Pinduoduo launches the "low price" defense war｜618 observation

During the "618" promotion, competition among merchants became increasingly fierce. Major e-commerce platforms launched various discount activities to attract consumers to shop. In order to maintain its own advantages, Pinduoduo launched a new "automatic price tracking" system. Follow this article to see how Pinduoduo launched the low-price defense war. Recommended for Internet friends to read.

In the twenty-first "618", the competition becomes more intense.

Although Alibaba, JD.com, and Douyin have all started a series of actions around "low prices" since last year, the competition among existing e-commerce companies has reached a new level today.

Low prices and cheapness have changed from a defensive strategy of Alibaba and JD.com to a magic weapon for counterattacking Pinduoduo; Douyin also puts price power as its first priority. It is not enough to just imitate the price, but also to learn from the opponent's position to consumers.

Last year, Alibaba, JD.com, and Douyin successively launched refund-only services. The pre-sale mechanism, which has been criticized by consumers, has never been eliminated in the past few years of big promotions, but was abandoned by all major e-commerce platforms during this year's 618.

At this year's first quarter earnings conference call, Chen Lei, chairman and co-CEO of Pinduoduo Group, talked about industry competition, saying that consumers have formed the habit of cross-platform consumption. Consumers will make comprehensive comparisons between different platforms from multiple dimensions such as product category, price, and service quality before making a choice. Faced with such a trend, we also saw that peers have significantly increased their efforts in the first quarter.

When the foundation of its existence is challenged, Pinduoduo cannot rest easy.

1. “Low price” cannot be lost

For a long time, the coverage and influence of the "618" promotion have been weaker than that of "Double 11", the participation of merchants is not as great as the latter, and the discounts felt by consumers are much inferior to those of "Double 11".

Back to the "618" itself, this year's promotion is also called the most difficult in history. Cancelling pre-sales and simplifying the gameplay seem to be a last resort under the pressure of competition. However, full discounts, 10 billion subsidies, and flash sales have become the standard for big promotions. JD.com gets 50 off for 300 yuan or more, and Pinduoduo gets 30 off for 200 yuan. All these tricks will eventually fall on the calculations of consumers who compare prices among three stores.

For Pinduoduo, due to its long-term low-price promotions, the users who shop on Pinduoduo during the 618 promotion period are not as deeply rooted in the minds of the people as those on other platforms. Therefore, Pinduoduo itself does not attach that much importance to 618.

But this year is an exception.

Some consumers have found that this year Pinduoduo has pushed many hot search topics, such as #Learn from Pinduoduo’s 618 discounts#, #Who can save more than Pinduoduo on 618#, #Buying big items at Pinduoduo is confusing#, and #Pinduoduo’s 618 showdown#.

The biggest killer is the launch of the "automatic price tracking" system. The official explanation is to enable automatic price tracking for resource slots to reduce resource slot dropouts. The effective product range is all resource slot products, including 10 billion subsidies, limited-time flash sales, brand flash sales, and big promotions. After it is enabled, merchants can set the maximum price reduction for a single product in a single day.

Specifically, within the range set by the merchant, the system will automatically lower the merchant's price based on the price changes of other similar products on the platform. After the system was launched, many merchants complained that on the one hand, automatic price tracking would only reduce profits, and on the other hand, the frequent pop-up "automatic price tracking" pop-up windows were easily triggered by mistake, and could not be canceled if accidentally turned on. Perhaps under pressure from merchants' complaints, the price tracking function has recently been able to be canceled, but according to merchants, the cancellation entrance is still relatively hidden.

Pinduoduo is not the only one to do this. Before Pinduoduo launched this feature, Douyin had already been testing the "automatic price change" function. After the merchant sets the price, the platform can reduce the price in real time based on the prices of similar products on the site and the entire network.

Some merchants revealed that the reason why Pinduoduo launched the "automatic price tracking" function was that it found that the platform was slowly losing its low-price advantage. As low prices are Pinduoduo's biggest advantage, it must do everything it can to maintain them.

Even if you carefully avoid the ubiquitous pop-up windows, you can't avoid the official phone calls from Pinduoduo. A small Pinduoduo seller said that he received three or four calls in the morning asking him to join the automatic price tracking, and said that if he didn't join, he would be dropped from the resource position.

Even if they avoid "automatic price following", it is difficult for merchants to escape the fate of being compared with prices. A small merchant who does specialty product purchasing on Pinduoduo told 36Kr that when he participated in platform activities and posted new product links, the price comparison system often popped up a price reduction reminder: "The following products are already high-priced and there is a risk of traffic loss. Copy the price reduction of the new product, inherit the original product traffic and reviews, and enjoy natural traffic."

If you want to win exposure in the homepage recommendation area, low price is the best password. The above-mentioned merchant revealed that the platform may require 20% discount on the original price when making a quotation, but on June 18, the official guarantee discount is as low as 20%-30%. If the merchant does not accept the price reduction suggestion, the result is a sharp drop in traffic. "Because of the flow limit, there have been no orders for many days." The above-mentioned small merchant said.

2. The Race of Imitators

When low prices become the focus of competition between platforms, the price comparison system is no longer exclusive to Pinduoduo.

The biggest imitator is none other than Douyin. Since launching its low-price strategy at the beginning of the year, Douyin has begun to adjust its traffic distribution strategy, tilting traffic to low-priced and similar low-priced products across the entire network.

A person close to Douyin said that because brand merchants have little motivation to sell at low prices, Douyin's low-priced goods are mostly concentrated in non-brand sellers. Under Douyin's price comparison system, industrial belt merchants, small commodity stores, white-label, and low-priced goods merchants who buy goods from stalls are the most affected. In contrast, high-priced stores, strong development factories, and niche original stores are less affected.

For merchants, once the platform identifies a lower-priced product of the same model, the exposure and traffic of their own products will be absorbed by the lower-priced product. They have to set a lower price to bring the traffic back, but as the cycle goes on, it becomes a "losing-money-to-gain-publicity" business.

Based on the problem of price comparison system interruption on the platform, merchants are constantly exploring countermeasures, such as fission links, making dozens of product links for the same popular product, or differentiating the main picture, title, and details page from the same product on the platform. However, these techniques can only delay merchants from falling into the price comparison system, and cannot fundamentally solve the problem.

In addition to winning traffic by lowering prices, advertising is another way. However, the marketing budget and willingness of many small merchants are not high. In addition to continuously introducing more brands to drive the increase of overall advertising revenue and sales revenue, Pinduoduo hopes to increase the willingness of large white-label merchants to promote the entire site, which is conducive to improving the Take Rate of white-label merchants (currently about 4.6-4.7).

It is reported that there are about 12 million white-label merchants on Pinduoduo, accounting for 65%. For new merchants, it is becoming increasingly difficult to gain a foothold due to challenges in product pricing and operation. However, for merchants above the middle level, there is still room for growth due to factors such as product supply chain.

Douyin, with its huge traffic, is seen by the outside world as the most capable competitor to successfully imitate Pinduoduo. In terms of the composition of white-label merchants, Douyin and Pinduoduo do have many similarities. In addition to moving closer to Pinduoduo in terms of low prices, it has also set a GMV target of 4 trillion this year, which is almost the same as Pinduoduo's figure last year (4.2 trillion).

Douyin has indeed attracted the attention of Pinduoduo. However, from the internal point of view, Pinduoduo still has more advantages in terms of overall promotion strength and volume. "Pinduoduo will comprehensively refer to the price trends of other platforms, but will not blindly follow the lowest price, because the lowest-priced products are only a small part."

Although the size of the threat TikTok poses to Pinduoduo is a result that can only be verified with time, its existence cannot be ignored. Just like Pinduoduo's surprise attack on Taobao and JD.com, it may have happened in the past and it may also happen now.

Author: Li Xiaoxia Editor: Qiao Qian

Source: WeChat official account: "36氪 Future Consumption (ID: lslb168)"