The “involutionary” world of e-commerce: Only by competing on services can there be a way out

The essence of all businesses is to serve people. E-commerce has gradually transitioned from its explosive growth period to a stage of high-quality growth. What consumers need is to be "pampered" rather than "tricked."

More than half a month has passed since 618 of 2024, but the discussion is far from over.

First, there was a media report that "a certain e-commerce women's clothing merchant complained that the return rate was as high as 80%." The related topic quickly became the focus of social media, and resonated with many merchants: "This year's summer clothing return rate is almost 90%, and returning nine out of ten pieces is already the norm."

Then some merchants began to "complain" to the media about the "refund only" and "freight insurance" models of the e-commerce platforms, believing that the rules of the e-commerce platforms were too biased towards consumers and were exploited by some "freeloaders". They "cried" that they were being driven crazy by all kinds of "refund only, no return" reasons.

What happened during the 618 event, to some extent, reveals the current situation of the domestic e-commerce industry: after 25 years of market education, the number of online shopping users in China has exceeded 850 million, and annual sales have reached 10 trillion yuan. At the same time, in the highly inward-looking e-commerce world, there is anxiety about growth reaching its peak. Where is the way out?

01. The secret of e-commerce “breaking and establishing”: service system

Just after the Spring Festival in 2024, an old post written by Jack Ma 20 years ago attracted a lot of attention. Looking back on the development history of e-commerce in China, Eachnet, which was born in 1999, is often remembered, but it was Taobao, which was born in 2003, that made this new species of e-commerce enter the lives of ordinary people.

Why did Eachnet, which copied the eBay model, "miss the opportunity", while Taobao, a native website, became the online shopping enlightenment for countless netizens? The answer may be hidden in a sentence mentioned by Jack Ma in his post: "I firmly believe that the biggest beneficiaries of a true, great, and outstanding e-commerce website should be users, and the biggest builders should also be users."

Back in 2003, the impact of SARS accelerated the popularization of the Internet. The number of Internet users increased by 8.9 million in half a year, and 40% of the 68 million Internet users tried online shopping. So much so that in many narratives, the popularity of e-commerce in China is attributed to the Internet dividend.

This view is not wrong, but back to the context of the time, the reason why online shopping is accepted by young people is inseparable from two factors:

One is the lag in offline retail.

At the end of 2003, there were 236 shopping centers in cities above the provincial capital in China, and a considerable number of them were concentrated in megacities represented by Beijing, Shanghai and Guangzhou. For many people, the main place to shop is the small "mom-and-pop stores" with opaque prices and non-standard services, which cannot meet a large part of their consumer demands.

Therefore, when online shopping emerged as a "supplementary role" of offline retail, even though the logistics time could take as long as a week and the payment procedures were quite cumbersome, its potential was still quickly activated due to its transparent prices and standardized services.

The second is the online shopping experience that exceeds expectations.

Different from the traditional "what you see is what you get" shopping habit, the biggest challenge for e-commerce in its enlightenment stage is nothing more than "user trust".

Looking back at those e-commerce platforms that "survived", one of the important factors is "platform guarantee". For example, Alipay put forward the simple slogan "You dare to use it, I dare to compensate", which dispelled the doubts of some consumers; Taobao proposed the "7-day no-reason return and exchange" strategy in 2007, which made the online shopping penetration rate "soar"... In 2003, there were only 27 million users who "tried" online shopping. By 2013, the number of online shopping users in China had grown to 302 million.

It can be seen that the key to the "breakdown and establishment" of e-commerce in the Chinese market is the word "trust", and the gradually improved service system plays an indispensable role.

Unfortunately, after 2009, the e-commerce industry gradually deviated from its original track and rarely talked about "users". Instead, it used terms such as GMV and SKU that ordinary people could not understand. The market began to be manipulated by traffic thinking, and e-commerce platforms turned to play the role of "traffic operators."

As a result, in the past few years, new concepts such as live broadcast e-commerce and interest e-commerce have emerged one after another, and e-commerce has become a thorough traffic business. However, the cost is also obvious. For example, the return rate of women's clothing merchants is as high as 80%, which means that 80% of users did not buy the products they wanted. The foundation of e-commerce has shown signs of being shaken.

02. “Refunds only in special circumstances”, whose interests are affected?

Hidden behind the high return rate are actually quality issues such as untied threads, inconsistent sizes, no tags, and serious color differences, which directly affect the shopping experience. This is also the direct reason why many women's clothing merchants are criticized. Strategies such as "7-day no-reason return and exchange" can only treat the symptoms, but not the root cause.

There is reason to believe that the "high return rate" is not a phenomenon that only occurs during the 618 shopping festival in 2024. Similar problems are exposed after almost every major promotion. Some e-commerce platforms have tacitly acknowledged the existence of this phenomenon, because "freight insurance" protects the rights and interests of consumers to a certain extent, and is also a gray method to increase GMV.

As a "rising star", Pinduoduo was the first to launch a "refund only for special circumstances" system to address the burden that its predecessors were reluctant to get rid of: if consumers find that the goods they purchased on the platform are not what they ordered or have quality issues after receiving them, they can apply for a full or partial refund without having to return the goods to the merchant.

Judging from the system itself, its rationality is unquestionable.

The traditional return and refund only means restoring the original state after the contract is terminated, and consumers do not receive any compensation. At the same time, the cost of consumers seeking compensation through litigation is too high, so most consumers choose to swallow their anger. This means that the balance in the past was maintained at the expense of consumer rights. The refund system only compensates consumers with the price or residual value of the goods, which complies with legal provisions and is more fair.

Merchants on e-commerce platforms vary greatly, and some merchants may sell low-quality goods. However, many consumers are unwilling or unable to defend their rights due to the cost, which results in merchants having no other liability for breach of contract as long as they return the goods and refund the money. The "refund only" system, which allows merchants to get a refund without returning the goods, is undoubtedly an effective elimination mechanism, forcing merchants to improve the quality of their goods and services, and then protecting the rights and interests that consumers deserve.

The data that can be found is: Currently, about 90% of the refund-only cases on Pinduoduo are small orders below 100 yuan. Merchants with higher average order values ​​have generally begun to "strictly control" the quality of their products because the cost of "doing evil" is getting higher and higher. For categories such as fruits and flowers, which had a high frequency of returns and refunds in the past two years, the refund-only ratio in 2023 has dropped to 2.6%. Most merchants have played the quality card.

What is puzzling is that the “refund only” system is clearly another innovation of the e-commerce model, so why has it been caught in the whirlpool of public opinion like the “high return rate”?

The current public opinion mainly comes from the voices of a small number of merchants, who believe that the "refund only" system is "easy for buyers to exploit loopholes" and "may encourage the trend of taking advantage of customers". Consumers, as the "silent majority", rarely express their demands to the media, which invisibly creates a "survivor bias": merchants seem to have become victims of the "refund only in special circumstances" system, and e-commerce platforms represented by Pinduoduo are accustomed to "favoring users" in disputes.

It is undeniable that there are indeed a small number of "freeloaders" who abuse the "refund only" system, damaging the legitimate interests of some merchants. In some refund-only cases involving minor defects and some quality issues, the platform has difficulty in making judgments and instinctively stands on the side of vulnerable consumers.

However, these occasional problems should not be the original sin of the "refund only" system. At present, the Pinduoduo platform provides merchants and consumers with a complaint channel. Merchants who are dissatisfied with the platform's refund-only processing results can file a complaint and provide evidence to the platform, and the platform will also compensate the merchants based on the actual situation.

At least for now, mainstream e-commerce platforms such as Douyin, Taobao, JD.com, and Kuaishou have all followed Pinduoduo's lead and launched similar special refund services. After all, in this set of rules, the targets are actually merchants with poor product quality and poor service, which has far more benefits than disadvantages for most merchants, users, and platforms.

03. The end of e-commerce "involution" is still about service

"High return rate" and "refund only" were discussed at the same time, which not only exposed the problems of the current e-commerce industry, but also provided feasible answers. If we expand the perspective a little bit, if e-commerce platforms want to eliminate the traffic anxiety caused by the peak of growth, the most reliable route is to compete in service.

In its 25th year since e-commerce entered China, it has changed the consumption habits of nearly 1 billion people, but it is also time to rediscover the original intention: Has the "simple and efficient user experience" that was once advocated been overwhelmed by various business data, and has it fallen into the misunderstanding of excessive pursuit of traffic?

As one of the 1 billion consumers, we have a deep feeling: the opening screen ads of many social and tool apps have been dominated by e-commerce apps, and you will be redirected by mistake if you are not careful; after searching for a product on the e-commerce platform, the first products are often marked with the word "advertisement"... Both platforms and merchants have fallen into a vicious circle of traffic. There will be no growth without buying volume, and the cost of traffic is getting higher and higher.

The "ineffective internal circulation" driven by traffic thinking has resulted in the operation of e-commerce platforms becoming more and more complicated, and they need to constantly grab various traffic to maintain growth. The 618 in 2024 is destined to be a turning point. Several platforms no longer publish specific GMV figures, and third-party sources have given a judgment of "year-on-year shrinkage". "Rolling traffic" is no longer the correct solution.

As a result, more and more platforms and merchants realize that in order to break out of this vicious circle, they must change the underlying logic of internal circulation: compared with self-talking strategies such as "reconstructing people, goods and places", returning to the consumer's standpoint and innovating models around services is almost the only solution.

Take Pinduoduo's "refund only in special circumstances" system as an example. Although it may make a small number of merchants unhappy, it is welcomed by most brands. When some clothing merchants on the platform were troubled by the high return rate, brands such as Adidas, Belle, Bosideng, Semir, and Hongxing Erke opened flagship stores on Pinduoduo one after another. Brands such as Anta and Peak also entered Pinduoduo in the form of outlet stores or officially authorized stores.

The reason is not difficult to explain: if the "10 billion subsidies" have changed the minds of users, Pinduoduo is now the preferred channel for purchasing big-name products; the "refund only in special circumstances" system has further eliminated users' worries and no longer questioned the services and guarantees of merchants. For merchants on the platform, merchants and users have never been binary opposites. Only a healthy platform ecology can create soil for transactions.

If we dig deeper, if the e-commerce industry wants to continue to grow at its current size, it must be able to meet the consumer demand of the "downstream market". Most of these groups are not familiar with the platform rules and have no ability to "dispute" with merchants. Once a transaction dispute arises, they can be said to be a completely vulnerable group. The "refund only in special circumstances" system reduces the threshold and cost of after-sales service, which is not only a necessary measure to protect their interests, but also a necessary part of building trust.

Of course, this is just one part of after-sales service. The service system that needs innovation is not limited to after-sales service. Delivery time, logistics efficiency, repurchase rate and other aspects can also be the direction of volume.

Against the backdrop of the disappearance of the Internet dividend, it is time to abandon the idea of ​​"traffic only". There is nothing remarkable about the service. Even if traffic is purchased, most of the users are one-time users. Once you stop spending money to buy traffic, growth will be unsustainable.

In comparison, there are still many value points that can be explored in services. Using services to continuously consolidate the relationship with users and continuously increase repurchases based on trust are not new growth points?

04. Final Thoughts

For quite a long time, the trend of e-commerce platforms has been to "add things", trying to retain users and stimulate consumption with carefully planned "tricks".

When upgrading while consuming rationally becomes an irreversible cognitive trend, various marketing strategies no longer work, and it seems that it is time to "do subtraction". In addition to "canceling pre-sales" and other marketing subtractions, we should also turn "competing in service and lowering the threshold" from slogans into actions.

The essence of all businesses is to serve people. E-commerce has gradually transitioned from its explosive growth period to a stage of high-quality growth. What consumers need is to be "pampered" rather than "tricked."