The Solution to the Problem of Heavy Asset Profitability Driven by
Technology: A Case Study of AHS Recycling
Meiquan Wang
a
School of Management Science and Engineering, Shandong University of Finance and Economics,
Zhangqiu District, Jinan Jingshi East Road, China
Keywords: Second-Hand Recycling Platform, Circular Economy, Heavy Assets, Technological Innovation, Industry
Chain Integration.
Abstract: Third-party mobile phone retail stores receive a large number of second-hand mobile phones through trade-
in, and small and medium-sized merchants in the industrial chain have huge circulation demand. However,
due to the decentralization of the market, the multi-level transaction and the lack of industry standards, the
transaction turnover efficiency is low, and the behavior of shoddy and fraud is common, and users lack trust
in the trading platform. In this situation, love recycling came into being. However, driven by circular economy
and environmental protection policies, second-hand trading platforms are facing profit challenges under the
heavy asset model. Taking AHS Recycle as an example, this paper discusses how to realize the sustainable
profit of the heavy asset model under the concept of environmental protection through technological
innovation, industrial chain integration and policy coordination. The study found that AHS Recycle
effectively balanced high-cost investment and profit demand through the “self-operated+platform” two-
wheel-driven business model, intelligent recycling network construction and policy dividend undertaking. Its
experience shows that second-hand platforms can transform environmental value into commercial value and
provide reproducible solutions for the industry through standardized processes, technology empowerment and
green consumption scenario innovation.
1 INTRODUCTION
With the deepening of the concept of global sustaina
ble development, the ESG system and the" double ca
rbon"policy jointly build the core framework of glob
al economic transformation. In this context, the theor
etical system of circular economy with efficient recy
cling of resources as the core has become the key pat
h to break the constraints of resources and environm
ent in the era of industrial civilization. From Balding
's spaceship economy theory , which regards the eart
h as a closed system with limited resources, emphasi
zing the replacement of linear consumption by recycl
ing, to Strauss's perfect 'reduction, reuse, recycling' 3
R principle, circular economy has formed a multi-lev
el theoretical framework covering micro-enterprise o
peration, medium-sized enterprises collaboration, an
d macro-policy design(Smith et al.,2021;Müller and
Schmidt,2022). The Allen MacArthur Foundation fu
rther summarizes it as a dual system of technology c
a
https://orcid.org/0009-0005-4440-7923
ycle and biological cycle. The former focuses on the
continuation of the value of durable consumer goods
such as electronic products, while the latter focuses
on the natural circulation of organic resources, provi
ding a clear theoretical anchor for the second-hand re
cycling industry.
As a typical practice of circular economy in the fi
eld of consumer electronics, the second-hand recycli
ng industry carries a dual mission. It is necessary to r
ealize the closed loop of 'resources-products-waste-r
enewable resources' through the reverse logistics the
three core dimensions of circular economy, including
system regeneration, value retention and environme
ntal synergy, and realize the unity of environmental a
nd economic benefits by reducing the carbon intensit
y of electronic waste dismantling under the dual carb
on goal(Gupta et al.,2020;Park et al.,2021;Garcia an
d Wei,2022).According to the China Circular Econo
my Development Report (2024), China produces mo
re than 120 million tons of electronic waste such as
512
Wang, M.
The Solution to the Problem of Heavy Asset Profitability Driven by Technology: A Case Study of AHS Recycling.
DOI: 10.5220/0013848600004719
Paper published under CC license (CC BY-NC-ND 4.0)
In Proceedings of the 2nd International Conference on E-commerce and Modern Logistics (ICEML 2025), pages 512-518
ISBN: 978-989-758-775-7
Proceedings Copyright © 2025 by SCITEPRESS – Science and Technology Publications, Lda.

waste mobile phones and computers every year. If st
andardized recycling is achieved, carbon emissions c
an be reduced by about 42 million tons, equivalent to
2.3 million hectares of afforestation, which confirms
the strategic value of the industry in the carbon emis
sion reduction system.
However, there is an inherent conflict between the
traditional heavy asset operation mode and the 'cost-
benefit' optimization logic of circular economy. The
huge investment in fixed assets of offline
warehousing and logistics facilities (the average
construction cost of a single warehouse exceeds 50
million yuan), the high labor cost caused by complex
quality inspection process (accounting for more than
32 % of operating costs ), and the low efficiency of
inventory turnover (the average inventory cycle of the
industry reaches 90 days) are essentially the product
of "scale expansion drive" under the linear economic
thinking, which is in contradiction with the
"functional economy" advocated by Strauss (
reducing the consumption of physical resources by
replacing product ownership with services) (Chen
and Zhang, 2022;White et al.,2022).The innovative
practice of AHS Recycle has broken through this
theoretical paradox - by constructing a circular
economy ecology of 'reverse logistics network
digitization ( application of IoT devices to achieve
full-link tracking, reducing transportation losses by
15 %)-detection standardization ( self-developed AI
quality inspection system reduces the detection time
of a single device to 3 minutes, with an error rate of <
0.3 % ) -industrial chain synergy ( with Jingdong,
Xiaomi, etc. Establish a data sharing mechanism to
shorten inventory turnover to 45 days’ and implement
Balding's 'closed-loop economy' concept as a
quantifiable business model (Bostrom and Sandberg,
2023). In 2024, the total revenue was 16.33 billion
yuan, the operating profit of non-GAAP was 410
million yuan, and the gross profit margin increased to
18.7 %, which proved the reconstruction effect of
'industrial ecosystem synergy' proposed by Greider
on the cost structure.
Based on the theoretical pedigree of circular
economy, combined with the ESG evaluation system
and the dual-carbon policy objectives, this paper uses
the case analysis method to analyze how AHS
Recycle takes the technology cycle as the core driving
force to build a value-preserving business model in
the vertical field of consumer electronics. It not only
realizes the material cycle through product
remanufacturing and also reduces the carbon
emissions in circulation through the digital platform,
forming a theoretical transcendence of the traditional
heavy asset model. This study attempts to answer how
enterprises balance environmental protection
investment and business profitability through 'asset
lightweight' and 'value chain extension' under the
framework of circular economy theory, and how ESG
elements such as carbon management in the
environmental dimension, e-waste management in
the social dimension, and supply chain transparency
in the governance dimension form synergy with
circular economy theory. The answers to these
questions not only provide a transformation path for
the second-hand recycling industry, but also
contribute an interdisciplinary perspective to the
green innovation of the manufacturing industry under
the 'double- carbon' goal.
2 ANALYSIS OF THE CURRENT
SITUATION OF AHS
RECYCLEN
2.1 The Core Contradiction of Heavy
Asset Model
Second-hand platforms need to rely on infrastructure
such as offline stores, quality inspection centers, and
warehousing and logistics to ensure transaction
security and efficiency, but high fixed costs lead to
pressure on profit margins. As of the end of 2024,
there are 830 self-owned stores and 1031 joint-
venture stores, covering 283 cities. The average
annual operating cost of the single store of the offline
store is about 2 million yuan, superimposed on the
warehousing and logistics facilities of 7 regional
operation centers and 23 city-level operation centers
(the construction cost of the single warehouse
exceeds 50 million yuan), forming more than 3 billion
yuan of fixed asset investment. Although GAAP
achieved a profit of 28.97 million yuan in 2024,
historical data show that the cumulative loss in 2018-
2021 reached 1.38 billion yuan, and the operating
cash flow of Q1 in 2021 was-303 million yuan, and
the cash reserve could only maintain three months of
operation. This model of "heavy asset investment-low
cash flow return" is in fundamental contradiction with
the requirements of "light asset and high turnover" in
circular economy theory (Parket et al.,2021).
2.1.1 High Cost
The expansion of stores and the construction of
automation centers (similar to the 4 billion investment
of Jingdong Asia No.1) have led to a continuous
increase in operating costs. In the first quarter of 2023,
The Solution to the Problem of Heavy Asset Profitability Driven by Technology: A Case Study of AHS Recycling
513

the net loss was CNY 50 million, and the gross profit
margin hovered at 11 % -12 % for a long time. The
hardware investment of a single store is about 70,000
yuan, the monthly operating cost includes about
30,000 yuan such as manpower and rent, and the
annual operating cost of 700 stores exceeds 250
million yuan. As shown in Figure 1, profits increased
from 3.73 billion yuan in 2019 to 14.84 billion yuan
in 2024, with an average annual compound growth
rate of about 31.8 %, showing excellent performance.
In 2024, the performance cost of Q4 increased by
31.8 % year-on-year, and the sales cost increased by
18.7 %, which eroded the profit space brought by the
increase in gross profit margin. The highest growth
rate is 56.8 % in 2021 and then slows down year by
year to 27.3 % in 2024. It is necessary to pay attention
to the possibility of market saturation or increased
competition.
Figure 1: The revenue and proportion of each business of ATRENEW from 2019 to 2024.
As shown in Figure 2, the company has
experienced a transition from loss to profit. After
2021, profits and profit margins have improved, and
profits have improved significantly in 2023,
reflecting the effectiveness of strategic adjustments.
Profits of 410 million yuan and profit margin of 2.50
% are the best in history, benefiting from scale effect
or high gross profit business.
Figure 2: The operating profit and profit rate of ATRENEW from 2019 to 2024
37.3
42.44
66.55
86.77
116.58
148.4
2.02
6.14
11.25
11.93
13.07
14.8
0
20
40
60
80
100
120
140
160
180
2019 2020 2021 2022 2023 2024
Products(billion yuan) Services(billion yuan)
-5.35
-1.44
-1.03
0.07
2.52
4.1
-13.60%
-3.00%
-1.30%
0.10%
1.90%
2.50%
-20.00%
-10.00%
0.00%
10.00%
-6
-4
-2
0
2
4
6
2019 2020 2021 2022 2023 2024
Non-GAAP(billion yuan) Operating Margin
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2.1.2 Single Profit Model
Although the platform claims to build a 'C2B + B2B
+ B2C' closed-loop, the actual business is still
dominated by to B, and the C-side growth is slow. In
2020, the to B business will contribute 83 % of
revenue, the B2B platform will distribute more than
80 % of the recycling equipment, and the C-terminal
GMV will account for less than 20 %. Compared with
idle fish and transfer, love recycling has obvious
shortcomings in user services (such as credit system
and after-sales security), which makes it difficult to
attract C-terminal users, resulting in C-terminal gene
deletion. Over-reliance on self-marketing revenue
(accounting for 90 % of total revenue), the proportion
of platform service revenue is less than 10 %, and the
income structure needs to be further optimized.
As shown in Figure 3, product income has always
been dominant, but the proportion has shown a
fluctuating downward trend. From 94.80% in 2019 to
90.87 % in 2024, it decreased by 3.93 percentage
points. The lowest point was 84.43 % in 2021 and
then rebounded due to business adjustments or
changes in market demand. The proportion of service
income is generally low, but it shows a trend of rising
first and then falling. It rose from 5.20 % in 2019 to a
peak of 15.57 % in 2021 and fell back to 9.13 % in
2024. The business dependence is high, the
company’s income is still heavily dependent on
products, and the service business has not become a
stable growth point. In 2021, the proportion of core
products rebounded rapidly after the decline, showing
that the core products are still competitive, which
confirms that the product business has strong
resilience.
Figure 3: The sales of self-operated products and the income of third-party services of ATRENEW from 2019 to 2024.
2.2 Pressure on Environmental
Compliance Costs
The environmental protection policy requires the
platform to assume responsibility for the harmless
treatment of electronic waste, such as data removal,
compliance renovation and other links to further
increase the cost (Brown & Lee,2023). In the early
stage of recycling, we invested a lot of resources to
build an intelligent sorting system and independently
developed a data removal technology 'love removal'
to ensure that the recycling process meets
environmental standards. AHS Recycle needs to meet
the policy requirements such as 'electronic waste
treatment pollution control technology specification'
and invests about 150 million yuan per year for
equipment upgrading and carbon emission
monitoring. Although it obtains ESG bonus through
'the carbon intensity of unit product transportation is
22 % lower than the industry average', the policy
compliance cost accounts for 36.6 % of the net profit,
which weakens the business sustainability.
2.3 The Balance Between Market
Demand and Economies of Scale
Users' sensitivity to convenience and price requires
the platform to expand its coverage rapidly, but blind
expansion may lead to a decline in single-store
2019 2020 2021 2022 2023 2024
Services
5.20% 11.24% 15.57% 11.07% 10.37% 9.13%
Products
94.80% 88.76% 84.43% 88.93% 89.63% 90.87%
94.80%
88.76%
84.43%
88.93%
89.63%
90.87%
5.20%
11.24%
15.57%
11.07%
10.37%
9.13%
Products Services
The Solution to the Problem of Heavy Asset Profitability Driven by Technology: A Case Study of AHS Recycling
515

efficiency. According to the '2024 White Paper on
Electronic Product Recycling Industry', about 30 %
of the stores in the recycling platform that blindly
expanded failed to meet the expected recycling
volume, resulting in an increase in overall operating
costs. In 2024, the volume of multi-category
recycling transactions will increase by nearly three
times year-on-year, but it is necessary to improve the
reuse rate of stores through refined operations
(Kumar and Yadav,2022).
3 MECHANISM PATH ANALYSIS
3.1 Technology-Driven Cost
Optimization
3.1.1 Intelligent Recycling Network
The business ecology of love recycling covers the
supply side, the processing side and the demand side.
The supply side aggregates and disperses the source
of goods, including 1P consumer recycling (official
website APP, love recycling stores, brand
manufacturers, e-commerce partners) and 3P
merchant recycling (professional merchants such as
cattle, offline massive mobile phones and 3C product
retailers). The processing end relies on 8 regional-
level large-scale operation centers and 15 small urban
warehouses to build an end-to-end standardized
industrial chain and provide value-added services
with independent research and development of scarce
technical capabilities (Gupta et al.,2020; Brown and
Lee,2023; James and Lopez,2021).
On the basis of this architecture, AHS Recycle
further builds a three-level system of 'point to station
to square', builds the world's first 'non-standard
second-hand electronic product automatic
transmission quality inspection and sorting storage
system' Matrix3.0, and realizes the unmanned
operation of the whole process. This innovation has
reduced labor costs by 85 %, quality inspection costs
by 20 %, quality inspection efficiency by 18 %, daily
processing capacity of 24,000 units, sorting error rate
< 0.01 %, and daily average processing capacity of
2,000 tons, far exceeding the industry average. On the
demand side, the high-quality goods source is
connected to the C-end consumers ( such as Jingdong
Paipai, Tik Tok, Kuaishou and other innovative
channels ) through 'Paipai', and the middle and low-
grade goods are transported to the B-end small and
medium-sized merchants ( distributors, repairers,
exporters, etc. ) through 'Paijitang', forming an
efficient order fulfilment network, through the whole
chain of the second-hand consumer electronics
cycle(Zhou and Kapoor,2021).
3.1.2 Digital Full-Link Management
The whole process of Dongguan 'Matrix 3.0' pipeline
integration covers logistics unpacking, automatic
labeling, module shunting, X-Ray disassembly and
repair detection, semi-automatic detection using App
tools, and Photo Mirror screen detection, 007 function
detection, Photo Box appearance detection, manual
supplementary quality inspection, Photo Cube
product picture shooting and other links. This system
realizes the traceability from user delivery to sorting
and sales, effectively reducing losses and improving
turnover efficiency. Among them, the AI quality
inspection system greatly reduces manual
dependence, and the detection time of a single mobile
phone is reduced from 10 minutes to 20 seconds, with
an annual cost saving of more than 20 %. The big data
dynamic pricing model improves the inventory
turnover rate, and the average turnover cycle of Q3 in
2023 is 3 days (industry average 10 days) ; AI
recommendation algorithm accurately matches
supply and demand, and sales revenue of selected
retail channels will increase by 301.3 % year-on-year
in 2024(Brown and Lee,2023).
3.2 Value Reconstruction of
Closed-Loop Industrial Chain
3.2.1 Self-Operated Strict Election to
Increase Premium
Through standardized quality inspection and
renovation processes, 30 % of the recycled products
are converted to B2C retail. From the perspective of
GMV, in 2023, the GMV of second-hand consumer
electronic products from Jingdong's mobile phones
accounted for 11.6 % of the company’s GMV.In 2024,
the GMV totaled CNY 5.5 billion. The attempt of
multi-category recycling (such as gold and luxury
goods) has achieved initial results. The monthly
GMV exceeded CNY 70 million, the potential for
business expansion is considerable, and the gross
profit margin has increased to 12.5 %.
3.2.2 Platform Service Income Increase
Its platform 'PJT Marketplace' solves the circulation
efficiency problem of second-hand electronic
products through global standardized grading and
bidding mode, attracting 850,000 registered
merchants. In 2023, 3P service revenue was 1.31
billion yuan, up 10.7 % year-on-year, and the
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charging rate increased from 0.5 % in 2018 to 5.39 %
in 2023, with its transaction scale reaching 6 times the
second largest in the industry. In 2023, the
compliance renovation business contributed revenue
of 810-million-yuan, accounting for 9.4 % of the
recovery revenue; in 2024, the proportion of income
will be further increased, promoting the expansion of
value-added profit space.
3.3 ESG-Oriented Brand Upgrading
Relying on the cooperation with Jingdong, the
proportion of old-for-new recycling accounts for
more than 50 %, and the recycling of mobile phone
categories in 2024 increased by 100 % year-on-year.
Cooperate with L'Oreal to explore the recycling of
empty cosmetic bottles and participate in the "trade-
in" action advocated by the policy; united
FRESHHIPPO, Mengniu and other brands to launch
the "return to life" activity, through the exchange of
points and environmental protection package to
enhance user participation, reduce carbon emissions
and get the S & P ESG score industry leader.
Continue to broaden the overseas market and
highlight the social value of the circular economy,
promote the scale of the circular economy, attract
ESG investment, and enhance the recognition of the
capital market.
3.4 Branding and User Mental
Occupation
Through public welfare projects such as the 'Digital
Student Assistance Program for Children in Mountain
Villages' and social communication, environmental
responsibility is transformed into user trust, thereby
strengthening the brand image of environmental
protection. Promote recycling services on content
platforms such as Tik Tok and RedNote and improve
the reach efficiency of C-end users and achieve
penetration of new media channels (White et al.,2022;
Andersen and Rossi,2021).
AHS Recycle's "Rural Children's Digital
Assistance Program" was born in 2018. It is a long-
term public welfare project jointly launched by the
ATRENEW and the One Shoulder Snow Project
Public Welfare Organization. It aims to help children
in mountain villages broaden their horizons by
donating idle electronic equipment, so that cities and
children in mountain villages can stand at the same
starting line, while extending the service life of
electronic equipment and promoting sustainable
social development. As of December 31,2022, the
project supported 56 schools, completed 2068 hours
of teaching, and accumulated 10,770 students in
class, effectively contributing to the education of
rural children.
4 CONCLUSION
This paper uses the case analysis method to analyze
the heavy asset profit model of AHS Recycle under
the framework of environmental protection and
concludes that the concept of environmental
protection and heavy asset profit are not opposite, but
can be integrated through technological innovation,
industrial chain integration and policy coordination.
It further expounds the core experience of love
recycling to realize the integration of the two and
reduces the marginal cost through intelligent and
digital technology. Increase the proportion of high-
profit retail businesses through self-operation and
strict selection and expand the scale effect relying on
platform services; with the help of the government's
"trade-in" and carbon emission reduction policy
window to build competitive barriers. It is suggested
that with the promotion of the '551 Project' (5,000
stores and 100,000 recycling machines) in the future,
Love Recycling will continue to optimize the single
store model and multi-category collaboration
capabilities, explore a more universal heavy asset
profit paradigm for the second-hand recycling
industry, and promote the deep unification of
environmental protection and commercial value.
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