Taobao and JD.com competed in a 50% discount war, but in the end, no one was hurt

Recently, Taobao and JD.com have launched 50% off promotions. What kind of business logic and strategy are hidden behind the seemingly fierce price war? In this article, we will analyze it with the author.

E-commerce promotions are becoming more and more subtle, and direct discounts are becoming increasingly rare, replaced by endless gift samples, shopping credit rebates and mini-games that take up a lot of time and energy.

But what’s interesting is that in September this year, Taobao and JD.com both launched a direct 50% discount promotion. JD.com took the lead, offering 50% discount on all clothing items from September 19 to 25. Taobao immediately followed suit on the 20th, when Tmall launched a new autumn and winter clothing product promotion site, also offering 50% discount on all items.

However, if you look closely at the 50% discount rule of JD.com and Taobao, you will find that the so-called 50% discount is a bit euphemistic. You might have thought that there would be rivers of blood, but in the end, not even a superficial wound was caused.

JD.com’s method is to search for 50% off clothing on the homepage, and consumers can collect coupons for 50% off for purchases over 100, 100% off for purchases over 200, and 150% off for purchases over 300, and then place orders at designated brand flagship stores. Taobao’s rules are almost the same, except for the denomination of the coupons, which are 50% off for purchases over 99, 150% off for purchases over 299, and 300% off for purchases over 799.

In other words, the 50% discount is not a real 50% discount, but a "up to 150" or "up to 300" discount. If the purchase price exceeds 300 yuan on JD.com, it is not a 50% discount, and the same is true for Taobao if the purchase price exceeds 799 yuan. Moreover, JD.com requires consumers to use JD.com payment to place an order to enjoy the discount (including bank cards and Baitiao), while WeChat payment and Cloud Quick Pass are not included.

This is another "packaging promotion" technique commonly used by e-commerce platforms. The significance of shouting slogans is far greater than bringing real benefits to consumers.

But in fact, it is not a real 50% discount, which is more in line with the current logic of e-commerce operations. After all, directly spending money and holding big promotions without any twists and turns will not only hurt merchants, but also make the platform bear the stigma of provoking price wars.

For this 50% off event, both Taobao and JD.com chose clothing. On the one hand, it is indeed the season change, and various brands are launching new autumn and winter clothes. It is an eternal business method to offer discounts on some products. On the other hand, direct coupon promotions are more suitable for brands with certain subsidy capabilities and flagship stores on Taobao and JD.com, which is convenient for unified planning on the platform and will not cause too much economic pressure on the brand.

Clothing brands have more SKUs, so even with direct subsidies, they can ensure a balance between profitable products and regular products during big sales. Moreover, like 3C products, there are more brands with deep pockets and flagship stores. But at the same time, the unit price of clothing products is lower than that of 3C products, and the consumption threshold is not high, making it easier to participate in big sales.

In general, this 50% off sale hidden at the end of September is not a loss-making event for both the platform and the brand, except for fooling customers.

This 50% off carnival is more like a medium-sized event set up between the two annual big promotions of 618 and Double 11. For e-commerce platforms, the more long-lasting ones are the daily discounts every now and then. 300-30 and 200-20 have become commonplace. Price wars are no longer occasional wars, but daily games.

To put it bluntly, the spectacular Thousand Regiments War around 2010, which resulted in countless casualties, will not happen again.

Spending real money may not necessarily bring in many incremental users. The industry has entered the stage of competition for existing users. A small promotion every three days, a big promotion every five days, and a carnival every six months will allow e-commerce platforms to better utilize the value of their existing users.

Moreover, the current low-price promotions are a natural law common to the global retail industry, without any life-and-death implications. They are simply a way to demonstrate price power. Although it may seem like a lot of noise but little action, this type of promotion is necessary.

"Its significance lies in two aspects. First, the e-commerce platform itself develops some new categories, or increases the competitiveness of weak categories. Cutting prices is the most direct and effective way. For example, JD.com is focusing on the clothing category this time because clothing is JD.com's weak category. Second, using low prices to attract consumers to buy is also helpful for industrial upgrading. Because a mature product must expand its user base through low prices and other means, although the profit of a single product will decline, the overall profit will not be affected due to the increase in scale. And the profits from these mature products can be used to develop new products. This is industrial upgrading." Zhuang Shuai, founder of Bailian Consulting and retail e-commerce expert, told Zhiwei that this is the significance of doing promotions from time to time.

The price war among retail e-commerce companies has never stopped, it just involves different users in different ways and at different stages. Now there seems to be a tacit understanding: as long as it is not the kind of promotion that is obviously a loss, it is considered e-commerce marketing.

As for why they cannot go back to the stage of making a loss to gain publicity, Zhuang Shuai explained that e-commerce platforms have no restrictions on area and shelf space, and originally they could put unlimited products on the shelves for promotion. However, for merchants, if they do not sell fast enough or in large quantities, they will not be able to balance online operating costs and marketing costs. Over time, they will lose confidence in the platform and will not only be willing to set low prices but will also leave the platform.

"Merchant retention is the key to comprehensive low-price competition. To ensure comprehensive low prices for a long time, in addition to improving sales efficiency, we must also improve user experience and services, and ensure the profitability of merchants and platforms. The difficulty can be imagined. Therefore, the low prices of e-commerce must be limited and local activities."

According to Star Chart monitoring data, the cumulative sales of integrated e-commerce platforms and live streaming platforms during the 618 shopping festival in 2024 was 742.8 billion yuan, compared with 798.7 billion yuan in the same period last year, a year-on-year decline of 7%, and the first negative growth since 2019. This year's 618 shopping festival is also known as the "worst 618 shopping festival", and even Motie Books boycotted JD.com's 618 shopping festival. Small fights are common, but when it comes to real promotions, merchants are actually unwilling to spend money, platforms cannot bring growth, and consumers do not get much benefit, but the marketing money is actually spent. Even big promotions like 618 are exhausted, let alone this small, beautified 50% discount promotion.

The current promotion methods are either by category, or the platform issues coupons as official subsidies, or joins forces with some merchants. Among these methods, category low-price wars are more dominant, because merchants in the same category are more likely to cooperate. If my peers do it, I can do it too. There is no malicious competition, and it is also easier for the platform to implement activities. For example, Taobao named this event "Cooling Subsidy."

One fact that must be acknowledged is that e-commerce promotions are no longer effective.

Ultimately, e-commerce companies hold big promotions for growth, to demonstrate price power, and to strengthen brand impression. In addition to low prices, there are many other ways. Zhuang Shuai mentioned that many new products are not discounted now, "but e-commerce companies will rush to be the first to launch, cooperate with brands to make customized products, and create their own brands. JD.com also has a special department for its own brands, and Taobao is also making efforts. The same is true offline. JD.com acquired Huaguan Supermarket to do discount retail, etc. The purpose is to gain more advantages beyond price, such as strengthening the richness, diversity, and differentiation of products in the supply chain, as well as the service experience facing consumers, etc."

In the retail industry, product quality, service experience, and product price are mutually reinforcing. If any one aspect lags behind, it will be ruthlessly reflected in financial data and user reputation. No one can currently achieve good and cheap products and impeccable after-sales service. Whether it is due to the current stage of e-commerce development or consumer demand, sacrificing service and experience at a low price is not an absolute advantage. The optimal solution is to balance the three. However, this balance is also the most difficult problem.

On social platforms, Zhiwei saw that the reviews of consumers who participated in the two 50% off promotions on JD.com and Taobao were surprisingly tolerant. The reason is very simple. Even if it is not really 50% off, and it is not really 50% off for the entire store, it really does not require consumers to brainstorm and do math problems, and it can be seen that the platform has some sincerity in restoring its true nature.

After all, users are more picky about big sales, but also more tolerant.

Written by: Zhou Zhou Edited by: Da Bing This article is written by the author of Operation Party [Zhi Wei], WeChat public account: [Zhi Wei], original/authorized to be published on Operation Party, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.