1688 joins Taobao and Taobao Specials migrates. Is Alibaba’s main low-price battlefield shrinking back to Taobao?

Recently, Taobao, Taobao Special, and 1688 have undergone some changes in their businesses, not only in terms of organizational structure and internal personnel reorganization, but also in the return of Taobao Special Edition, which was once highly anticipated by Alibaba. Let's take a look at their changes~

Recently, Alibaba Chairman and co-founder Joseph Tsai reflected on the changes in the past few years in an interview with an investor podcast. He admitted that "Alibaba has fallen behind." He also said that Alibaba has carried out a reorganization within Taobao.

The changes are not only reflected in the organizational structure and internal personnel reorganization, but also in the recent changes in Taobao products. 1688, which has been engaged in B-side business, recently joined Taobao and opened three stores; and Taobao Special Edition, which was once highly expected by Alibaba, was also returned to Taobao.

Taobao's highlight moment was in 2022. In May of that year, Alibaba's financial report revealed that Taobao's annual active consumers exceeded 300 million in the 12 months ending March 31, 2022. It took Taobao only two years to grow from 0 to 300 million. But Taobao's peak was also frozen when the number of users exceeded 300 million.

At the end of February this year, according to a report by Wandian, Taobao Special will fade out of the historical stage, and Taobao Special merchants will move back to Taobao in the future. In response, Taobao Tmall said that the Taobao Special business will continue to develop, and at the same time increase the full supply of Taobao Mobile to serve Taobao Special's original market users.

Although the Taobao Special app is still there, its existence seems to have little significance. When you open Taobao Special, whether it is the recommendation page or the search page, more Taobao Tmall stores or Taobao factories appear now. It is difficult for users to tell whether they are browsing Taobao or Taobao Special.

It took only four years for Taobao Special to go from its official debut to its gradual disappearance. During these four years, the e-commerce industry and consumer environment have undergone tremendous changes. The changes in Taobao Special over the past four years are also a microcosm of Alibaba's strategic changes: from "burning money for growth" to "reducing costs and increasing efficiency", and then to focusing on price power.

While Taobao Special Edition is returning to Taobao, 1688 is also entering Taobao, and Alibaba is concentrating its resources to defend its e-commerce base. However, the competitors in the e-commerce track are stronger than they were four years ago, and Taobao is facing greater challenges than it was four years ago.

1. Taobao, which was “fostered” by Alibaba

In March 2020, Taobao’s special price version was officially launched. This is seen as a key battle to resist the rise of Pinduoduo.

When Taobao Special was launched, Pinduoduo had 628 million active buyers in the first quarter of 2020. By the end of 2020, this figure reached 788.4 million, exceeding Alibaba's 779 million in the same period. For Alibaba at that time, Pinduoduo was already a competitor that could not be ignored.

Although Taote has publicly stated that it and Pinduoduo are two different businesses, Taote is still competing with Pinduoduo in terms of growth methods, marketing promotion, and product category expansion.

Except for the inability to achieve social fission on WeChat, Taobao's growth methods such as games, red envelopes, and short videos are similar to those of Pinduoduo in its early days.

At the end of July 2020, Pinduoduo launched the first "True Fragrance Festival" and invited Internet celebrity Wang Jingze to sell goods live. A few months later, Taote launched the "One Yuan More Fragrance Festival" event, and Wang Jingze also appeared in Taote's video ads. Taote won the exclusive naming rights for Hunan Satellite TV's New Year's Eve Gala in 2021, and before that, the naming sponsor was Pinduoduo.

After going online, Taobao has paid special attention to industrial belts and factories. Ma Kaiyue, the person in charge of "Laoma E-commerce Circle", told Tech Planet that although Alibaba had mentioned the idea of ​​building industrial belts before, the most vigorous effort was made after Taobao went online. In 2020, Taobao's production shop assistants were all veteran e-commerce professionals with more than ten years of experience. "At that time in Wenzhou, we had four or five meetings a week, and as long as there was a problem, the shop assistant would come to solve it."

In the two years since its launch, Taobao has continuously and proactively disclosed data such as users, merchants, and order volume to prove its rapid growth. 230 days after its launch, Taobao's annual active users exceeded 100 million. One year after its launch, the annual active users have exceeded 150 million. In 2021, Taobao's M2C direct supply orders increased by 400% year-on-year. Wang Hai, general manager of Taobao's business unit at the time, once revealed that by March 2021, Taobao's ground team had covered 2,000 industrial belts, 1.2 million merchants, and 300,000 factories across the country.

However, the growth of Taobao's merchants and users is inseparable from the direct infusion of Alibaba's resources. In 2021, Taobao's senior management did not shy away from this point when communicating with the media. "Alibaba's group resources are a unique advantage for Taobao's growth," said Zou Yan, the then general manager of Taobao products.

In 2020, Taobao Special will be fully connected with 1688, and hundreds of thousands of small and medium-sized enterprises on 1688 will be indoctrinated into Taobao Special. A former Taobao employee told Tech Planet, "Many of Taobao's product pools are from Taobao. Taobao Special is where all the white-label merchants from 1688 and Taobao Factory are piled together."

Wang Fu entered Taobao in 2022, when he had already opened stores on Taobao and Pinduoduo. He chose to open a store on Taobao because Taobao is owned by Alibaba and he does not have to worry about bankruptcy. More importantly, in 2022, Taobao store owners can synchronize Taobao sales, reviews and other data when they enter Taobao.

Wang Fu told Tech Planet that because the data can be connected, Taobao shop owners around him will open Taobao Specials, which does not require much cost and threshold for them.

For them, Taobao Special is indeed an incremental platform. Many Taobao Special merchants interviewed by Tech Planet said that in the early days, even without paid traffic, the Taobao Special platform could have a certain amount of orders. Wang Fu recalled that the daily basic volume was between 70 and 80 orders, and sometimes there were hundreds of orders.

After Liu Xing started doing Taobao Specials in 2021, he also said that as long as he was willing to lower the price to carry out activities, he could have hundreds to thousands of orders every day.

2. Taobao’s “dramatic changes”

In 2022, the number of Taobao users exceeded 300 million, but the change also occurred in this year.

After the number of users exceeded 300 million, the development direction of Taobao began to change. Repeat purchases and retention replaced new users and became the most important development goal of the team at that time. More importantly, in 2022, "reducing costs and increasing efficiency" became Alibaba's primary goal. This means that Alibaba will no longer give Taobao a transfusion in exchange for growth as before.

In the second quarter earnings call of 2022, Alibaba stated that 20% of Taobao's 300 million annual buyers were users who had never shopped on Taobao or Tmall. This means that Taobao has brought Alibaba about 60 million new users.

The cost and investment of 60 million new users can also be confirmed in the financial report. According to the financial report data, the operating profit in fiscal year 2022 will be 81.733 billion yuan, a decrease of 41.683 billion yuan compared with 123.416 billion yuan in fiscal year 2021. Alibaba said that "this is mainly due to our increased investment in Taobao Special and Taobao Caicai, increased expenses for user growth, and our measures to support merchants."

However, in the third quarter earnings conference of 2022, the frequency of Taote's appearance decreased significantly, and when it appeared, it was emphasized that "Taote's losses have been significantly narrowed." Just a year ago, in the third quarter earnings conference of 2021, "Taote" was mentioned 17 times. After announcing that the number of users exceeded 300 million, Taote no longer disclosed key data such as users, merchants, and order volume.

The changes are also reflected on the merchant side, where orders have dropped.

Liu Xing noticed that the traffic started to decline in 2023, so she talked to the Taobao clerk. The Taobao clerk did not give an accurate answer, "just saying that the traffic would tend to be invested in promotion later."

This is also the general perception of Taobao merchants. In the second half of 2023, Wang Fu also clearly felt the decline in the number of orders. Wang Fu did not go to the waiter to ask the reason. He probably knew that "the main reason is that the platform did not give users red envelope subsidies." He has observed that when there are more subsidies, the transaction volume is large, and when the subsidy intensity decreases, the order volume will decline significantly.

When Taobao no longer gives users red envelopes, users will no longer stay on Taobao. The reason why Jiang Xin insists on placing orders on Taobao is the VIP red envelopes. For a yearly fee of 36.5 yuan, she can receive red envelopes without any threshold every day. But in January this year, Jiang Xin found that she could no longer find the VIP entrance on Taobao, and she could not renew her subscription.

Without red envelopes, Taobao has lost its appeal to Jiang Xin, "because there is nothing that cannot be bought without Taobao."

In 2023, Taobao's 3rd anniversary celebration did not arrive as scheduled, but began to increase the publicity of Tao Factory. More importantly, in 2023, Wang Hai, the former head of Taobao and Alibaba partner, was transferred to be in charge of Taotian's Small and Medium Enterprise Development Center, and appeared in the 618 press conference of that year in a new identity.

A source told Tech Planet that the number of existing merchants on Taote remains at hundreds of thousands. For reference, the number of merchants officially announced by Pinduoduo is still in 2020. At the end of 2020, the number of active merchants on Pinduoduo was 8.6 million. Guosen Securities speculated in a research report that the number of active merchants on Pinduoduo will reach tens of millions in 2022.

3. The main battlefield launched a comprehensive low-price war

For merchants, the recent news of returning to Taobao has not made much of a fuss. For them, Taobao Special has been fading away since a year ago. Now it is difficult to find merchants who still attach importance to Taobao Special operations.

In 2023, most merchants gave up operating Taobao. Liu Xing and Wang Fu both stopped operating after the traffic decline last year. "The store is just there, and we ship as long as there are orders," Wang Fu told Tech Planet.

"In the past, Taobao would invite us to participate in Double Eleven events several months in advance, but in 2023, I didn't even notice any Double Eleven events on Taobao," a Taobao merchant told Tech Planet, "At that time, I knew that Taobao was probably not going to work."

Taote merchants are more concerned about whether they can get their deposit back than transferring their stores back to Taobao. "I already have Taobao, so having another store doesn't make much sense to me," said Wang Fu.

Taobao Special is gradually disappearing, but Taobao has not given up on low prices. To a certain extent, Taobao Special's return to Taobao means that Taobao is starting to use its main battlefield to launch an all-out price war.

In 2023, Taobao launched 99 Specials and the "Taobao Good Prices" section. The "N Yuan N Items" project in this section also appeared on Taobao Special. Some employees of "Taobao Good Prices" were transferred from Taobao Special. Low prices were repeatedly mentioned at important nodes such as 618 and Double Eleven.

But in the past year, Taobao's performance in low prices seems not to be impressive enough. This year, Alibaba continues to integrate its white-label resources into Taobao.

Due to the consumer trend of "big brand substitutes", 1688 has established a certain low-price perception among C-end consumers in the past few years. 1688, which has always been engaged in B-end business, has also recently entered Taobao. 1688 has opened three stores on Taobao. 1688's manufacturers directly enter Taobao in the form of semi-hosting to connect with C-end consumers.

At present, the 1688 Strictly Selected Taobao Store, the 1688 Enterprise Self-Purchasing Tmall Store and the 1688 Industrial Experts’ Selection Tmall Store have 40,000, 120,000 and 37,000 fans respectively as of press time.

1688, which has industrial belt resources, has certain advantages in attracting price-sensitive consumers. However, how 1688 manufacturers, brands and small and medium-sized businesses can be integrated into the same consumption field remains a problem.

"Ali has fallen behind in the past few years," Joseph Tsai recently reflected on Alibaba's mistakes in a podcast interview.

Cai Chongxin said that they are reorganizing the staff and adjusting the organizational structure to adapt to the strategy. "Although Alibaba has felt the pressure of competition, it is back now."

However, Taobao now has more than one powerful opponent. In 2024, Douyin became the fourth e-commerce player to clearly promote "low price" as a core strategy. The low-price war is more difficult to fight than four years ago.

Author: Xi Rui WeChat public account: Tech Planet