Taobao's series of big moves are sending important signals

This article discusses a series of strategic changes taken by Taobao, including the update of the store comprehensive experience rating standard, the implementation of the store labeling system and the linkage with product traffic. These are major measures taken by Taobao to adapt to the new development stage of the e-commerce industry.

During this year’s 618, the fierce competition in the e-commerce industry is visible to the naked eye.

First, Taobao and JD.com announced the cancellation of pre-sales and would directly sell spot goods at low prices. Then Douyin announced a small-scale test of the e-commerce price change system. Then Pinduoduo launched the "automatic price following system."

According to more than 20 years of research on the e-commerce industry by "Zhuang Shuai Retail E-commerce Channel", price competition among major e-commerce platforms will eventually become the norm. Only by continuously upgrading the platform's services and experience can their respective advantages and differentiation be reflected. This is also in line with the development law of every industry from price competition to experience competition.

Judging from the fact that Taobao and Tmall announced a number of strategies in January this year, including upgrading the new store comprehensive experience rating standards and launching a store label system, the e-commerce industry has entered a new stage.

It is understood that Taobao and Tmall's new comprehensive store experience scoring standards have added new indicators related to consumer assistance, such as "refund rejection rate" and "platform help-seeking rate", as well as high-quality service items such as "return shipping insurance" that influence consumer shopping decisions. In addition, they have added assessment indicators such as "track abnormality rate", "promised timeliness" and "door-to-door delivery" to target consumer pain points such as logistics stagnation and delivery speed.

Based on the new experience rating standard, Taobao has launched a store label system, and stores that provide good services will be officially "labeled" and certified. The new label not only includes the experience score, but also includes "average delivery time", "damaged return", "customer service response time" and other key dimensions that affect consumers' shopping experience.

More importantly, recent reports from multiple sources indicate that the new rating system is directly linked to product traffic. Especially in search scenarios that are crucial to merchants, the better the service and the higher the experience score, the higher the search ranking.

This also means that good service = good traffic = new growth will become an important principle for future business operations.

1. Three major characteristics of the new stage of the e-commerce industry

The traffic dividend disappears, the stock market is in competition, and the price war is fierce...

These are actually the incentives for the e-commerce industry to enter a new stage. Every mature or emerging e-commerce platform needs to think deeply and understand what characteristics the new stage of the e-commerce industry has, and then clarify which are the core strategies.

"Zhuang Shuai Retail E-commerce Channel" integrates the feedback and evaluation of major e-commerce platforms by merchants and consumers, as well as e-commerce industry data and financial report data of listed e-commerce companies, combined with the strategies, organizational adjustments and initiatives of multiple e-commerce platforms such as Taobao Tmall, JD.com, Pinduoduo, and Douyin E-commerce, and attempts to clearly depict the three major characteristics of the new stage of the e-commerce industry.

1. Feature 1: The end of price competition is price convergence.

Ten years later, why are major e-commerce platforms starting a price war again in 2023?

On the one hand, the traffic dividend of e-commerce platforms has disappeared and they have entered into competition in the stock market. In order to stimulate consumer demand and attract limited users, price war is the most direct and effective means. On the other hand, insufficient external demand has led to a situation of oversupply, and merchants are in urgent need of destocking to ensure cash flow and develop new products.

Obviously, in this price war, agents and distributors are the main forces, and platform subsidies are helpers. However, for brands and e-commerce platforms, price wars are short-term behaviors that hurt themselves by 1,000 yuan but cannot hurt the enemy by 800 yuan. Therefore, price competition is not an infinite war. When the price reaches a certain level, it will not be able to be lowered any further.

In addition, for merchants and platforms, a certain profit is the basic guarantee for survival and development. Without profit, they will enter a vicious cycle. Some merchants on e-commerce platforms have even begun to cut corners and sell inferior products in order to cope with the "lowest price on the entire network."

Whether for profit or for repeat purchases driven by consumer satisfaction and loyalty, merchants and platforms cannot be confined to the single competitive dimension of price.

The end result is that commodity prices on major e-commerce platforms will quickly converge, and the benefits that can be brought by simply relying on price cuts will be reduced.

2. Feature 2: The e-commerce industry has upgraded from traffic dividends to operating dividends.

The traffic bonus lies in the fact that e-commerce platforms continue to have new registered users, and new users buy products out of curiosity and a desire to try new things. Most of them only pay attention to the richness and price of products, and do not have a deep understanding of experience and service. Merchants and e-commerce platforms still compete on the richness of products, and there is a longer period of gradual improvement in experience and service.

When the traffic dividend is no longer there and good products at low prices become an industry consensus, merchants and e-commerce platforms need to form a consistent goal and focus on the essence of business. They should not only think about improving business efficiency from all angles, but also place good service in a more important position and jointly improve user experience.

Merchants need to break away from the operational inertia of chasing traffic, and e-commerce platforms need to change their core profit model that relies solely on traffic monetization, and jointly reap dividends from refined operations: while ensuring cost-effectiveness, new growth can be achieved through good services and improved experience.

3. Feature 3: Consumers on e-commerce platforms not only pay attention to price, but also pay more attention to experience.

Buying and selling is not a one-time transaction. When the prices of major e-commerce platforms gradually converge, the quality of the service experience will have an increasingly significant impact on consumers.

In May, the Beijing News conducted a 618 consumer survey on more than 3,000 consumers. The data showed that although consumers are more likely to be attracted by "awesome prices and promotions" (50%), "authenticity guarantee" and the comprehensive shopping experience of "product power + price power + service power" are still as high as 44% and 34%. Price guarantee service (28%), after-sales guarantee (25%), rich new products and brands (23%) and delivery speed (15%) are also the main items of concern for consumers.

These data show that consumers not only pay attention to price, but also attach importance to multi-dimensional shopping experience. This also explains why Taobao and Tmall have taken a series of actions such as redesigning their homepage, increasing VIP benefits, and offering discounts, as well as upgrading the underlying logic of the evaluation system. In fact, they are filling in the final pieces of the puzzle in terms of user experience in the new stage of e-commerce platforms.

2. The meaning behind Taobao’s upgraded experience

Recently, many merchants have reported to the "Zhuang Shuai Retail E-commerce Channel" that the Taobao Seller Rating System (DSR), which has been in place for more than 20 years, will be fully upgraded to the Store Experience Points & Product Experience Index (PXI) system, which has become a major move that shocked the e-commerce industry on the eve of 618.

It is understood that there are two obvious changes in the upgrade of Taobao's experience system:

The first change is that after the merchant’s experience score improved, store traffic began to increase significantly.

According to the "Store Experience Score Specifications" released by Taobao, it has been clearly stated in the rules that "the higher the store's overall experience score, the better the search ranking results that can be obtained."

Not only the merchant's store will be taken into consideration for the experience, but individual products will also be taken into consideration. Taobao can more conveniently incentivize merchants from store traffic to individual product traffic through various types of experience points.

In this experience scoring system, both stores and products will have an experience measurement standard. From the appearance of the product main picture, the richness of the details page to logistics, after-sales, etc., all are included in the consumer experience. If merchants do these things around the products, they can return to the correct direction of e-commerce, which is to refine operations and seek growth, thereby obtaining more certain and stable long-term benefits.

In addition, it can be seen that the PXI system is closely related to the traffic distribution within Taobao, covering store operation scenarios such as Taobao Mobile search, guess what you like, advertising, event registration, etc. The higher the score, the higher the search ranking.

A merchant shared the relationship between Taobao experience score and traffic incentives. "If the experience score is around 60, there will be a big gap in traffic. If the product experience index is optimized to 90, basically the traffic can increase by about 20%."

According to "Zhuang Shuai Retail E-commerce Channel", a co-branded storage bag in the flagship store of a leading grocery brand has been significantly improved by optimizing the delivery and refund experience (delayed delivery/out of stock/non-delivery issues), reducing consumer complaints and assistance issues. The product experience index (PXI) has increased from 61 points to 93 points, and the corresponding product traffic has increased by 20.5%.

Another dishcloth product was significantly improved by optimizing the delivery experience (delayed delivery/out-of-stock issues) and reducing consumer complaints and requests for help. The product experience index increased from 67 points to 90 points, and the corresponding product traffic increased by 39.3%.

From this change, we can see that Taobao is going to formally define service experience as a bonus for merchants. Compared with the current e-commerce industry's requirement for merchants to improve their experience and impose more "penalties", Taobao obviously attaches more importance to the "rewards" after the merchant experience is improved. For example, in the after-sales scenario, Taobao will strengthen the protection of merchants with high experience scores, and the platform will become more cautious in imposing penalties.

After all, the way to improve consumer experience has always been that e-commerce platforms and merchants work together to truly serve consumers. If it is at the expense of the interests of merchants, and if merchants are only fined to provide good services, which makes them complain, then it is putting the cart before the horse.

I believe that in the future, merchants and stores with good experiences will not only receive more traffic incentives from Taobao, but will also be able to gain more rights and interests in multiple scenarios such as refunds, appeals, and abnormal shipments.

The second change is the full display of experience points and experience labels.

It is reported that the new label not only includes the experience score, but also includes "average delivery time", "damaged return", "customer service response time" and other key dimensions that affect consumers' shopping experience.

The service label and experience score will appear together in multiple prominent locations such as the store homepage, impression page, product details page, etc., providing a strong reference for consumers' shopping decisions.

This change means that the upgrade of experience is not decided by Taobao as a platform. Taobao is no longer the referee, but is consumer-centric, letting consumers be the referee. Taobao and merchants have the same goal: to improve user satisfaction, provide users with a better experience, and increase the repurchase rate of high-quality merchants.

Over the past year, Taobao and Tmall have continued to optimize logistics, after-sales, 88VIP services and other aspects to upgrade user experience. The average delivery time has been reduced by 8.1 hours, the average return and refund time has been reduced by 17 hours, and the Wangwang satisfaction has increased by 6 percentage points.

In terms of increasing repurchase rates, the repurchase rates of merchants in the same category with high experience scores on the Taobao Tmall platform are significantly higher than those of merchants in the same category with low experience scores, especially in the pet category, where the repurchase rate is 127% higher.

Obviously, Taobao's upgrade from DSR to PIX, and from store evaluation to store + product double evaluation, once again confirms a common truth in the retail industry: gold or silver cups are not as good as consumer word of mouth.

According to the data from Analysys International's "Observation of the First Cycle of 618 in 2024", during the first cycle of 618 this year (May 20-June 3), the GMV growth rate of the comprehensive e-commerce market (Taobao Tmall, JD.com, Pinduoduo) was 14%, and the first wave of GMV of Taobao Tmall increased by 14.6% year-on-year, accounting for 60.5% of the market share of comprehensive e-commerce platforms. The number of daily active users (DAU) of Taobao APP increased by 22.9% year-on-year.

We have to admit that in the current complex consumption situation and the new stage of e-commerce industry development, for merchants who provide good products at good prices, how to further improve services and enhance consumer experience is still a big challenge. However, as long as merchants and e-commerce platforms can return to the essence of business, and continue to strive for excellence based on the multi-dimensional requirements of consumers and the corresponding indicators given by the platform, the opportunities are obviously greater than the challenges.

3. Value Thinking of Taobao Experience Upgrade

From DSR to PIX, Taobao's various measures and practices for upgrading the experience show that Taobao has designed a complete closed loop of consumer experience: not only does the e-commerce platform serve consumers, but merchants are also more willing to provide consumers with better goods and services because they can obtain traffic incentives and rights. When the consumer experience becomes better, the merchant's business can also become better, thus forming a healthy growth.

The upgrade of Taobao experience has huge value for consumers, merchants and the e-commerce industry.

From the consumer's perspective, as prices on major e-commerce platforms converge, Taobao Experience Score can help consumers screen high-quality merchants that perform well in customer service, logistics, after-sales and other services, allowing consumers to not only buy good products at good prices online, but also enjoy good services, making shopping safe, comfortable and happy.

From the merchant level, the goal of serving consumers well can only be truly achieved when the e-commerce platform and merchants maintain a win-win situation.

So, in the new stage of the e-commerce industry, merchants do not need to have too much "price anxiety" and "traffic anxiety". Instead, they should constantly think about how to increase the weight of good services on the basis of providing goods with equal price power. Only in this way can they obtain more high-quality traffic incentives and more rights and interests provided by the platform, and get rid of the vicious cycle of low price, low quality and low profit brought about by the single price competition dimension.

For those merchants who stick to the industry foundation and bottom line of providing good products at low prices, working together with e-commerce platforms to improve consumer experience, they will inevitably be able to smoothly transition from the "traffic dividend" stage to the "operating dividend" stage.

If we look at the entire e-commerce industry, more than 20 years ago, Taobao's DSR became China's first e-commerce platform evaluation system, and was subsequently adopted by all e-commerce platforms and became the industry standard.

Today, the e-commerce industry, which has undergone sufficient price competition, is about to enter a new stage of development. Taobao is not only undergoing self-transformation, but also working with merchants and all e-commerce platforms to once again cross the cycle, overcome current industry difficulties, and jointly promote the upgrading of consumer experience to achieve: good service = good traffic = new growth.