news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

A price war that has lasted for six years is about to escalate in intensity.

In the past month, e-commerce platforms have gradually weakened the concept of low prices. Taobao has weakened its "five-star price power" system, Douyin has re-listed GMV (gross merchandise volume) as its first goal, and even Pinduoduo, which started this round of low-price wars, has begun to place GMV in a more important position. Among the major domestic e-commerce platforms, only JD.com has not yet turned around and weakened low prices.

Douyin's adjustment to weaken low prices has somewhat surprised the outside world. Just in May, Douyin took the lead in opening a price comparison system and internally testing the automatic price change function.

However, at the end of July, Wei Wenwen, president of Douyin e-commerce, revealed at an internal communication meeting that Douyin e-commerce will improve its pricing power in a more refined manner in the second half of the year.“The pricing power of Douyin e-commerce is by no means simply the pursuit of absolute low prices.”

Over the past year, several major e-commerce platforms have flocked into the low-price battlefield. Their ideal state is to win more orders and market size from Pinduoduo by relying on low prices.

But the fact is that even with abundant traffic like Douyin, the traffic is limited, and tilting the traffic towards white-label and low-priced goods will inevitably damage the platform's advertising revenue. If the price paid can allow the platform to obtain higher returns in the future, the platform can still delay satisfaction.

But the problem is that when Pinduoduo was exploring the sinking market, the sinking market was still blank, and Pinduoduo established a supply chain advantage. Six years later, Pinduoduo has built an iron wall in the absolutely low-priced white-label market, and the platforms that rushed in excitedly found that they could not beat Pinduoduo at all.The low-price strategy did not allow the platform to achieve a higher or expected market size.

In the brand market where Pinduoduo does not have an advantage, no platform can obtain an absolute price advantage. Low prices only exist for specific products at a specific time.The platforms’ low prices are like cutting off one’s own sword.

The end result was that they failed to snatch more orders and users from Pinduoduo, but instead reduced their average order value and profits.

As a result, e-commerce platforms that failed to obtain ideal profits have stepped out of the low-price battlefield, which is also a timely way to stop losses for them.

In fact, before they started to catch up with Pinduoduo, e-commerce platforms also tried to catch up with GMV. They were a step behind and missed the best opportunity to compete with Pinduoduo for the lower-tier markets. Since last year, they have been trying to catch up with Pinduoduo, but Douyin and other platforms are a step behind again. Now, they have finally decided to retreat to their base camp and return to their own sphere of influence.

A

The core reason why Douyin does not pursue absolute low prices but focuses on GMV is thatIn the low-price field, it cannot defeat Pinduoduo and cannot gain absolute price advantage.

The main form of Douyin is live streaming e-commerce, rather than shelf e-commerce. The form of live streaming e-commerce is destined to make branded goods occupy a larger share in the commodity pool.

The founder of a live streaming organization MCN told Zimubang (ID: wujicaijing) that the reason why many anchors are reluctant to live stream on Pinduoduo is that Pinduoduo's advantaged products are white-label products, and white-label products often do not have much marketing budget, making it difficult to squeeze out profits for the anchors.

The white-label products that appear in Douyin's live broadcast room naturally cannot compete with Pinduoduo's white-label products in terms of low prices because they have to reserve commissions for the anchors and other links.

In the past two years, Douyin has been constantly attacking shelf e-commerce. In March this year, Douyin launched the Douyin Mall version. Unlike the mall channel in the Douyin APP, the Douyin Mall version APP places the "low price flash sale" below the banner recommendation position, giving it a more important display position.

In May 2023, Wei Wenwen, president of Douyin e-commerce, mentioned in a speech that content scene commodity traffic accounted for 56%, and shelf scene commodity traffic accounted for 44%. In the past year, shelf scene GMV accounted for 30% of the global GMV. "In the future, we hope that content and shelf scenes will account for half each."

Even so, Douyin's circle of competence is still live streaming, not shelf e-commerce. According to a previous report by Growth Factory, Douyin Mall's GMV mainly comes from repeat purchasers. These consumers come into contact with brands through short videos or live streaming and make purchases. When they want to buy again, they may buy through the mall or product card channels.

In other words, as long as live streaming e-commerce remains the main customer acquisition and conversion channel for Douyin merchants, Douyin will not be able to compete with Pinduoduo's white-label merchants in terms of absolute low prices.

In July, according to 36kr, Douyin is reducing the proportion of traffic allocated to live broadcasts by influencers and shifting the traffic to high-quality short videos and brand store broadcasts, but Douyin denied this view.

Even if brands save on commissions paid to influencers through self-broadcasting, the commissions will not be directly passed on to consumers. After all, both brands and white-label products will not easily break prices. Once the prices are broken, they will be more passive when setting prices with anchors in the future.

If merchants want to compete with influencers for traffic in their own live broadcast rooms, they will have to pay more investment costs. In the final analysis, it is difficult for the live broadcast e-commerce ecosystem to produce absolutely low-priced products.

According to Latepost, Douyin still requires price comparison for standard products, but the price comparison for non-standard products has weakened.

It is obvious that Douyin has already withdrawn one foot from the battlefield of the white-label low-price war.

B

To engage in price wars, platforms also have to pay a considerable price, especially for products like TikTok that rely on a paid traffic system.

The tilt of traffic towards white-label and low-priced goods will inevitably damage the platform's advertising revenue. If the price paid can get a higher return, the platform can still delay gratification, but the problem lies in,The low-price strategy did not bring the expected results. Instead, it fell into the dilemma of "killing both quantity and price": the price went down, but GMV did not meet expectations.

According to Analysys International, the transaction volume of major platforms (Taobao Tmall/JD.com/Pinduoduo/Douyin/Kuaishou) during the entire "618" cycle in 2024 will increase by 13.6% year-on-year, of which Pinduoduo will increase by 17.7% year-on-year and Douyin will increase by 26.2% year-on-year, making them the two fastest growing platforms.

Although compared horizontally, Douyin's GMV growth rate is still very fast, there is still a big gap compared with the previously set goals.

In May this year, according to an exclusive report by 36kr, Douyin's e-commerce GMV will be approximately 2.7 trillion yuan in 2023, and the GMV target for 2024 is 4 trillion yuan, an increase of nearly 50%.

Judging from the 618 data, Douyin is still far from achieving a growth rate of 50%. Low prices can bring more users, higher order frequency, and more orders to the platform, but since e-commerce has long entered the stock competition, the number of new users that each platform can attract is very limited, and the order frequency and order volume do not contribute more GMV to the platform, but instead damage the profits of merchants.

If Pinduoduo, the king of white-label products, had not stood in front of Douyin, there would still be room for the company to compete on low prices. However, after a year or so of implementing the low-price strategy, various companies have realized that it is difficult for them to beat Pinduoduo in the fight for white-label products. They have invested all their efforts in the low-price war, but are increasingly unable to make ends meet in terms of ROI.

Obviously, Douyin has also realized that in the long run, the profits that white-label merchants can bring to Douyin are far less than those of domestic or international brands, even high-profit brands such as cosmetics.

In the past two months, Douyin has been adjusting its strategy. A research report released by Cinda Securities in July mentioned that Douyin's white-label advantage has weakened slightly recently, while its branded advantage is relatively significant. "The weak growth of white-label products in the past two months may be related to the adjustment of platform policies."

Withdrawing from the low-price market is more like a timely stop-loss action by Douyin.

Among major Internet companies, Douyin can be said to be the company that values ​​ROI the most. This is not the first time that Zhang Yiming has changed his strategy in the traffic investment business.

In 2021, Douyin has been directing traffic to a number of WeChat mini-games, allowing users to directly jump to the WeChat mini-program game interface through links to achieve cross-platform traffic diversion. Although mini-games are also an important source of revenue for Douyin, in order to maximize efficiency, Douyin will still sell traffic to competitors instead of only supplying traffic to its own business.

C

Another reason that prompted Douyin to withdraw from the price war is that competing on low prices has an invisible danger - it can easily damage the platform's reputation.In the past few years, by introducing brand merchants, Douyin e-commerce has formed a high quality mindset, but a sudden turn to low prices, or too many low-price traffic-generating methods on the platform, is tantamount to pushing users back to Taobao and JD.

One user found that in order to deal with the platform's price comparison system, some brands have also begun to take countermeasures and launched products with smaller single packaging specifications. This phenomenon is particularly evident in daily necessities such as tissues and toilet paper rolls. Users who receive cheap products with specifications far from what they expected will naturally be disappointed with the platform.

This is also the reason why Pinduoduo launched a refund-only policy. An e-commerce operator analyzed that it is easy for white-label products to be different from the ones advertised, which can easily damage users' trust in and experience of the platform.

Obviously, Pinduoduo, which has been fighting in the white-label market for many years, has done better in this regard.In addition to absolutely low prices, the platform also needs to build a complete operating system.The implementation of refunds alone has greatly improved the user experience.

In May this year, Douyin e-commerce issued a new rule: unreasonable SKU price setting for the same product link, that is, it is not allowed to have a large price difference between different SKUs in the same product link (the price setting is extremely low or extremely high). This rule is aimed at merchants who exploit the platform's loopholes to attract traffic with low prices. For example, the cover shows that it is a product, but when you click on the link, you find that it is just the accessories of the product.

At the above-mentioned internal meeting, Wei Wenwen pointed out that "improving consumer experience is the basic skill of e-commerce platforms, and it is also the long-term direction of Douyin e-commerce efforts."

E-commerce platforms have weakened low-price competition, but this does not mean that the low-price war has completely ended. The low-price war around brands is still going on. There are two characteristics of the brand low-price war. First, low prices only exist for specific products in a specific period of time, and no platform can achieve absolute price victory; second, when the price difference between platforms is not large, this war tests the user's loyalty to the platform.

In this regard, Taobao and JD.com both have their own high-value membership systems and shopping mindsets, and this group of people is the focus of competition in the second half of the year. Douyin's killer weapon is still the scale of users and user activity. This change in the dimension of the war is also the reason why Douyin must become a shelf e-commerce.

Judging from the current situation, the price war has weakened, but it has not completely ended.

Just in July, Douyin e-commerce once again adjusted the investment rules for its low-price flash sale channel, lowering the quote requirement from ≤150 yuan to ≤100 yuan; the minimum price traceability period was extended from 1 day to 14 days.

At present, the "low-price flash sales" in the Douyin Mall still occupy a prominent position on the homepage, with the slogan "3 yuan for 3 items" and free shipping for all items.

In the current situation of consumption downgrade, low price is still important. However, this strategy, which was listed as the top priority by various companies in the past six months, is giving way to higher business goals, namely price, user volume, GMV, and monetization rate, under the pressure of ROI and GMV.

Not only Zhang Yiming does not want to compete for the title of white-label king, Huang Zheng also does not want to be just the white-label king. According to Wandian.com, Pinduoduo adjusted its business focus in the second quarter of this year, from pursuing commercialization and increasing profits to putting GMV back as the first goal. Pinduoduo also hopes to maintain its advantages and market share.

Competition among e-commerce platforms has shifted from focusing on price competition in the past six months to a multi-dimensional war. A new competition involving more factors is taking place among these e-commerce platforms.