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If you say that "low price" or "refund only" makes Taobao's sales model more like Pinduoduo, then you are only seeing the surface.

While successively weakening the "absolute low price" and loosening the "refund only" policy, Taotian, which does not want to be caught between users and merchants, is about to take a "historic step".

At the same time as the official announcement of the relaxation of the "refund only" policy, Taobao also announced a solicitation of opinions on the "Basic Software Service Fee Rules for Taobao Sellers". The reporter learned that according to the relevant rules, starting from September 1, Taobao and Tmall will begin to charge a "Basic Software Service Fee" of 0.6% for orders on the platform with a transaction status of "successful" (i.e. the buyer has completed and confirmed receipt of the goods).

It is an industry practice for e-commerce platforms to charge basic software service fees. Previously, Taobao was the only e-commerce platform in China that was free for sellers to use.

Image source: Screenshot from official website

Starting from September 1, Tmall will cancel the platform’s annual software service fee (hereinafter referred to as the “annual fee”): new merchants joining from September will not need to pay; for merchants who have already paid the annual fee, Tmall will refund them in batches according to the settlement rules.

Coincidentally, Xianyu, Alibaba's second-hand e-commerce platform, also announced that it plans to charge sellers a basic software service fee (0.6% of the actual transaction amount of a single order, capped at 60 yuan), which will be officially implemented on September 1.

On the one hand, these measures are seen by the outside world as Taotian's intention to "make up for lost time" and enhance its "ability to increase revenue". More importantly, some people believe that the relationship between Taotian and merchants will undergo a "historic change". The platform is not blindly biased towards merchants, nor is it blindly biased towards users. Taotian is trying to find a better way to "reverse the roll" of Pinduoduo.

Image source: Screenshot from official website

The relationship between the platform and merchants has changed

Taobao’s official plan for collecting “basic software service fees” has now been fully elaborated.

As for the charging standards, for orders with a transaction status of "transaction successful" (i.e. the buyer has completed and confirmed receipt of the goods), Taobao charges a basic software service fee of "transaction amount * 0.6%". "Transaction amount" refers to "the transaction amount of the transaction order when the receipt of the goods is confirmed (based on the transaction amount recorded by the platform transaction system)". If a refund occurs after the order is confirmed to be received, Taobao does not support the refund of the basic software service fee that has been deducted in real time to the seller for the refunded part. When the transaction order is confirmed to be received by the buyer, Taobao will deduct the basic software service fee in real time according to relevant rules.

The reporter noticed that Taobao also launched relevant preferential policies.

According to its statement, Taobao will refund the full amount of basic software service fees paid by the sellers to Taobao for the year for Taobao sellers whose annual transaction volume on Taobao is 120,000 yuan or less. Taobao will issue Alimama coupons to Taobao sellers whose transaction volume on Taobao is more than 120,000 yuan and less than 1 million yuan from September 1 to December 31, 2024, with the face value of the coupons being 50% of the basic software service fees paid by the sellers to Taobao in 2024.

In addition, Tmall will cancel the platform's annual software service fee from September 1. Previously, merchants in different categories on Tmall had to pay an annual fee of 30,000 to 60,000 yuan per year. After the exemption, new merchants who enter Tmall after September 1, 2024 will no longer need to pay this fee. At the same time, for merchants whose operating turnover from January to August 2024 reaches the annual target, Tmall will fully refund the annual fee.

In this regard, Zhuang Shuai, founder of Bailian Consulting, said in an interview with a reporter from the "Daily Economic News" on WeChat that after the adjustment, platform charges will no longer be "one size fits all."

"Those with good business pay higher fees, and those with poor business pay lower fees." Zhuang Shuai said that the original annual fee was fixed.

Cui Lili, professor of the Digital Economy Department and executive director of the E-Commerce Research Institute at Shanghai University of Finance and Economics, told the Daily Economic News that canceling the annual fee and charging basic software service fees should be a common charging model for information platform services. "On the one hand, sharing transaction revenue can reduce revenue pressure. On the other hand, it is actually a shared benefit, rather than charging purely from marketing expenses."

Cui Lili believes that it is more reasonable to charge merchants according to their actual performance rather than charging them a one-time fee for a period of time. She believes that the new strategy gives merchants a certain degree of choice. "In the past, we charged an annual fee based on the brand's entry, and brands may have regarded Tmall more as a form of exposure. Now it is more reasonable to charge according to actual transaction results."

Cui Lili also said that the current online market is very fully developed, and the diversity of various channels is also quite common. It feels reasonable to conduct online sales through online channels built by the platform and pay a certain percentage of service fees when a transaction is made.

Zhuang Shuai believes that after this adjustment, the relationship between Taotian and merchants will be different.

"The relationship is more benign." Zhuang Shuai believes that the current relationship is based on transactions, GMV, and combined with more dimensions to serve users well. It is not blindly biased towards merchants, nor is it blindly biased towards users. "In fact, both extremes are not desirable. The relationship between the platform and merchants should be consistent, and they should work together to serve users well."

No more "learning to walk by imitating others"

In fact, charging basic software service fees is an industry practice for e-commerce platforms.

Pinduoduo mentioned in its latest financial report that its revenue mainly consists of revenue generated from online platform services and product sales. The revenue from online platform services mainly includes online marketing service revenue and transaction service fees. Pinduoduo mentioned that when its service obligations to merchants are determined to have been completed in each sales transaction, the revenue related to transaction services will be recognized.

Although Taobao and Pinduoduo are moving in the same direction in charging service fees, the underlying logic is different, which can be seen from the fact that Taobao began to optimize the "refund only" policy.

On July 26, Taobao announced that it would optimize its "refund only" policy, increase merchants' autonomy in after-sales service based on the new experience score, and reduce or eliminate after-sales intervention for high-quality stores. The relevant policy will be officially implemented on August 9.

Image source: Screenshot from official website

It is reported that for merchants with a store experience score ≥ 4.8, the platform will not actively intervene through Wangwang to support consumers in refunding after receiving the goods, but the seller will negotiate with the consumer first.

Taobao is further improving the rights of merchants. Reporters learned that in response to the increase in after-sales service costs across the industry this year, Taobao will also comprehensively optimize the current freight insurance strategy in the near future. Sources said that Taobao Tmall has held multiple rounds of consultations with partners on the issue of freight insurance, and some policies are expected to be trial-run in September this year.

The person said that although the details of the strategy have not yet been finalized, it is certain that after this round of strategy adjustments, Taobao and Tmall merchants are expected to receive more freight insurance-related subsidies and their operating costs will be further reduced.

The adjustments are linked one after another. Pan Helin, a well-known economist and member of the Information and Communication Economics Expert Committee of the Ministry of Industry and Information Technology, told the reporter of the Daily Economic News that this series of actions means that Taobao will change its model. Pan Helin believes that Taobao's charging of basic software service fees, coupled with the optimization of "refund only" and shipping insurance, has released a signal that Taobao has begun to favor the cultivation of high-quality merchants.

In the opinion of industry insiders, this series of measures shows that Taotian no longer intends to follow the low-price assessment model similar to Pinduoduo.

Zhuang Shuai told reporters that due to considerations of supply-retail relations and other aspects, Taotian is adjusting and optimizing its previous low-price assessment model to strengthen its own characteristics.

Cui Lili also mentioned that there are still big differences between the products sold on Pinduoduo and Taobao Tmall. She believes that Taobao's shift to charging "basic software service fees" means that all platforms are at a baseline, and merchants' choice of platform should be based more on platform traffic or the pros and cons of other merchant policies.

According to the reporter, before the plan to cancel the annual fee, Taobao Tmall had launched a series of business-friendly actions: providing all brands and merchants with a number of initiatives including AI business efficiency improvement tools and free business advisors.

In fact, in July this year, there was market news that Taobao weakened its absolute low-price strategy. At the earnings conference in May this year, Alibaba Group CEO Wu Yongming said that improving product competitiveness, efficiency, customer service and consumer experience, thereby driving GMV growth and user consumption frequency, is the top priority this year.

Can a better route be found?

The strategic shift may be related to multiple factors.

According to the 2023 China E-commerce Market Research Report, among the factors that attract consumers to e-commerce platforms, the importance of product price discounts and the convenience of returns and exchanges has increased significantly. The proportion of consumers who choose price discounts has jumped from third in 2020 to first in 2023, becoming the most concerned factor for online shoppers.

Against this backdrop, the report points out that the platform has strengthened its control over price advantages by increasing the construction of an ecosystem for small and medium-sized businesses, in order to adapt to the industry development trend of winners being those with good quality and low prices.

The reporter learned that during the 618 shopping festival last year, Taobao's 10 billion yuan subsidy was fully tied to the five-star price power tool. Products with five-star price power also participated in Taobao's 10 billion yuan subsidy, and there will be a mechanism to ensure priority appearance, with the opportunity to be recommended to the first screen of Taobao mobile searches.

At the 2023 Taobao Tmall 618 Merchant Conference on May 10 last year, Mu Shan, then the general manager of Taobao Tmall 618, outlined three key points for merchants: good products at good prices, Taobao Good Price Festival, and short videos and live broadcasts that are good to look at. Among them, the two key points involve "price".

Last August, at Alibaba's first quarter earnings conference for fiscal year 2024, Dai Shan, then CEO of Taotian Group, said that the "price power war" will continue in the future and will continue to be a key investment project.

But all this did not bring obvious performance returns to Taotian. In the second quarter of Alibaba's fiscal year 2024 (the three months ending September 30, 2023), Taotian Group's revenue growth rate fell from 12% in the first quarter to 4%. In terms of stock price, at the end of November last year, Pinduoduo's US stock market value once exceeded Alibaba.

The industry situation has also changed. According to media reports, on July 23, there was news that Douyin e-commerce has recently adjusted the priority of its business goals, no longer putting "price power" first, and will focus on pursuing GMV growth in the second half of the year. In response to this news, Douyin did not respond to the reporter of the "Daily Economic News".

On July 31, market news said that Pinduoduo adjusted its business focus in the second quarter of this year, from pursuing commercialization and increasing profits to putting GMV back as the top priority.

At present, the internal competition for low prices in e-commerce seems to have come to an end, at least the pursuit of simple and crude "low prices" is no longer pursued. Faced with fierce competition, Taobao does need to reform itself, but directly turning to a price power strategy may not necessarily yield results.

Against this backdrop, Taotian has begun to push forward its new business strategy. It seems that Taotian has made it clear that only when merchants' business improves can the platform benefit. While actively helping merchants improve their business efficiency, Taotian is also trying to optimize its own revenue-increasing capabilities through commercial products.

On July 2, Alimama disclosed that its "full-site promotion" will be fully launched in the near future. Previously, Alibaba Group CEO Wu Yongming mentioned full-site promotion many times, and Alibaba CFO Xu Hong also said that Alibaba is continuously optimizing commercial products and will gradually launch these commercial products, which will help improve the return on investment (ROI).

Image source: Daily Economic News data map

This may mean that Alimama is trying to use AI to innovate commercial products to increase growth and further improve GMV. It is reported that during Tmall's 618, compared with homogeneous products that were not promoted on the whole site, the increase in traffic brought by the full site promotion to merchants reached 105%, and the increase in product transactions reached 43%, helping 130 of the first batch of internal test merchants to achieve a transaction volume of over 10 million.

It is worth mentioning that Taotian is still expanding the supply of “low-priced” goods.

For example, in March this year, 1688 has opened three stores on Taobao - 1688 Strict Selection Taobao Store, 1688 Enterprise Self-Purchase Tmall Store and 1688 Industry Expert Selection Tmall Store. It is reported that these 1688 Taobao stores will be integrated into a channel similar to Tmall Supermarket, and will launch 1688 Strict Selection OEM source factory goods on Taobao.

The e-commerce world is still changing, and Taobao is still adjusting itself. The effectiveness still needs to be proven by real performance. In the long run, the major platforms are expected to go deeper in their interpretation of low prices, and provide consumers with better-priced goods without sacrificing the supply-retail relationship. At the same time, the platforms have also made it clear that the platforms and merchants should stand together and work together to serve users well.

Daily Economic News