From automatic price tracking to AI price negotiation, e-commerce low-price wars surround merchants

New shopping trends such as "refund only" and "AI bargaining" have become popular on major e-commerce platforms. The price war has intensified, and many merchants have been forced to "have nowhere to go." What other effects does low prices bring? Are consumers the only ones who benefit from them?

Since early summer, the price war among e-commerce platforms has intensified.

At the end of May, Taobao announced the launch of a new feature called "Tmall AI Bargaining Assistant" in its APP; soon after, Pinduoduo launched "Automatic Price Following".

As a result, e-commerce merchants have not only had to deal with the impact of "refund only" recently, but also had to be busy replying to AI messages such as "If there is a discount, I will give a five-star rating", "This product looks very good, I am very interested", or keep a close eye on the price changes of their products.

But recently, a new signal emerged: According to media reports, Taobao Group held a closed-door meeting with merchants after the 618 shopping event, with first-line business executives attending. At the meeting, several changes were made, which will be officially implemented in the second half of the year. One core change is that Taobao has weakened its absolute low-price strategy. Since last year, the search weight allocation system based on "five-star price power" has been weakened and changed back to allocation based on GMV.

This may mean that the price war has entered a white-hot stage, and Taotian Group intends to put the brakes on it. However, can the merchants who have been besieged for a long time really breathe a sigh of relief?

1. High price limits cost money, and AI bargaining is time-consuming

From last year to this year, the "low price war" among e-commerce platforms has never stopped, especially around 618 this year, the price war has reached a new level. Looking back at the 618 period, Taobao announced that it was the "largest investment in history", Pinduoduo launched the "automatic price following" system, Douyin e-commerce conducted a small-scale internal test of the "automatic price change" function, and Kuaishou announced a 1 billion red envelope subsidy.

During this period, some merchants posted an open letter on their store homepage announcing that they would not participate in the promotion, "Sorry, we have decided not to do 618 this year." This is a microcosm - merchants are being surrounded by the platform's "low-price war", and when the platform is fighting hand-to-hand, merchants complain again and again.

Even if they can choose to "take a step back" during big sales, when major platforms continue to increase their low-price strategies, merchants will eventually have no way out.

"According to the platform's mechanism for limiting traffic due to high prices, the platform compares prices across the entire site, and then asks merchants with higher prices to lower their prices. If they don't, they will be limited." Chen Xiao (pseudonym) runs a pet supplies store on Taobao. Previously, one of his cat food products was reminded that "the high price of a product triggered the traffic limit, and the limit can be avoided after the price is reduced."

But Chen Xiao believes that the price of his cat food has been reduced to the lowest level. "Not counting any operation, platform and warehouse labor, the cost is 338 yuan, and we sell it for 340 yuan."

But another store that compared prices with its products priced two products at 320 yuan, "but in fact, our products are not the same, because theirs are nearing their expiration date. Isn't this forcing merchants to sell shoddy goods?"

This is not an isolated case. On platforms such as Xiaohongshu, many merchants mentioned Taobao’s high-price limit rules. Among them, one merchant posted a note saying, “Now if you sell at a high price, you will be restricted and accused of overselling… Merchants are already very tired and hard-working. The event is 300-50, plus shipping insurance, 20% of the profit is gone, and the return rate has soared this year, plus only refunds, 10% of the profit is gone; the promotion costs are also getting higher and higher…”

Discussion on Taobao’s high price limit on Xiaohongshu

Zinc Scale learned from the Taobao rules provided by merchants that high-price traffic limits are part of Taobao's "Five-Star Price Competitiveness" rules, which mentions that "the price of the product is compared with the prices of the same products in/outside Taobao, and the price competitiveness star rating is calculated comprehensively." The higher the star rating, the higher the traffic obtained.

One merchant mentioned, "We need to check the price competitiveness link every day to see if our products are restricted by high prices. If so, we will use coupons to lower the price. We cannot charge higher prices than our peers."

If "high price limit" is reducing profits and hurting merchants' finances, then the "Tmall AI Bargaining Assistant" launched by Taobao at the end of May is causing trouble for merchants.

According to Taobao's official introduction, after users open the Tmall app, they can click "Find Discounts" in the lower right corner of the shopping cart interface, and then they will see the "Help Bargaining" entrance. After clicking in, users can choose the bargaining product by themselves, and the assistant will use the user's Taobao message account to bargain with the merchant.

AI-assisted bargaining interface

"We have received this kind of bargaining message recently, but the other party is AI, and we are all human customer service. Many small items worth more than ten or twenty yuan can be bargained for two or three yuan, which is not very meaningful, but our customer service staff must respond well."

In the view of a Taobao merchant, this function actually increases the workload of customer service. "Especially for many small merchants, customer service staff is not enough. If buyers use AI to negotiate prices, regardless of whether the final discount is good or not, the time cost of replying to buyers actually increases."

2. Taotian Group puts on the brakes?

The various rules surrounding prices are essentially part of the low-price strategy. After all, "low prices" has become the core proposition of major e-commerce platforms in the past two years. Aowen, president of Taotian Group's Brand Business Development Center, once publicly stated that price is a very important consideration for users. It is not because of low prices to stimulate consumption, nor is it that Tmall encourages the industry to cut prices.

"First, we do not avoid good products at good prices; second, we have no intention of letting every brand compete on price. This is not what Tmall wants to do." But obviously, for merchants, the most obvious impact of the many rule changes is reduced profits.

Take Taobao as an example. From activities such as "official instant discounts" and "cross-store discounts", to requiring merchants to support "seller version freight insurance" and "pay later" and stipulate strict delivery times, to "refunds only" and "high price limits"... with all these rules piled up, merchants wanted to escape, but found that the rules of other e-commerce platforms were exactly the same.

It’s worth noting that change seems to be happening.

According to 36kr, in the first half of this year, Taobao's "five-star price power" system has been cancelled one by one. An insider said, "In the future, we will not blindly push the five-star price power logic to all merchants, but only allow suitable and willing merchants to participate."

In fact, at the beginning of this year, Taotian Group CEO Wu Yongming had already made it clear internally that GMV would be the first indicator and return to shelf e-commerce. This move is aimed at shifting the assessment focus to GMV (transaction amount) and AAC (average consumption amount), and no longer simply pursuing the order volume brought by low prices.

In addition, Taotian has also optimized operational details, replacing DSR (mainly including three scores: description match, service attitude and delivery speed) with the PXI (Product Experience Index) indicator.

This may mean that the "low-price war" will eventually change. After all, price wars are not a long-term solution . As Zhang Xiaorong, director of the Deep Technology Research Institute, once analyzed, it is difficult to say that there is a real winner in the pleasant illusion brought by low prices. "E-commerce platforms may seem to gain traffic, but their profits may be damaged; merchants may increase sales but have meager profits;

Consumers may seem to get a good deal, but they may face subsequent service and product quality issues.”

But merchants do not seem to be relieved. Zinc Scale noticed that many merchants mentioned that Taobao recently started to charge event service fees for the first time. One merchant posted a note on Xiaohongshu saying that merchants who sign up for the "Olympic Games Season" event will be charged a "software technology service fee" recently. The fee will be charged based on the actual payment after confirmation of receipt. The fee rate varies for each category, with the highest being 5%.

This will obviously further squeeze the profit margins of merchants. Therefore, many merchants expressed their unwillingness to participate in the event, "but if they don't participate, there will be no traffic."

3. First there was “refund only”, then there was a price war

In fact, long before the "high price limit" and "AI bargaining", the "refund only" rules introduced by major e-commerce platforms have been controversial . When Taobao and other e-commerce platforms followed this rule, some small and medium-sized individual merchants said that it attracted some malicious "refund only" wool parties.

Previously, Zinc Scale searched on major social media and found that many e-commerce merchants complained about the "refund only" rule. One merchant mentioned, "As a 10-year-old store, this year's Taobao really opened my eyes. The buyer just said that the product was a bit big, and the refund only window popped up directly... I was forced to refund only three times in one morning, and my appeals were rejected many times."

Another merchant posted a note on Xiaohongshu saying, "It's so annoying to only offer refunds. Some of the leggings I selected were slightly defective and I was already selling them at a loss. But today, five pairs came in and only offered refunds. They were bought by one person. Isn't this a blatant way of taking advantage of others?"

"The consumer only applied for a refund, and the products were not from my store. The order number and product packaging were incorrect. He didn't reply to my messages or communicate with me. I don't know if he made a mistake accidentally or if the customer made a set of pictures himself. The order volume is low, and I can only make 2 yuan at most for one order. Small businesses really don't make much money..." and so on.

It was even revealed online that some merchants printed a "refund only notice" and shipped it together. The notice read, "If you apply for a refund only without the merchant's consent, you will be sued directly and no further notification or reminder will be given.

The cost of the lawsuit and the compensation amount of about 2,000 yuan shall be borne by the buyer in full, and the purchase shall be deemed as acceptance of this clause. "Regardless of the authenticity of this notice, it is at least enough to show the merchant's attitude towards "refund only".

In the past two years, many businesses have closed down.

Nowadays, with the "refund only" policy, the "low price war" policy, and now the commission for activities, major e-commerce platforms are competing for merchants while constantly besieging them . On major social media platforms, many merchants have said that they "will not participate in any activities" or "wait for the store to close down."

As merchants’ dissatisfaction with the platform continues to accumulate, where will the competition among e-commerce platforms end?

Written by: Li Xuanqi; Edited by: Li Jinlin

WeChat public account: Zinc Scale (ID: znkedu)