There are no winners in price "involution"
2024-08-15
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The low-price strategy is to serve growth. Currently, the low-price strategy can no longer adapt to changes in the market environment. What the major platforms need to do is to give full play to their own advantages, consolidate their positions, serve merchants and users well, and extend and expand on this basis, rather than using price means to damage the healthy ecological environment of e-commerce.
E-commerce platforms that were still competing to deploy low-price strategies in the first half of this year suddenly changed their minds. Recently, it was reported that many e-commerce platforms weakened their low-price strategies and instead prioritized GMV (transaction volume) growth as their business goals.
GMV is an important indicator to measure the overall transaction scale and activity of e-commerce platforms. Prioritizing it means that the platform will weaken the model of exchanging low prices for traffic in traffic allocation, and instead consider the comprehensive contribution of goods more comprehensively. The change in the mechanism will also guide merchants on the platform to change their business thinking in order to obtain more recommendation opportunities.
Why do e-commerce platforms weaken their low-price strategy? The main reason is that this strategy no longer works.
For some time, major e-commerce platforms have launched low-price promotions such as "full discount" and "10 billion subsidies" during various shopping festivals, and later launched a "refund only" model in after-sales service, trying every means to win users. However, despite all the efforts, the effect is not obvious, and some platforms have even seen a decline in growth.
The low-price strategy is for growth. If the low price does not lead to an increase in orders, an increase in the number of users, and an increase in final profits, then it is untenable to continue to implement the strategy.
More importantly, using low prices as a guide can no longer adapt to changes in the market environment. Excessive pursuit of price advantages will lead to more recommendations for low-priced and low-quality products, which will lead to an increase in return rates, increase transaction costs, and reduce platform quality to a certain extent; excessive pursuit of price advantages will also squeeze merchants' profit margins, further weaken product power, and even give rise to vicious competition. In addition, the low-price strategy may also lead to insufficient investment by merchants in after-sales services and other aspects, affecting consumers' shopping experience and satisfaction.
The Politburo meeting held recently pointed out that it is necessary to strengthen industry self-discipline and prevent "involutionary" vicious competition. This undoubtedly sounded the alarm for the price war in the e-commerce industry. Major e-commerce platforms have gradually realized that simply relying on low-price strategies can no longer meet the expectations of all parties and must make changes.
However, it is too early to say that the price war among e-commerce platforms has ended. Whether the strategy of e-commerce platforms to weaken low prices can be firmly implemented and whether other platforms will follow suit remains to be seen. If each platform wants to maintain the stability of its existing market share in the subsequent competition, it needs to make trade-offs in factors such as price, traffic, and profit, seek a balance, and make new strategic matches according to market changes.
At present, the major domestic e-commerce platforms have formed their own characteristics in their development. Some platforms have rich categories, some platforms have reliable quality, some platforms have outstanding self-operated advantages, some platforms are widely favored for group buying, and some platforms have obvious social attributes. What the major platforms need to do is to give full play to their own advantages, consolidate their positions, serve merchants and users well, and extend and expand on this basis, rather than using price means to exert power in completely unfamiliar fields and damage the healthy ecological environment of e-commerce.
Consolidating one's own advantages is not something that can be done overnight. E-commerce platforms need to bend down, maintain sufficient strategic focus, and work hard for a long time to win the market with differentiated competition and high-quality services. (Source: Economic Daily Author: Meng Fei)
Source: Economic Daily
