The tragedy of "refund only" of Pinduoduo, Douyin, Taobao, and JD.com

Behind the 618 shopping carnival of e-commerce platforms, there is a storm caused by the "refund only" policy. From JD.com's follow-up to Pinduoduo's self-operated stores being maliciously ordered, to the merchants' helplessness and counterattack, this traffic battle has undoubtedly blinded the eyes of many platforms. When the grievances of merchants, the rights of consumers, and the rules of the platform are intertwined, we can't help but ask: Who will be the final winner in this war without gunpowder? This article will take you to explore the business logic and social impact behind the "refund only" policy.

The first 618 shopping festival in which almost all e-commerce brands offered “refund only” has passed, but the storm that followed among merchants, platforms and consumers is intensifying.

From December 29 last year, when JD.com, the last leading e-commerce platform, followed suit and implemented the "refund only" policy, to the eve of 618 this year, the eye of the storm had already formed within 168 days.

On March 25, Pinduoduo, which first launched the refund-only function in 2021, launched its own store "Duoduo Welfare Club", but it was soon attacked by malicious orders from a large number of small and medium-sized merchants on the platform. These "insiders" who were familiar with Pinduoduo's rules applied for refunds only after placing large orders, and then yelled at the official customer service. As a result of a series of operations, Pinduoduo's own store was quickly removed from the shelves four hours later.

The merchants' grievances about "store crashes" come from the implementation of the refund-only service. They believe that the platform is not fair, that it is deliberately trying to please consumers, and that it unscrupulously condones the implementation of refund-only orders without sufficient evidence, even attracting a large number of "freeloaders", causing difficulties for store operations.

In the e-commerce war of 2023, after all the companies have played their last trump card of "price war", refunds have become a new competition in another dimension. Douyin e-commerce, Taobao, JD.com, which launched this function in the second half of the year, and Kuaishou e-commerce, which was late in January this year, have all attracted the invasion of "wool parties" to varying degrees.

On one hand, users in major content communities are never tired of sharing strategies for “getting the best deals” on different e-commerce platforms. On the other hand, merchants who cannot get their money or their goods back have no way to turn to the platforms for help, and their legal rights protection is unstable. They have no choice but to spontaneously form private mutual aid organizations and use all means to vent their anger.

At the center of the conflict, the platforms only focused on their competitors, acting as storm chasers without paying attention to other things. However, when the storm passes, both buyers and sellers will profit and lose, and who will clean up the mess in the end?

01 Forced from online to offline

In the URL bar of any browser, enter the pinyin initials of "Shanghai Merchants Mutual Aid Association" and you will be taken to the homepage of a website with the same name. It was established to provide a solution other than a platform for merchants who are troubled by problems such as refunds.

The mutual aid association includes real merchants from all over the country who are willing to register their information. When a buyer in a certain area takes advantage of the situation by offering only a refund, the victim merchant can contact a local counterpart through the message, and the counterpart will personally visit the buyer to negotiate a return or refund.

Although the website is crude, it is effective and has attracted tens of thousands of online shop sellers from all over the country. Except for remote areas such as the three northeastern provinces, Yunnan, Guizhou, Xinjiang, and Tibet, most areas have been covered to the district and county level. There is also a prominent reminder at the bottom of the homepage that those who need help in Shandong and Shanghai can contact the local online court to file a case.

Since this type of problem is a new type of civil dispute in recent years, legal departments across the country cannot handle it uniformly and efficiently. For example, a law firm in Beijing recently issued a reminder that "the Beijing Internet Court has clearly stated that the refund is only due to the platform's fault and needs to be handled by the platform. Even if the case is approved, it will not even support the payment."

E-commerce platforms are not completely indifferent to the suffering of merchants, and have set up relevant complaint channels. However, when encountering situations where merchants and buyers disagree, the platforms tend to favor the latter.

In the actual operation of consumers, when they are still communicating and negotiating with the merchants after initiating after-sales service, the platform will sometimes pop up a window to prompt them to directly confirm that only the refund is effective; and in the subsequent appeal process on the seller's side, the store's rating will be deducted or even fined if other compliance issues are discovered.

After comprehensively considering the cost-effectiveness of various solutions, offline direct visits or tit-for-tat harassment have become the best choice for e-commerce sellers. The "bombing of stores" mentioned above is just a demonstration against the platform. In addition to the communication and negotiation-based methods of the Merchants Mutual Aid Association, merchants will also take tit-for-tat real-life harassment against "wool parties" regardless of whether they are real or fake.

The simplest and crudest way to vent anger is to bombard them with phone calls. Personal attacks are just an appetizer. Some merchants even buy software to set up continuous SMS harassment at a fixed time and quantity. It is not difficult to find the buyer's delivery address through logistics information. Some merchants choose to broadcast the buyer's information and actions on the loudspeaker at the entrance of the community, so that they will succumb due to fear of "social death".

Some of the above-mentioned behaviors have obviously exceeded the scope of the prohibition of the law. However, according to the current legal provisions, the sales behavior of consumers and merchants is actually a sales contract, and after the contract is terminated, one party refunds the money and the other party returns the goods. If there is an inappropriate refund without return, the consumer has also violated the legitimate rights and interests of the merchant and constituted unjust enrichment.

It is these unclear and confusing accounts that have plunged buyers and sellers into an endless war of words. At this time, as the platform that proposed and implemented this policy, it seems to have disappeared even if it has been subjected to "cyberbullying".

02 Invisible Platform

The rise of e-commerce platforms is inseparable from the support of tens of millions of merchants, especially small and medium-sized sellers. However, the love-hate relationship between platforms and merchants also permeates the development history of the entire industry.

At 9:00 pm on October 11, 2011, the largest mass incident in the history of China's retail e-commerce broke out. Taobao Mall, the predecessor of Tmall, triggered a collective protest by small and medium-sized sellers due to adjustments to merchant service fees and deposit rules.

The first wave of online attacks caused 2,000 SPUs to be removed from the shelves of stores. Hundreds of offline merchants gathered at the entrance of Alibaba’s headquarters, and some even set up a funeral hall for Jack Ma in Hong Kong to intimidate him. This “October Siege” was finally resolved when Zhang Yong, then president of Taobao Mall, firmly refused to compromise, but Jack Ma personally stepped in to appease the public by halving the amount of the new regulations.

The starting point of the new regulations is actually that Alibaba faces public supervision and public opinion risks after its listing, and is determined to crack down on counterfeit and shoddy goods to improve the quality of the platform, which is in disguised form raising the threshold of "making it easy to do business in the world."

The subsequent success of Taobao and Tmall proved Zhang Yong's wise decision, but also left Pinduoduo with room to make a move. The low-quality merchants abandoned by Alibaba transformed themselves into white-label stores on Pinduoduo targeting the market outside the Fifth Ring Road, helping Pinduoduo to overtake Alibaba.

As Pinduoduo grows bigger and stronger, it cannot ignore the bad experience these "heroes" bring to consumers, so the refund-only policy came into being. Pinduoduo first applied the refund-only model to the fresh food field during the community group buying war. After all, the quality of fresh food will be seriously affected by the timeliness, and even the returned goods are of little value to the merchants, but will bring higher inventory and processing costs. Therefore, this model was welcomed by both buyers and sellers on the platform at the time.

The successful pilot and the intensified competition for users between platforms have led Pinduoduo to boldly and aggressively promote the refund-only policy. The difficulty of returning goods on e-commerce platforms cannot be solved by a simple shipping insurance. The refund-only policy can further eliminate users' concerns about placing orders and stimulate consumption potential. More users coming to the platform cannot be a bad thing for merchants, and high-quality merchants will not be affected by the refund-only policy in theory. The refund-only policy can also serve as an effective elimination mechanism to drive out bad coins. Why not do it?

What seemed like a win-win for all parties has now led to an irreconcilable storm of contradictions. The problem is that the interests pursued by the platform are in conflict. In the perfect theoretical environment of refunds, it is actually a small group of "wool parties" and low-quality merchants who are stirring up trouble. One side wants to get something for nothing and take pride in taking advantage, while the other side wants to make a profit by counterfeiting and selling shoddy products at a low cost.

As platforms, they should hate these two groups. However, the fierce competition between platforms has made it impossible for them to distinguish the quality of traffic and they have to gather all of it. Platforms should have set thresholds for merchants to enter, but they dare not easily miss any opportunity to increase GMV; platforms can also increase the threshold for refunds based on user behavior, but a failed application is likely to make users turn to other e-commerce companies.

At least until the battle for traffic ends, hiding and playing dead may be the platform's helpless choice.

03 I was hurt but I couldn’t stop

The verbal battles and conflicts are still going on, the judicial burden has obviously increased, and the voices calling for a halt to the refund-only policy are becoming more and more frequent. Some public opinions on the merchant side call the refund-only policy the Chinese version of "0 yuan shopping", which is obviously an exaggeration and a way of throwing the baby out with the bathwater.

From a short-term perspective, the refund policy alone is of course an e-commerce platform's protection and tilt towards consumers. Due to inappropriate tilt or loose judgment criteria, merchants suffer losses in their interests. What should be solved is the issue of platform judgment.

After all, from a long-term perspective, the refund policy alone will attract more users to consume on the platform, which means a brighter future for stores that make a living by selling goods and platforms that charge commissions from merchants.

According to a Happy Returns report released by PayPal last year, 81% of American digital shoppers will check the return policy of a merchant before making their first purchase from the merchant; more than 55% of people said that they gave up the purchase because the return policy did not provide convenient return options. Wunderman Thompson also found in an April 2023 survey that 36% of shoppers worldwide said that free returns would encourage them to shop directly from merchants.

In fact, Amazon, the largest e-commerce platform in the United States, is the originator of the refund-only policy. As early as October 2017, Amazon added a refund-without-return service to its after-sales policy and explained to sellers on the platform that "sellers require this because, in many cases, it can save you return shipping and handling costs and reduce customer dissatisfaction with delayed shipments, thereby improving your rating."

The offline retail industry also follows this principle. Costco, a traditional American retail giant, is world-famous for its bizarre return and exchange policy. Food products can be returned after half is consumed; products purchased and used for more than a few years can still be refunded in full; even membership cards with top-up can be refunded for free before the expiration date.

Costco's business model cannot be completely compared with domestic e-commerce platforms. B2C's relaxed return policy puts the cost pressure on itself, while C2C e-commerce platforms can transfer losses to sellers who run stores, and even make some innocent sellers suffer unjust accusations in order to please consumers.

Since the current bad results are caused by the short-term competition among platforms, it is the platforms themselves that should make adjustments. The current market trend is no longer the winner-takes-all bonus of the past, and long-term competition requires more emphasis on internal training. AI, which has been pushed to the forefront by large-scale model technology, has gradually become a basic capability of leading e-commerce companies. To play a fair and impartial referee between buyers and sellers is not a question of whether you can, but whether you want to.

The platform's inaction and blind pursuit of traffic data are also tantamount to encouraging the expansion of the "wool party" and low-quality merchants. Once the adverse impact expands to the social level and attracts the intervention of the market leaders, the chaos of only refunds will return to normal like the "choose one of two" policy back then.

Author: Fu Shen

Source: WeChat public account: "New Entropy (ID: xinshangxz)"