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Text｜Liu Tong from Daju Finance

In 2024, the e-commerce industry has suddenly changed, and the giants have declared: We can no longer compete with low prices. Why do Douyin, Taobao, and JD.com, these former low-price warriors, choose to give up now?

Behind this lies the pain of transformation.

Those warriors who once used "absolute low prices" as their spears now seem unable to move forward.

Taobao announced the shift of its strategic focus from the competition of "absolutely low prices" to the competition of comprehensive value. Wu Yongming, CEO of Taobao Group, said: GMV, the traditional indicator, will once again become the first yardstick for measuring everything. They want to return to the essence of shelf e-commerce and no longer blindly pursue the illusory "absolutely low prices".

Taobao's transformation has not been smooth sailing. They announced that they would reduce their reliance on "five-star price power" and weaken the strategy of absolute low prices. The so-called "five-star price power" refers to the one-star to five-star rating given to products by Taobao based on the market competitiveness of product prices, which directly affects the search ranking and traffic distribution of products. This is the product of the platform's implementation of a low-price strategy, and it was also a weapon that Taobao was once proud of.

JD.com knows that low prices should not mean sacrificing quality. They want to fight this price war in an upright manner by optimizing the supply chain and improving operational efficiency, while ensuring product quality. They want to fight on their feet, not on their knees.

At the beginning of this year, "price power" became Douyin's top priority for e-commerce, and the focus of the entire e-commerce system quickly shifted to "low prices". In order to accelerate the introduction of industrial belt merchants with large room for price reduction, Douyin upgraded its support policy and returned cash to some industrial belt merchants based on the completion of GMV targets, with the highest incentive reaching 50% of GMV.

However, gambles do not always bring expected returns. According to insiders, Douyin knew that low prices would have a certain impact on GMV, but the rapid decline in GMV growth in the first half of the year still exceeded their expectations. This is a lesson and an awakening. Douyin Group's executives began to participate in e-commerce business management meetings more frequently and inquire about business conditions. After they judged that the live e-commerce format could not achieve the lowest prices, the company decided to put GMV back to the top priority.

Taobao, JD.com, Douyin, Pinduoduo, etc. all need to achieve higher-dimensional competition by optimizing the supply chain and improving operational efficiency while ensuring quality. Because the e-commerce industry is at a new crossroads, the strategy of low-price competition can no longer meet market demand.

In the past year, the low-price strategy has been like a double-edged sword. While boosting platform performance and efficiency, it has also caused considerable damage to each platform.

Specifically, the average order value has declined and revenue growth has been hindered, which seems to be the inevitable result of low-price competition. More seriously, the low-price strategy has destroyed the original operating logic of the platform, causing the platform to lose its own characteristics and fall into an endless price war.

According to people from Douyin's e-commerce department, Douyin's e-commerce algorithm rules may return to the GPM era from OPM. Douyin will no longer pursue small profits but quick turnover of orders, but will focus more on sales in the live broadcast room. The fierce internal competition of the 618 promotion triggered a strong backlash from the merchant side. Many leading merchants chose to flee the promotion and the conflict was brought to the table.

But in July, JD.com launched a new long-term promotion called "Super 18", with an ambiguous attitude, trying to attract new customers and retain existing customers through continuous low-price discounts. However, whether this strategy can be successful still needs time to verify.

So, why do some giants take one step at a time and another step at a time? Do they firmly choose to give up low-price competition, or do they choose to "take both ends" in an ambiguous situation?

The reasons behind this are both complex and profound. Although low-price competition can increase traffic and market share in the short term, in the long run, it will compress merchants' profit margins. Ultimately, this compression will be transmitted to product quality, and it is very easy to fall into a vicious cycle of goods not matching the description and high return rates. At the same time, user experience will also be damaged, resulting in a decline in the platform's reputation and loyalty.

What is more serious is that low-price competition destroys the platform's operating logic and characteristics. In the process of pursuing low prices, the platform often ignores the importance of quality and service.

Therefore, after weighing the pros and cons, the giants chose to abandon low-price competition and turn to higher-dimensional value competition. They began to realize that quality, service, and user experience are the core competitiveness of e-commerce platforms.

However, the difficulties in the transformation process have surprised the giants.

Recently, Taobao has also changed its supply strategy for low-priced white-label products. Taobao Factory has launched "black label stores" to provide "factory" identification and traffic support plans for high-quality supply; 1688 will also introduce high-quality factory supply to Taobao to achieve the overall upgrade and development of the supply chain.

In the future, the strategies of the giants will further diverge. Some will choose to continue to delve into the low-price market, while others will choose to shift to higher-dimensional value competition.

Some merchants also said that the price adjustment of the platform may be related to the "Interim Provisions on Anti-Unfair Competition on the Internet" announced by the State Administration for Market Regulation in May. The regulations will be officially implemented on September 1 this year, defining and attributing many operating chaos in the e-commerce industry.

As for how the policy will be implemented and whether the platform's shift is thorough, it depends on the specific implementation results. What is certain is that "low price" has become a "double-edged sword". How to make good use of this "weapon" will be a long-term proposition that major e-commerce companies need to think about.

On June 20, the function of attaching stores to short videos on Douyin was quietly taken offline. For short videos posted by users with stores attached, the store entrance was also quietly withdrawn (for videos posted more than 30 days ago), but this did not cause any other ripples on the videos posted by users.

This subtle change heralds another major shift in e-commerce platforms.

Not only Douyin, but Taobao is also quietly innovating its homepage modules. More streamlined and more refreshing, this is the general feeling of users about Taobao's revision. The original complex modules have been cleverly integrated into the two menu bars at the top, and more pages are left for the dual waterfall flow of product and user content recommendations. The trend of product content is becoming more and more obvious.

As for the delisting of the store function of Douyin short video, it is also a step in the product content strategy. However, this is very different from the underlying logic of content e-commerce that we have talked about in the past. In the past, content was the servant of goods, but now, the platform seems to be forcing goods to become vassals of content.

The underlying logic of user payment transactions is undergoing a silent transformation. In the early days of shelf-based e-commerce, consumers eagerly searched for products, made decisions and placed orders. At this time, the advantage of the commodity transaction platform lies in the ability to integrate commodity information. However, with the increase in e-commerce platforms, consumers began to compare prices and services across platforms. If e-commerce platforms want to gain a foothold, they need strong supply chain capabilities and efficient supporting fulfillment capabilities. At this stage, content platforms have not actually had a direct conflict with shelf-based e-commerce platforms. Most of them are just diverting traffic to shelf-based e-commerce platforms.

However, with the rise of Douyin, the relationship between content and goods in the era of interest e-commerce has undergone earth-shaking changes. Content began to directly serve the transaction of goods, and the link from content to goods became shorter than ever before. Short videos and live broadcasts are all masterpieces of the content e-commerce era. At this time, the content capabilities of the platform dominate the new growth curve of the e-commerce sector, such as Taobao's live broadcasts, Douyin's short videos and live broadcasts.

However, in the early stages of content e-commerce, in order to prove the feasibility of this business path, all parties, whether platforms, merchants or influencers, were more oriented towards transaction results, which also destined the relationship between content and goods to be that of service and being served. However, when price competition reached its extreme, e-commerce platforms began to fall into a new dilemma. At this time, consumers' demands became more and more granular, and they were no longer satisfied with the ordering behavior that could be generated by a simple video or a single point of content.

From the user's perspective, a whole set of content systems is gradually prompting an order. This content system includes not only the links for the product itself, but also the content system that generates this demand, and even more unexpected dimensions. From the platform's perspective, the model of product service content can gain higher user stickiness, longer user attention, and achieve transactions at the same time. From the perspective of experts, there are traces of an ideal traffic monetization model where content is not linked to transactions, such as Xiaohongshu bloggers.

Consumers, influencers, and content platforms have all reached a tacit understanding that they all prefer to use products to serve content. Merchants who focus more on products than content have already stood on the opposite side of this trend. At the same time, brands with high content capabilities have strong content generation capabilities and the ability to stir up topics, and are becoming the new favorites of content e-commerce.

Whoever can continuously bring new fun to the audience will be able to gain a firm foothold in platform traffic and long-term brand development. In this process, it looks like the brand has achieved sales through marketing, but from the audience's perspective, buying the product is also a part of participating in each "national entertainment" and the product serves the content.

Douyin and Taobao, two e-commerce giants, are exploring the future of content e-commerce in different ways. Douyin is continuously adjusting its product-carrying function, trying to further drive out the content of those "traffic-stealing" merchants. Taobao is actively integrating its e-commerce system with its content system, trying to keep users browsing.

Douyin has embarked on the path of distinguishing between active and passive shopping mindsets of users when doing content e-commerce, while Taobao has integrated content into its own platform and made the products themselves into content. This is Douyin's division and Taobao's integration. It can be expected that the two apps, Douyin Mall and Taobao, are very similar in terms of user mindsets and functions, and will inevitably "accompany" each other to run the path of product contentization together.

After watching the differentiation of Douyin and the integration of Taobao, we actually found that both of them are now following the Xiaohongshu model. Douyin is actively reducing the commercialization ratio of its app, while Taobao is like making a Xiaohongshu with a large proportion of product content. In the future, there are still only two possibilities for products to become hits: first, the merchant can build a whole content matrix for this product to guide the consumer's mind; second, a certain product can appropriately cater to the content trend spontaneously generated by users.

In fact, these two types of products were also the ones that had the most orders before, but in the future, as the only thing that platforms can attract is content, products will become part of the content. The future of e-commerce platforms will be a deep integration of content and products, and they will all have super high cost-effectiveness like Pinduoduo. Whoever can find their own position in this integration and provide quality content and supply will stand out in the future e-commerce competition.

Conclusion

The future of e-commerce platforms lies in the deep integration of content and products. Only by finding the right position and providing quality content and supply can we stand out in the future e-commerce competition and win the market.