In recent years, Beixia Zhu, located in Yiwu City, has attracted a large number of live streamers and merchants with titles like “The First Village of Internet Celebrities” and “Capital of E-commerce”. However, fierce competition, price wars, and weakened domestic demand have led to the decline of this e-commerce town’s former prosperity.
The craze in Beixia Zhu began around 2019 when live-streaming e-commerce boomed on platforms such as Kuaishou Technology and Douyin. Located on the outskirts of Yiwu City, the global hub of wholesale trade in Zhejiang Province, Beixia Zhu became the starting point for entrepreneurs eager to enter the industry and get rich quick.
According to the South China Morning Post, traces of that era still linger in the 99 buildings in Beixia Zhu once occupied by livestream sellers. Signs advertising “Super Supply Chain of Beixia Zhu” and “Popular Supply” still hang outside storefronts. On a weathered wall, a faded slogan can still be discerned: “Without dreams, why come to Yiwu?”
But now, the bustling crowds have disappeared, and shop owners who were once busy packaging orders have slowed down their pace.
Without internet celebrities filming videos or conducting live commerce here, Beixia Zhu has returned to being a “factory outlet.”
One shop owner pointed to a narrow alley outside the store, saying that it used to be filled with cars and livestreamers. When a product became popular, everyone rushed to produce it and sell it at lower prices, hoping to squeeze out the competition. Eventually, when no one was making money anymore, everything collapsed.
This brutal competition is known locally as “rolling,” a term frequently heard in China in recent years. It stems from the Chinese term “involution,” describing a society or industry stuck in endless “rat races” without real progress, where people undercut each other until all resources are exhausted.
Industry observers believe the phenomenon of involution will not disappear soon. Kenny Ng Lai-yin, a strategist at Everbright Securities International, told the South China Morning Post, “China’s overall consumer demand remains weak, with concerns about deflation persisting. As the Chinese real estate market collapses, household wealth and consumer confidence are decreasing.”
Since last year, due to the economic slowdown following the COVID pandemic and weak domestic consumption, China’s e-commerce industry has plunged into fierce price wars.
When bidding hits rock bottom prices, extreme cost cutting, the ultimate outcome is the deterioration of product quality. Prices are reduced to the lowest possible level, as costs can no longer be compressed, leading to near “fake” products where even the basic functions may be compromised.
An article in a Chinese entrepreneur magazine on December 27, 2023, mentioned that in 2023, popular products like carrot knives, mini mops, and sun hats staged performances in North Beixia Zhu’s stores, with lifecycles possibly lasting only a few weeks. For example, the 9.9 RMB large water bottles, a perennial hit product in Beixia Zhu, leaked water in nearly all cups received, with a 90% return rate.
The downward price competition has also affected traders and manufacturers in Yiwu.
Yiwu International Trade City is just a 10-minute drive from Beixia Zhu, with buyers from around the world bargaining prices. Piles of goods are scattered on the floor awaiting packaging. Here, there are no fancy brands, only the lowest prices. Many small businesses have expressed that making money has become increasingly difficult.
Yiwu trader Huang Qianqian told the South China Morning Post, “The internal competition in our industry has accelerated, leading to some unhealthy practices.” She mainly sells products to Southeast Asian customers on platforms like Shopee, Shein, TikTok Shop, and Temu, highlighting the oversupply of goods and insufficient purchasing power as key challenges.
Further upstream in the supply chain, manufacturers are struggling to cope with meager profits.
“In the past, orders from a few major clients were enough for us to make money,” said Zhang Jianhong, the owner of a garment factory.
Over the 20 years in Yiwu, she witnessed how rising rents and labor costs eroded her profit margins from 40% to 10%.
For suppliers like Zhang, the internet can be a double-edged sword: while online business helps bring in new customers, it also makes it easier for competitors to copy products and drive prices down.
She said, “Our goal for the next few years is just to survive.”
On the other hand, since the end of 2020, Chinese regulatory authorities have begun to tighten restrictions on the words and actions of livestreaming influencers, which is part of a wider crackdown on the tech industry. Beijing believes that the influence of the tech industry has become too significant.