RMB 40 billion (USD 6.3 billion). This year’s target is set at RMB 80 billion (USD 12.4 billion).
But Xingsheng Youxuan is behind schedule. With a footprint in 1,100 cities and 70,000 rural towns across 17 provinces, its average monthly GMV for the first six months of 2021 was RMB 3 billion.
The broader community group-buying sector has faced headwinds since Q1 2021, with average daily GMV falling from more than RMB 200 million (USD 30.1 million) to RMB 150 million (USD 23.2 million) in May. The slowdown has been attributed to the industry’s seasonality, as well as tighter government regulations on the use of subsidies after tech giants went overboard and undercut existing retailers. Most big players in this field, including Meituan and Pinduoduo, are underperforming compared to lofty 2021 GMV targets set last year when the sector was red hot.
Since the entrance of internet giants in July of 2020, Xingsheng Youxuan’s business has suffered as operating costs continue to rise in an attempt to keep up with the scale of logistics in the business. Another provider, Tongcheng Life, which used to be second only to Xingsheng Youxuan, filed for bankruptcy this month.
For Xingsheng Youxuan, the latest injection of USD 300 million gives the company a lifeline to stay in the competition for now. To succeed in the long run, online grocers need to develop efficiency advantages in supply chains and logistics, as well as solve pain points related to limited product selection and a ceiling in the number of SKUs under management.
36Kr Connection features translated and adapted content published by 36Kr. This article was originally written by Dong Jie for 36Kr.