2024-08-05
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arts | Lin Jing
Cover source | Tuchong Creative
The e-commerce platforms that were crazy about low prices seem to have begun to collectively change their direction. In less than a week, Douyin and Taobao announced that they would adjust their low-price strategies.
On July 27, Taobao launched a solicitation of opinions on the optimization of "refund only" for merchants. It mentioned that for stores with a score of 4.8 or above, the platform will not actively intervene through "Wangwang" to support consumers to refund only after receiving the goods. The sellers will negotiate with the consumers first. It is currently in the testing stage and is expected to be officially implemented on August 9.
Also at the end of July, an insider revealed to Tech Planet that Douyin e-commerce is also adjusting its price comparison system. In the future, Douyin’s non-standard products will no longer be compared in price, and standard products will still be compared, but they will only be compared with products of the same level, for example, brands against brands, high-quality white labels against high-quality white labels, and ordinary white labels against ordinary white labels.
Over the past six months, all major e-commerce platforms have made low-price strategy an important goal. Corresponding to this is the continuous introduction of price comparison systems, refund-only functions, and other functions. Merchants offering the same products at lower prices have the opportunity to receive more traffic and exposure. In actual practice, this can easily lead to a vicious cycle of "bad money driving out good money" and give rise to those who maliciously take advantage of freight insurance.
Judging from various current signals, in the second half of this year, e-commerce platforms are trying to adjust their strategies and get out of the low-price quagmire.
Relax the "refund only" policy and adjust the price comparison system
In terms of refund only, in addition to "loosening restrictions" on stores with high store scores, Taobao also plans to make two optimizations in the after-sales process. First, the appeal channel. When a merchant files an appeal, the platform will conduct a quality inspection of the merchant's services and ask a third-party testing agency to conduct random inspections of the goods. If the inspection passes, the platform will compensate the merchant for the loss. Second, upgrade the abnormal behavior recognition model for refund only for goods received, and reject refund only requests submitted by consumers with abnormal behavior.
In the view of Taobao merchant Qiao Mai, the current store experience score is a comprehensive assessment of the data indicators of the past 30 days from three dimensions: product quality, logistics speed, and service guarantee. For merchants, while ensuring product quality, they must improve the delivery logistics speed and compete in after-sales service.
At the same time, while returning the "refund only" rights of stores with a score of 4.8 to merchants, Taobao also optimized and upgraded the experience points, upgrading the store experience points and product experience points to core factors of search, recommendation, and advertising algorithms. The higher the experience score, the greater the exposure opportunity.
In Qiao Mai's opinion, small and medium-sized merchants like her have obvious shortcomings in after-sales and operation teams, and the store scores rarely reach 4.8 points. When experience points occupy a more important position in traffic distribution, the challenges will undoubtedly increase further. Overall, it is currently more beneficial to brand merchants.
Douyin e-commerce has also begun to adjust its low-price strategy. An insider revealed that in the future, Douyin e-commerce's algorithm rules may return to the GPM (sales per thousand impressions) era from OPM (order volume per thousand impressions). In his opinion, under the OPM model, it is more likely for merchants to cut corners and sell at low prices to achieve small profits but quick turnover.
The backends of some merchants have also changed. Ma Kaiyue, founder of Lao Ma E-commerce Circle, told Tech Planet that from the backend of Doudian's "Price Promoter", it can be seen that some non-standard products such as women's shoes and children's clothing do not show price comparisons. Standard products still show price comparisons, but they are more "subtle" and no longer show labels such as "same style low price", "same style high price" and "lowest price on the entire network".
Non-standard products are more challenging to compare prices. In Ma Kaiyue's view, consumers now pursue fashionable aesthetics and personalized consumption. The life cycle of non-standard products is relatively short, styles are updated quickly, SKUs are abundant, and even for the same style, there are large differences in materials, workmanship, etc. The price comparison system is also prone to errors, and merchant appeals are often not approved.
Another challenge is that because the price comparison system cannot intelligently identify the material of each style, it still judges based on pictures, SKU attributes, and detail pages. This makes it easy for some merchants to exploit the rules and "intercept traffic". They use products with low-quality fabrics but gain more traffic.
Platforms turn to GMV growth
The change started in the second half of this year. A Douyin e-commerce partner told Tech Planet that in the first half of the year, the platform "shopkeeper" continued to emphasize low prices, but starting from the end of July, he was notified that the focus in the second half of the year would be on GMV operations. According to the "shopkeeper" he contacted, under the low-price strategy, the internally set GMV target was not achieved as scheduled, and there was a large gap. In the second half of the year, GMV will be improved from multiple dimensions.
At the same time, the above-mentioned partners said that the platform is also relaxing the entry threshold. For example, currently "personal stores" are also allowed to participate in Douyin e-commerce promotion activities, and influencers of alcohol (except liquor) and jewelry who have not reached L3 level can also carry out product promotion.
Taobao has also refocused on GMV growth. It released a signal earlier that it would weaken its low-price strategy. After the 618 promotion this year, Taobao Group held an important closed-door meeting with merchants. According to 36Kr, the closed-door meeting clarified a number of strategic adjustments to be implemented in the second half of the year. The most important change is that the system of allocating search weight according to "five-star price power" has been weakened since last year and changed back to allocation according to GMV.
Among them, "Five-Star Price Power" is a price competitiveness evaluation system launched by Taobao in the first half of 2023. After the tool evaluates the price competitiveness of a product, it will give the product a rating of one to five stars, which will directly affect the product's search ranking, traffic distribution, and display opportunities.
Judging from the data that has been disclosed, the low-price strategy has limited effect on the growth of the platform's GMV while lowering the platform's average customer price. Alibaba's financial report data shows that in the 2024 fiscal year (ending March 31, 2024), Taotian Group's revenue was 434.893 billion yuan, a year-on-year increase of 5%. Among them, the fourth quarter revenue was 93.216 billion yuan, a year-on-year growth rate of only 4%. At the same time, in the fourth quarter of fiscal year 2024, Alibaba's adjusted net profit was only 24.42 billion yuan, a year-on-year decline of 11%.
The growth rate of Douyin e-commerce has also slowed down. According to Wandian.com, in January and February this year (taking into account the Spring Festival holiday, the statistics are generally combined), Douyin e-commerce achieved a total GMV of nearly 500 billion yuan, with a cumulative year-on-year growth rate of more than 60%, and the year-on-year growth rate in March fell below 40%. After the second quarter, the growth rate further fell to less than 30%. In 2023, the monthly growth rate of Douyin e-commerce can still be maintained above 50% overall.
Liu Ming, a children's clothing merchant who has deployed on multiple e-commerce platforms this year, told Tech Planet that under the internal circulation of low prices, merchants, platforms and users are now trapped in the quagmire of low prices. Problems have begun to emerge, and it is time to solve them.
In his opinion, the prices are getting lower and lower, but the platform's investment costs are increasing, and the profit margins of merchants are shrinking. They start to save costs in raw materials and other links. In the end, the products received by consumers are not the same as the ones in the pictures, and the return rate increases sharply. Merchants not only have to bear a large amount of freight insurance costs, but also face inventory pressure. According to him, even if a leading brand sells 2 billion products, it is still very anxious because 1 billion returns are on the way, forming a false prosperity of e-commerce.
Moreover, after a merchant lowers the price, it is difficult to raise it back up. Even if the price of the products in their store is increased by only 10 yuan, the sales volume will drop significantly. The short-term traffic gained in exchange for low prices cannot help the store develop healthily in the long run.
In addition, some merchants believe that the recent intensive adjustments of various platforms may be related to the "Interim Provisions on Anti-Unfair Competition on the Internet" announced by the State Administration for Market Regulation in May. This regulation will be officially implemented on September 1 this year, and defines and attributes many operational chaos in the e-commerce industry.
In the face of internal competition, will low prices be completely abandoned?
Behind the crazy low-price strategy is the fact that the internal competition among major e-commerce platforms is intensifying, and the battle for existing users has become more intense, both in attracting new users and preventing the loss of existing users.
In particular, when Pinduoduo showed strong growth and its market value continued to soar, it almost became the object of study and research for major e-commerce platforms. According to the disclosed financial report data, in 2023, Pinduoduo's revenue was 247.6 billion yuan, a year-on-year increase of 90%; the adjusted net profit was 25.477 billion yuan, a year-on-year increase of 110%. Moreover, in November 2023 and May 2024, Pinduoduo's stock price surpassed Alibaba twice, becoming the Chinese stock with the highest market value in the US stock market.
Liu Ming, a children's clothing merchant, told Tech Planet that consumers' sensitivity to prices has increased significantly this year, and all services seem to be unable to surpass the temptation of "only refund + low price" to users.
However, the merchant composition and key category structure of e-commerce platforms are different. Compared with blindly pursuing absolute low prices, it is more necessary to explore differentiated competitiveness.
A service provider told Tech Planet that many agents of clothing brands now use short video platforms as channels to sell some unsaleable and outlet product lines. This is a low-price system in itself, and the brand itself has a strict price control system, so there is not much room for low prices.
At the same time, in the view of the above-mentioned service providers, compared with shelf e-commerce, the characteristic of interest e-commerce is timely consumption, consumer demand is stimulated instantly, the cost for merchants to create content is also relatively high, they all offer the lowest price, the quality cannot be guaranteed, and there is no space to create content, which is contrary to the platform's tone.
Although, compared with the madness and aggressiveness of e-commerce platforms in offering low prices, the current strategy of platforms to weaken low prices appears to be more cautious, but in the view of merchant Liu Ming, whether it is just refunds or price comparison systems, they have had a relatively large impact on merchants' operations in the past.
For example, the various price comparison systems launched by major e-commerce platforms have almost driven merchants crazy. Liu Ming said that merchants will constantly receive reminders in the background, and as long as they lower the price of a certain product, they can get corresponding traffic growth. If it is a hot product, and the price of a certain product is higher than that of another platform, they will immediately receive a phone reminder from the "shopkeeper", and either remove it from the shelves or change the price, otherwise the traffic will be restricted. Even the paid traffic will be sucked away for free by merchants with the same product at a lower price.
Although it remains unknown how much the platform will adjust in the future and whether it will completely abandon the low-price system, many merchants said that the platform has obviously begun to "reflect", which is a good start after all.
(Note: All names in this article are pseudonyms.)
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