The final payment people are back: the black and white of the Double 11 pre-sale

As the Double 11 Shopping Festival kicks off, the pre-sale system of e-commerce platforms has once again become the focus. For merchants, the pre-sale system is both a reassurance for stocking up and a double-edged sword for sales. This article will take you to explore the business logic and consumer experience behind the pre-sale system, and analyze how the key strategy of this e-commerce promotion affects every participant in the shopping festival.

This year, Taobao restarted pre-sale for Double 11, which caused widespread debate among consumers. Some were keen to get bigger discounts through careful calculations, while others were fed up with the cumbersome pre-sale system.

The original intention of the pre-sale system was to allow merchants to gain more certainty in big promotions, but different merchants have different experiences.

Consumers or merchants? Taotian has been constantly adjusting the weights on both sides of the scale over the past year, but it is almost impossible to keep it even.

Consumers who had just experienced a "refreshing" shopping experience on 618 have become the ones who have to pay the final payment again on this Double 11.

On October 14, Taobao and Tmall officially launched the longest Double 11 in history, 10 days earlier than last year, and the entire promotion lasted nearly a month. The pre-sale system, which has been used for 10 years, made a comeback after being cancelled a few months ago during the 618 shopping festival.

An insider of Taotian told Xuebao Finance that the platform received a lot of feedback in the communication with merchants on the eve of Double 11. Most merchants believe that the pre-sale system is conducive to pre-stocking according to demand and advertising budget management, which are very important during the big promotion period. Therefore, after investigation, Taotian decided to restart pre-sales.

Over the past year, major e-commerce platforms have experienced unprecedented internal competition, with a series of measures to improve consumer experience, such as the lowest price on the entire network, refund only, and cancellation of pre-sales, etc., which have greatly tilted the balance of the platform towards consumers. However, this Double 11, the wind direction has begun to change, and Taobao has increased the weight on the merchant side.

The extended consumption cycle, numerous discounts, and confusing price system have caused some users to fall into the confusion of "data migrant workers" again. At the same time, some people have carefully studied the platform rules and bought their favorite products at low prices by calculating the problems with two decimal places.

Many businesses are eager to embrace the return of pre-sales. However, some people believe that restarting pre-sales is just a marketing method to extend the promotion cycle and does not provide any substantial help to businesses.

The pre-sale black and white are once again put on the table.

Chu Duan, vice president of Alibaba Group and president of Taobao Platform Division, said at a communication meeting on the eve of Double 11, "The new leadership team of Taobao Group will not find a reason to do or change something. We will do it if we want to do it, and change it if we want to change it. If consumers and merchants like it, we will continue to do it."

But for an e-commerce platform that generates more than 8 trillion yuan in transaction volume each year, every policy shift is the result of a clash of interests among merchants, users, and the platform.

Did Taotian do the right thing in restarting pre-sales?

01 Pre-sale: a love-hate relationship

On the first day of pre-sale, Zhang Fan dug out the Excel spreadsheet she had made for last year's Double 11. Taking advantage of her free time at work during the day, she started her annual "cloze test".

(Zhang Fan’s small account book)

Source: Provided by the interviewee

For Zhang Fan, who has a long and complicated shopping list, the pre-sale period gives her ample time to make decisions. "When I have money in the future, I will still be as careful with my budget as I am now. I just like the feeling of wits and courage to maximize my own interests under the rules," she told Snow Leopard Finance.

Since its inception in 2014, the pre-sale system has accompanied various shopping festivals on e-commerce platforms for 10 years and is deeply integrated with the core gameplay of the big promotions.

Under the platform's full-reduction rules, consumers buying a large number of goods at one time is the most profitable choice. However, the purchase of different goods has different decision-making cycles, and new demands often emerge. The pre-sale system can give consumers enough time to do their homework.

Taking Zhang Fan's Excel spreadsheet as an example, during this year's Taobao Tmall Double 11, in addition to the usual 50 yuan off for purchases over 300 yuan, the platform will also issue beauty coupons and other coupons for various subcategories during the pre-sale period, as well as large-value coupons for 88VIP users. In addition to each store's own coupons, it is not easy to figure out the rules and come up with the best solution in a short period of time.

Li Jie, who waits for the pre-sale to start in the live broadcast room every Double 11, told Snow Leopard Finance that the main reason for paying the deposit is to have time to accumulate the discount slowly, otherwise once the price changes or a product you want to buy is sold out, the entire shopping cart will have to be readjusted. In addition, the deposit reduction and deposit discount activities given by major anchors during the pre-sale period can also save her a lot of money.

In recent years, the day of pre-sale opening is usually the busiest time for the live broadcasts of major anchors. On the first day of pre-sale for Double 11 this year, the sales of Li Jiaqi's live broadcast exceeded 100 million in 5 minutes, and the top anchors such as Bee Surprise Club and Mushrooms are Coming also exceeded 100 million in transaction volume within 1 hour of the start of the broadcast. A large number of brands and anchors will pour marketing budgets on the day of pre-sale opening to create a grand promotion and hot sales.

The pre-sale system, which was born 10 years ago, has already penetrated into every corner of Double 11.

But for another group of consumers who don’t watch live broadcasts and don’t like to spend time doing math problems, the pre-sale system brings a completely different experience.

After the pre-sale system was launched, "Consumers question whether Double 11 pre-sale is more expensive than direct purchase" and "Consumers question whether 88VIP is a price cut for old customers" became hot topics on Weibo. Many consumers complained on various social platforms that the final payment amount for pre-sale products was higher than that for spot goods, and that they could not get beauty coupons after paying the deposit.

If you search the keyword "pre-sale" on the Black Cat Complaint Platform, you can see a large number of complaints during the Double 11 period about pre-sale products not being shipped within the time limit, merchants changing prices after paying a deposit, and the deposit plus the final payment being higher than the spot price.

Zhang Fan told Snow Leopard Finance that in the process of calculating the discount, if she missed any promotional activities in any link, the total amount of the goods after the final payment would change, and there is a high probability that the pre-sale price will be more expensive than the spot price.

The original intention of the pre-sale system was to give merchants a longer stocking period and consumers a longer decision-making period. However, after being bundled with a variety of promotional activities, it has become increasingly heavy and the threshold has become higher and higher.

Not only are consumers not buying into it, many businesses also have different views on the pre-sale system.

02 Is pre-sale a necessity for merchants?

"I am particularly worried that (Xiaomi SU7) will not be popular at the beginning and no one will buy it. What I am more worried about is that if everyone comes to buy it and waits for a long time, they will definitely be criticized." Lei Jun's concerns are also the concerns of many Taobao merchants during the big sale.

The original intention of the pre-sale system is to eliminate more uncertainties for merchants.

But not everyone is at the center of the stage in this carnival. For some small and medium-sized merchants, the pre-sale system is not only dispensable, but even now that the pre-sale system is deeply tied to the full-reduction gameplay, many small and medium-sized merchants have become victims of "forced orders", and the order cancellation and return rate during the promotion period remains high.

On the second day after the pre-sale started, Awei, who has been running a Tmall store for more than 10 years, communicated with buyers and processed more than 10 deposit refunds. He learned from user feedback that after paying the deposit, many people found that the discounted price of the purchased goods was not much different from the spot price on other platforms, and some spot prices were even cheaper.

"Only when the goods are sold can there be certainty." Awei told Snow Leopard Finance, "The pre-sales 10 years ago were real pre-sales, but for many merchants now, pre-sales are just a disguised extension of the promotion period." In his opinion, with the development of e-commerce to this day, platform merchants are all experienced and usually do not have too much deviation in sales expectations during promotions.

Many Taobao and Tmall merchants told Snow Leopard Finance that the number of order cancellations due to order crowding that had to be processed every day during the pre-sale period increased significantly.

Merchants of different sizes and different product categories have completely different experiences with the pros and cons of the pre-sale system.

An industry insider told Snow Leopard Finance that big brands often need pre-sales because of their large shipments and short delivery windows. Pre-sales also make it easier for brands to concentrate their marketing budgets within a few days, avoiding high-cost, low-performance "marathon" marketing.

This year, on Double 11, home appliances that require longer stocking and delivery time became hot-selling categories due to the addition of old-for-new subsidies. Liu Yi, the owner of a home appliance sales company in Wuhan, doubled the number of people to pack and ship in advance based on pre-sale orders, but still failed to complete all shipments on October 21, the final payment date. He plans to recruit some part-time workers later.

For merchants who face great shipping pressure during big sales, the pre-sale system can provide them with a certain degree of buffer.

In terms of product categories, it can also be seen from the pre-sale battle reports officially released by the platform that brand merchants in Taobao and Tmall's advantageous categories such as beauty, clothing, etc. are usually popular in pre-sales.

Within 10 minutes of the first day of the Double 11 sales, 13 brands including PROYA, L'Oreal, Estee Lauder, Helena Rubinstein, and Olay exceeded 100 million yuan in succession, and 20 brands exceeded 100 million yuan in the first 30 minutes. In the first hour of the Double 11 pre-sale, the transaction volume of 125 clothing brands doubled year-on-year, the pre-sale amount of 32 pet brands doubled year-on-year, and 73 pet brands exceeded the full day of last year.

Huatai Securities pointed out in a research report that the restoration of the pre-sale system is more important to the merchant side, and it is an effective mechanism design for the platform to deliver higher certainty to merchants. If the pre-sale system allows the merchant side's inventory to fall back to a healthier level during the promotion period, the merchant's bargaining power in the e-commerce industry chain is expected to increase, and in this process, they will be more inclined to favor e-commerce platforms with high profit margins and high turnover rates.

03 Taotian’s problem: Who are the customers?

As to why Taobao and Tmall restarted the pre-sale system on Double 11, executives of Taotian Group gave a response before Double 11 started.

Jia Luo, president of Tmall's business unit, said that compared with the first half, there are significant differences in consumers' shopping characteristics in the second half of the year: first, the average order value and the average item value are high. For example, people need to buy autumn and winter clothes in the second half of the year, and new mobile phone brands are released in the second half of the year. Second, consumers need to be given more consumption expectations and clear discounts, and pre-sale orders placed in advance will reserve inventory.

Chu Duan, president of Taobao Platform Business Unit, said that many merchants feel that pre-sales are very important to business. After careful research, Taobao found that pre-sales can indeed bring opportunities for incremental business, and many consumers can accept the pre-sale system.

An employee of Taotian told Xuebao Finance that there have been different opinions internally regarding the cancellation of pre-sales on June 18. He was not surprised that pre-sales were restarted on Double 11. "After the cancellation of pre-sales on June 18, many merchants hoped to restart pre-sales on Double 11, because the products in autumn and winter are often very different from those in spring and autumn: the average order value is higher, the stocking cycle is longer, and the inventory cost is higher."

In other words, restarting pre-sales is a change made by Taotian after weighing the interests of both merchants and consumers.

In the past year, Taotian Group has undergone a major management reshuffle internally and the price war among e-commerce platforms has been unprecedentedly fierce. During this process, Taotian has been making fine adjustments, trying to balance the balance between merchants and consumers.

From the price power strategy to the lowest price on the entire network during last year's Double 11, and then to the refund-only service launched at the end of last year, facing the internal competition in the e-commerce industry, Taobao and Tmall have tilted the balance towards consumers and are committed to improving the consumer experience. This trend reached its peak on June 18 this year. On the eve of the event, Taobao announced at the merchant conference that it would cancel the pre-sale system that had been in place for 10 years and sell products directly from spot goods to simplify the shopping process for consumers.

But this trend suddenly came to a halt at the end of July this year and began to reverse.

On July 26, Taobao announced the optimization of the refund-only policy. For users who frequently use the refund-only policy, the platform will no longer approve their applications immediately, but will conduct a more detailed evaluation through customer service. For items that are not suitable for the refund-only policy, the refund-only policy will be cancelled and replaced with a return refund policy.

In the following September, Taobao upgraded the freight insurance, which had long been criticized by merchants, into a return package. Through concessions by the platform, logistics and insurance companies, the average return cost of merchants was reduced by more than 20%.

During this period, Taobao and Tmall also downplayed the label of "the lowest price on the entire network". This year's Double 11, this statement almost disappeared.

At a media communication meeting before Double 11, when asked whether a series of policy shifts, including the restart of pre-sales, reflected Taobao's lack of strategic determination, Chu Duan responded that Taobao's strategic determination from the past to now has always been "to make it easy to do business in the world", and it has never changed.

"If we find that we have gone a little bit too far or deviated a little bit, we will pull back. If we are a little bit slower, we will try to run harder. This is actually the process."

Behind the frequent adjustments and shifts is a question that has long troubled Taobao: Who is Taobao's first customer? Consumers or merchants?

In the second half of 2020, when answering an employee’s question about who is the No. 1 customer, Zhang Yong, then CEO of Alibaba, said: “It is meaningless to discuss whether the buyer is first or the seller is first. It is not appropriate to put either one first. We still need to look at the specific situation.”

For Taotian four years later, there is still no standard answer to this question.

(All interviewees in this article are pseudonyms)

Author: Hanxing