Alibaba's "618" multiple-choice question

Recently, Taotian Group announced the adjustment of the rules for the 618 promotion in 2024. Among them, the most important one is probably the cancellation of pre-sales. Subsequently, JD.com also announced the cancellation of pre-sales. So, what is the reason behind the e-commerce platforms choosing to cancel pre-sales this time? Why did Alibaba change?

On May 6, Taotian Group's promotion project team announced the adjustment of the rules for the 2024 618 promotion at the Merchant Conference. The most important change is the cancellation of pre-sales - the sale will be directly started at 8 pm on May 20, with a guaranteed price throughout the whole process. JD.com also announced the cancellation of pre-sales two days later.

Prior to this, the pre-sale rules had been in place for 10 years.

If we go back to before 2022, the cancellation of pre-sales was a major event that was enough to prove the platform's change of direction. But today, it is just the aftermath of Taotian's personnel and strategic adjustments.

In the past few years, the domestic e-commerce industry has undergone changes. Facing the fierce impact from Pinduoduo and Douyin, Alibaba has entered a period of adjustment.

User experience is placed in the most important position by the management. In an interview video released by the Norwegian Sovereign Wealth Fund, Alibaba co-founder and chairman of the board of directors, Joseph Tsai, reflected: "We forgot who our real customers are. Our customers are people who use the app to shop, and we don't give them the best experience."

What users can see is that in the past two years, Taobao has improved the user experience: 10 billion yuan in subsidies, the "refund only" policy, and the restart of the web version of Taobao.

However, the difficulty of making changes is not just the action itself. The pre-sale system has affected a considerable part of the promotion revenue, and Taobao, which focuses on "big and comprehensive", needs to resolve the merchant relationships that are far more complicated than those of its competitors.

From no longer obsessing over GMV to pursuing user experience, this is the choice Alibaba has made in the face of new competition, but the choice is obviously not limited to this.

1. In order to capture users, you can give up short-term income

Consumers have long suffered from "pre-sales".

On the Black Cat complaint platform, there have been more than 80,000 complaints about pre-sales. For example, it is not uncommon for orders for spot goods to be changed to pre-sales, pre-sold goods to not be delivered on time, and price increases to make up the difference. Even during the big promotion period, the goods could have been received within three days of placing an order, but because of the promotion, it usually took more than a week from paying the deposit to signing for the courier, which seriously affected the consumer experience.

However, in the view of some insiders, pre-sale is Tmall’s core gameplay and will not be cancelled so easily.

For example, in the past many pre-sale products were sold through Taobao Live, especially beauty and skin care, cosmetics and other categories.

And these categories are very important to Taobao. According to Mojing market intelligence data, in the 2023 Tmall 618 pre-sale, the industry with the highest pre-sale amount was beauty and skin care, with pre-sale sales of 6.22 billion yuan. According to Latepost, a former Taobao live broadcast employee said that the pre-sale of the 2022 Double 11 promotion was the main force, and the pre-sale transaction volume of the big anchors accounted for more than 50% of the total transaction volume.

At the same time, Taotian’s transaction volume during the 618 pre-sale period last year accounted for about 5%-10% of the entire promotion.

But Taotian still cancelled the 618 pre-sale.

The reason is that the main theme of Alibaba's e-commerce in 2024 is: users mean everything. The management has given a path for this: everything is centered on consumer needs and experience to optimize all business links, emphasizing "good products", "good prices" and "good services".

First, Alibaba has made every effort to build resources and promote the development of Taobao's core e-commerce. For example, the wholesale platform 1688 opened a store on Taobao to provide cheap goods, and Taobao's merchants and goods were moved back to Taobao.

Second, in order to get a "good price", the Taotian activities are non-stop.

For example, starting at 8 pm on April 23, Taobao launched a six-day 10 billion flash sale festival. Among them, the product portfolio subsidies of well-known brands such as Apple and Dyson were about 30% to 70% of the original price; the prices of many subsidized items also hit new lows.

On May 6, a large number of Taobao users were suddenly given free orders. Before that, the official did not release any activity rules. Later, the official announced that Taobao’s anniversary celebration had started a free order activity for answering questions. It is reported that 1 million free orders will be issued during the activity period. In addition to various holiday promotions such as May Day and Mother’s Day, Taobao seems to have been “discounting” in the first half of this year.

Third, bend down and learn from your competitors, such as "refund only" and "door-to-door delivery".

Pinduoduo's refund-only policy was launched in early 2021. Users can initiate a refund without returning the product. Pinduoduo will directly refund orders below 20 yuan. When it comes to orders of higher amounts, the system usually considers multiple indicators and proactively provides partial refunds for users with excellent credit records.

Even though it has been criticized by many merchants, other e-commerce platforms have chosen to follow suit.

In September 2023, Douyin announced a "refund only" policy, Taobao and JD followed suit at the end of the year, and in January 24, Kuaishou also joined the "refund only" team.

Alibaba also learned from JD.com’s “home delivery” service. JD.com’s logistics has always been well received, while Taobao’s logistics has been complained by some consumers for many years.

Due to price wars, courier companies can only earn a few cents per delivery for Taobao and Pinduoduo. In order to improve efficiency, couriers are used to delivering e-commerce packages directly to the post station, and users have to go to the post station to pick up the goods themselves, which is of course not as convenient as door-to-door delivery. In response to this, Taotian has set aside a budget to recruit 100,000 outsourced Cainiao post stations across the country, which are specifically responsible for delivering packages from the post stations to consumers.

On the one hand, Alibaba has been constantly changing in order to capture users, and has even sacrificed some short-term revenue in exchange for a better shopping experience and to stimulate more consumption. But on the other hand, while changing, confusion and doubts have also emerged.

2. Change and Chaos

Not all actions taken in pursuit of user experience have been well received.

For example, the "home delivery" to improve user experience has been criticized on various social platforms. One reason is that home delivery requires a phone call, even if you don't like answering the phone. Another reason is that for home delivery, couriers often slide the package to the door of the room from a distance to speed up delivery efficiency, which does not give consumers a good impression.

At the same time, feedback from the merchant side is more common.

A big seller on Taobao named "Diao Ye" mentioned in his WeChat public account, "Now it feels like everything is a mess inside Taobao. Normally, at the beginning of each year, each brand has to sign an 'annual frame' with Tmall. This is not only a means for Tmall to bind various brands, but also a major source of income. But the problem is that it is already April now, and the waiter who connects with us keeps changing, and no one cares about us signing the annual frame. We are carrying a pig's head but can't find the temple gate." Diao Ye said.

There are many merchants who hold similar views. Some merchants said, "All platforms under the Taobao system are messing with policies, which are unstable and inexplicable." For example, a merchant shared that the rules were released at around 1:00 p.m. on May 9. From May 10, the platform's processing time for merchants to generate expedited delivery orders was shortened from 24 hours to 30 minutes. Because the time was shortened too much, many merchants gave feedback and stopped this rule.

A blogger of a women's clothing store on Taobao that Bohu Finance follows also said that she is studying the gameplay and rules of other platforms. According to her, "Taobao's freight insurance is now borne by the seller, regardless of whether the customer returns the goods or not." At the same time, she complained that Taobao loves to "fine". Whether the consumer requests late delivery or the courier fails to deliver on time, there will be a fine.

As for "refund only", the controversy is even greater.

But in fact, this is not just a problem for Taobao. The "refund only" policy is definitely good for consumers, but it will also inevitably lead to abuse by some wool parties. The rival platforms have also caused conflicts with merchants because of this policy.

At the same time, some consumers are also worried that merchants will pass on the increased after-sales costs caused by refunds alone, or even the losses caused by freeloaders, to ordinary consumers, thereby raising prices.

As e-commerce enters the stage of stock competition, the game between platforms begins to revolve around several major dimensions: price, service, and the main thread of all this is users. In the past, Taobao, JD.com and Pinduoduo all had their own characteristics, but now they are becoming more and more similar.

3. Final Thoughts

Alibaba needs to change, Alibaba is changing, and Alibaba has to change.

There is a rising star, Pinduoduo. On November 29, 2023, Pinduoduo's intraday market value exceeded Alibaba for the first time; on January 3, 2024, Pinduoduo's market value reached US$197.893 billion, surpassing Alibaba's US$195.058 billion and JD.com's US$43.224 billion.

At the same time, Douyin is competing for Alibaba's profit source - brand advertising. According to LatePost, an insider revealed that "the most troublesome thing about Douyin is that it is like a hedgehog. A random live broadcast can earn tens of millions of yuan. It is difficult for Alibaba to find a solution to this kind of unplanned behavior, and it is impossible to create a content platform with 800 million daily active users." Many Alibaba employees believe that Douyin's growth has far exceeded expectations and is more difficult to deal with than Pinduoduo. It is understood that the transaction volume of Douyin's beauty and skin care category was close to Taobao and Tmall at the end of last year.

It is impossible for Alibaba not to be anxious.

At the same time, other platforms are also racing against time. For example, JD.com followed up with a 10 billion subsidy and only refunded the money. Pinduoduo, which has always been a learning platform, is also making up for the lack of content. According to the statistics of Yuehu iApp during the Double 11 promotion last year, the user overlap rate of Taobao, JD.com, and Pinduoduo was as high as more than 50%, among which Taobao and the other two platforms had the highest user overlap.

Competition in the same market means that the worst thing to do is to avoid the situation of "others have what I don't have". The current situation is that when each company holds a deck of cards that includes low prices, supply chains, content, logistics, etc., it is difficult to achieve long-term victory by winning by surprise. Execution, endurance, and details have become the key.

References:

1. New Standpoint Pro: Radical Wu Yongming "prepares in advance" for 618, and merchants say they "can't bear it anymore"

2. LatePost: Jack Ma’s three internal statements mark the true end of Alibaba’s restructuring

3. All-Weather Technology: Alibaba made a difficult decision