Taobao's new rules are officially implemented, some are happy and some are sad?

The "loosening" of Taobao's new rules and the adjustment of service fees are not only a redefinition of merchants' rights and interests, but also a deep optimization of consumer experience. Behind this is a complex game between the platform, merchants and users. This article will give you an insight into the business logic behind Taobao's new rules and how it affects every participant in the e-commerce ecosystem.

As competition among e-commerce platforms becomes increasingly fierce, every change in platform rules will attract close attention from merchants and consumers. Behind the rule changes, it will also reflect the game between platforms, between platforms and merchants, and between users.

On August 9, the new "refund only" rule was officially implemented after Taobao's optimization was "relaxed". The new experience score will enhance the after-sales autonomy of merchants, and reduce or eliminate after-sales intervention for high-quality stores; among them, for merchants with a store experience score of more than 4.8 points, the decision-making power of refund only will be returned to them.

In addition, Taotian also announced that "basic software service fees for sellers related to platform transactions will be charged at a rate of 0.6%" and "the annual software service fee for the Tmall platform will be canceled", both of which will take effect on August 9 and officially implemented on September 1.

Image source: Weibo screenshot

In the past, almost every time Taotian adjusted its platform policies targeting merchants’ operating costs, it was mostly accompanied by voices of resistance from merchants. However, this time, Taotian announced the “loosening and only refunding” and “charging service fees” together, which instead ushered in a “soft landing”.

Just as in the past year, the outside world paid more attention to the slogan proposed by Jack Ma, "Return to Taobao, return to users, return to the Internet", but quietly ignored the emphasis of the new official Wu Yongming on "facing the current situation and starting a new business."

01 “Flexible” refund only

At the end of December last year, Taobao and JD.com launched the "refund only" service almost at the same time. This special service launched by Pinduoduo in 2021 has almost become the new standard in the e-commerce industry after the "seven-day unconditional return and exchange".

But upon closer inspection, although both are refunds, the specific rules and enforcement are very different.

Some industry insiders said that compared with Pinduoduo, Taotian’s “refund only” not only grades sellers but also buyers in terms of weight. The buyer’s credibility will also affect the result of refund only. Secondly, Taotian’s refund only merchants can file appeals, and the amount involved is usually not high.

But in fact, sometimes even if the buyer has a good reputation and sufficient reasons, it is still difficult to get a refund only. Li Tian (pseudonym) bought a kitchen cabinet on Tmall in April this year. After installation, he found that it was seriously unstable, the paint was uneven, and there was a strong odor. In a fit of anger, he submitted a "refund only" request.

However, the result was beyond his expectation. The seller was only willing to accept a refund of 50 yuan, and the remaining 138 yuan was the "security deposit" paid by Tmall to compensate him.

Image source: Taobao APP screenshot

Moreover, as Taobao and Tmall have been focusing on the "brand route" in the past few years, some merchants and categories are inherently not suitable for the "refund only" service; according to a report by the new media "LatePost", two Alibaba industry operations employees even believed that the "refund only" policy may only apply to 10% of Taobao's products.

“Refund only” is like a card that Taobao has to play in the competition in the e-commerce industry. However, if refund only itself has not been effectively and universally implemented, how can we talk about “loosening” now?

Moreover, the current "relaxation" of refunds still has "requirements" for merchants.

In this policy adjustment, the store "experience score" has become a core indicator. For merchants with a comprehensive experience score of ≥4.8 points, the platform will not actively intervene through Wangwang and support refunds after receiving the goods, but will encourage merchants to negotiate with consumers first; for merchants in other segments, the platform will grant different degrees of autonomy based on the experience score and the nature of the industry. The higher the experience score, the greater the merchant's disposal power.

However, it is not easy to maintain a score of 4.8. Some merchants publicly stated on social platforms: "4.8 is not an easy score to maintain. For a store with monthly sales of less than 1,000, one bad review and one product return will drop to 4.85. Add to that the satisfaction with logistics and delivery, and it is easy to drop to (below 4.8)."

Image source: screenshot from Xiaohongshu

Moreover, getting a score of 4.8 does not mean that you will not be "refund-only". Merchants with a score of 4.8 or above can take the initiative, but in fact, the platform does not take the initiative to intervene and optimize the refund-only appeal.

There is also a view that the "relaxation" is aimed at merchants with a score of 4.8 or above. It is a good thing for the top merchants, but for many small merchants, it further compresses their living space; "What can they do? Either recharge or leave."

Image source: Screenshot of Wave Line FT public account

Because the experience score not only affects "refunds", but also relates to one of the lifelines of sellers, "traffic". In this policy adjustment, Taobao announced that the experience score will be one of the core indicators of traffic allocation and will completely replace the previous DSR (seller service evaluation system). But I am afraid that no seller can tell how much weight it has.

02 What is the new regulation aimed at?

On July 26, when Taobao announced the "relaxation of refund only" policy, it disclosed another key adjustment on the same day, which may be the core factor affecting the operating costs of sellers on the platform.

That is, "Taotian will charge a software service fee at a rate of 0.6% of the confirmed transaction amount of each order", and "from September 1 this year, the two annual fees of 30,000 and 60,000 charged only to Tmall merchants will be cancelled, and the annual fees already paid for 2024 will be refunded."

According to estimates by the secondary market investment research team "Dolphin Investment Research", the overall exemption and refund of fees under Taotian's exemption measures amount to tens of billions of yuan, covering more than 5 million merchants. The agency took intermediate data and assumed that the total exemption amount was 5 billion yuan.

As for the basic software service fee, Dolphin Research estimates that it may bring Taotian 28.8 billion yuan in new fees each year. After deducting the annual fee reductions and refunds, it is estimated that Taotian's annual new revenue may still be between several billion yuan and hundreds of billions of yuan.

Image source: Screenshot of Dolphin Investment Research Public Account

Although such calculation results are not accurate enough, what is more obvious is the change in the seller's operating costs. On the social media platform, some netizens roughly calculated that if the store's annual revenue reaches 1.2 million yuan, the old policy will return 30,000 yuan of annual fees, and no additional fees will be required; but the new policy will add an additional 7,200 yuan of deduction points per year if the annual revenue reaches 1.2 million yuan. For large merchants with annual revenue of tens of millions of yuan, the costs they face will also be higher.

Image source: Screenshot from TikTok

The costs of small sellers have also risen. Taobao e-commerce, including second-hand trading platforms such as Xianyu, have also begun to charge a basic software service fee of 0.6% (capped at 60 yuan) of the actual transaction amount of a single order. One Xianyu seller estimated that if his monthly turnover is 50,000 yuan, his monthly costs will increase by 700 yuan according to the new regulations.

Image source: Screenshot of Taobao Merchant Service Hall

It seems that the other side of the policy adjustment is that it will have different impacts on the operating costs of different businesses.

It is understood that the current operating costs for merchants to open stores on Taobao generally include deposits, annual fees; fees for business tools such as Business Advisor; platform service fees (including the newly added basic software service fees); traffic promotion fees; after-sales fees; logistics and warehousing fees, etc.

According to reports, the bulk of the merchant costs are traffic promotion fees, which can sometimes reach 50%-70%. In addition, traffic revenue accounts for more than 60% of the fees Taotian receives from merchants.

Image source: Screenshot of LatePost official account

For small and medium-sized sellers, even if the platform promises various exemptions, they will still face greater operational difficulties if the cost of investment increases due to the decrease in platform traffic.

"I closed the Taobao store I opened for 18 years," a Taobao store owner posted such a message on a social platform in early August. He said, "I am one of the earliest Taobao store owners. I am particularly tired this year. I can only get traffic and sales by participating in activities. I have to pay various promotion fees, plus technical fees, and I have to deal with picky customers. I just decided to close the store."

Image source: screenshot from Xiaohongshu

This store owner's sharing can be seen as one of the reasons why some small and medium-sized businesses choose to close their stores. With the peak of e-commerce traffic dividends, overcapacity on the supply side and intensified platform involution, large businesses are the objects of competition for platforms, and the platform's various resources and policies are more inclined towards them; under this trend, the profit space of small and medium-sized businesses is also shrinking.

03 Taotian needs a “new balance”

Nowadays, the supply and demand of the e-commerce ecosystem have undergone fundamental changes. Whoever has the traffic will win the world. Last year, Jack Ma proposed to Taobao to "return to users, return to Taobao, and return to the Internet." In the past year, Taobao's main narrative has revolved around "low prices", "recalling small and medium-sized businesses", and developing live broadcasts, short dramas, and supporting "shopping" to enrich the platform's products and content ecology and drive traffic growth.

The results brought about cannot be said to be unremarkable. According to the 2024 fiscal year and Q4 financial report released by Alibaba Group in May, the number of Taobao and Tmall purchasers and purchase frequency increased significantly this fiscal quarter, driving online GMV and order volume to achieve double-digit year-on-year growth.

Image source: Screenshot of Ali’s battle report

However, the growth in traffic is not necessarily proportional to the growth in revenue.

On May 14, Alibaba Group released its fourth quarter and full-year results for fiscal year 2024 (April 2023 to the end of March 2024). According to the financial report, in Q4 2023, with the "Double 11" event, Taotian Group's revenue only increased by 2% year-on-year. In Q1 2024, Taotian Group's adjusted EBITA (earnings before interest and taxes, excluding amortization expenses) fell by 1% year-on-year. In contrast, in Q4 2022, Taobao and Tmall's revenue increased by 9% year-on-year; in Q1 2023, Taobao and Tmall's adjusted EBITA increased by 1% year-on-year.

After the financial report was released, the market reacted quickly. Alibaba's US stocks fell before the market opened and continued to fall by more than 8% after the opening.

For investors, the platform's ability to make money is more important, and the key indicator is the monetization rate, that is, the income that 100 yuan of GMV can bring to the platform. In the past period of time, Taotian's performance has not met the expectations of the capital market.

Taobao is also actively adjusting. In July this year, according to 36kr, Taobao Group held a closed-door meeting with merchants after the 618 shopping event, clarifying several changes. One of the core changes is the weakening of the absolute low price strategy. Since last year, the search weight distribution system based on the "five-star price power" has been weakened and changed back to distribution based on GMV. In addition, this year Taobao's assessment focus has also shifted to GMV and AAC (average amount of consumption), and no longer pursues high DAC (order volume) brought by low prices.

Image source: 36kr screenshot

Zhuang Shuai, an expert in the retail e-commerce industry and founder of Bailian Consulting, believes that changing the fixed fee to a non-fixed fee based on the GMV deduction ratio proves that Taobao is still returning to GMV assessment, motivating employees from the internal level to help merchants increase GMV. It is also fairer, with the higher the GMV, the higher the fee, rather than the previous one-size-fits-all fixed fee.

The weakening of pricing power and the current policy adjustments for Taobao merchants are essentially the same thing. In essence, they are both aimed at finding new growth points and telling new stories in the capital market.

This reminds people of a sentence written by Wu Yongming, the new helmsman of Taotian, in an internal letter at the end of last year: "Face up to the current situation and start a new business."

It has been just over half a year since Taotian launched the “refund only” policy and now has “relaxed” it; in retrospect, it is crucial for Taotian to strike a balance between improving consumer experience and protecting the rights and interests of merchants as much as possible.

Compared with Pinduoduo and Douyin, one of Taotian's advantages lies in its 88VIP customers with high average order value. Industry insiders estimate that the annual GMV of 88VIP is roughly equivalent to the annual GMV of Douyin's entire e-commerce platform.

However, if we want to ensure a high average order value, it will go against the goal of low prices and traffic growth; if we want to increase the platform's monetization rate, it will inevitably increase the operating costs and pressure on merchants, which will have an adverse impact on the platform's recall of small and medium-sized merchants and the enrichment of product categories.

The current e-commerce market is no longer what it was ten years ago. To some extent, Wu Yongming’s emphasis on re-entrepreneurship seems to be more suitable for the current turbulent e-commerce world.

Zhuang Shuai believes that the e-commerce industry will show two major development trends in the future: on the one hand, differentiation will become the key to the continued development of major e-commerce platforms; on the other hand, the platform's rules and systems must achieve a win-win situation for consumers, merchants and the platform, and form healthy competition. Only such an e-commerce platform will become the first choice of consumers and merchants.

After the new regulations came into effect, Taobao still holds the initiative in the hands of the platform, and uses both kindness and severity on merchants, forcing them to improve their service and product quality, thereby screening out good merchants and eliminating bad ones.

While large merchants will gain greater profits, they will also have more sufficient marketing budgets, bringing more income to the platforms, but this will also push up traffic costs. As for the future prospects of small and medium-sized merchants, they will "vote with their feet."

If such changes become a trend, they will in turn affect the adjustment of platform policies, and ultimately achieve a dynamic balance among consumer rights, merchant interests, and platform interests through constant bargaining.

Author | Liu Liang

Editor | Interesting Business TMT Group