Users, merchants, platforms, who benefits from “refund only”?

With the rise of e-commerce, "refund only" has become a common means of consumer protection. However, does "refund only" really benefit users, merchants, and e-commerce platforms? This question has sparked widespread discussion.

There is bound to be a big war between e-commerce platforms in 2024, but surprisingly, the starting point of this fierce battle is the "refund only" function.

In the last few days of 2023, Taobao and JD.com successively updated the platform dispute handling rules and after-sales service management rules. Among them, the most watched change is that "in some cases, consumers can choose only a refund and no return."

Prior to this, the "refund only" function had existed on Pinduoduo for a long time. On one hand, users applauded, believing that this was a further protection and inclination of consumer rights by major platforms; on the other hand, small and medium-sized merchants cursed, "Platforms that support refund only are all mindless buyers."

Logically speaking, after Taobao and JD.com introduced the new rules, the voices on both ends of the scale should not differ much. However, at present, the narrative logic of merchants has obviously prevailed: refunding only is encouraging freeloaders, which will be detrimental to the profitability of merchants in the long run, and the ultimate result is that merchants have to raise the overall price of goods in order to survive.

In contrast, the voices are very weak. Almost no consumers have argued for the advantages of the "refund only" function on the Internet. Even many consumers agree with the merchants' point of view, pointing out that problems such as "extra-long pre-sales" are more worthy of the platform to solve first.

Where will this dispute involving platforms, merchants and consumers go? To answer this question, we still need to see who is using "refund only" and which users are the beneficiaries of refund only?

1. Silent Refund-Only Users

Let me first make a rather "contrasting" observation of Hedgehog Commune: among the "refund only" users, the elderly people who like to get up early and queue up to buy promotional items almost never take the initiative to "take advantage of the situation"; instead, those who maliciously request refunds are young people who understand the refund only rules, are proficient in online shopping, and have a certain level of education, and are even college students.

In other words, it is often the young "Internet natives" who make the most of the money by offering only refunds, while the "Internet immigrants" are unfamiliar with the rules and do not know how to or are unable to fully understand the rules of only refunds.

"Have Taobao and JD.com also launched a refund-only function? I don't know. I usually only use Pinduoduo." Xiaoxiao lives in a third-tier city on the coast. She has been using Pinduoduo for almost four years, ever since she started helping her friends "cut a corner" on their purchases. She is an absolutely loyal user.

As a full-time mother, taking care of her daughter takes up most of her time and energy. Xiaoxiao can only find time to shop online. Most of the items she buys are daily necessities for the household and clothes and shoes for her daughter.

In her four years of online shopping, Xiaoxiao has not had many refund experiences.

"I usually choose to return or exchange products I don't like. Sometimes, even if I buy a product that is not very useful, I think it is not worth returning it because the price is very cheap." There are many consumers who share the same idea as Xiaoxiao. For some low-priced products, the time and effort spent on returning them often far exceeds the value of the product itself. If the purchased product does not have shipping insurance, the buyer may also need to bear the return shipping costs.

It was not until October last year that Xiaoxiao received the long-awaited package, only to find that the original knitted jacket had turned into a cotton sportswear, and the color of the clothes had changed from black to green, so she went to the merchant to argue. "The merchant meant that this clothing was not worth much, he didn't want it anymore, and asked me to choose a refund only." This was Xiaoxiao's first time using the refund only function, and her intuitive feeling was that the after-sales experience was very smooth. Although she was still very angry about the merchant sending the wrong product, she still resisted the urge to give a bad review when she saw the refund arrive quickly.

In fact, in many refund-only cases, negotiating with the merchant to determine a refund-only option is a relatively peaceful way. In some situations where the buyer and seller cannot reach an agreement, the platform will intervene and make a judgment as a third party.

Aunt Wu, 43 years old, works in a provincial capital city. She is also an old user of Pinduoduo. The reason for her loyalty to Pinduoduo is very simple: "I just think it's cheap." Recently, she has become addicted to buying local specialties on Pinduoduo to try them out, but she unexpectedly encountered unscrupulous merchants who cut corners.

The platform directly pops up a refund-only window丨Source: Interviewee

"I ordered two pumpkin crisps, but the merchant only delivered one." Aunt Wu contacted the customer service to request a replacement, but the customer service refused on the grounds that they "did not make money" and only agreed to return a 6 yuan red envelope to Aunt Wu. Just as the two sides were deadlocked, Pinduoduo's official service desk popped up in the dialogue window, indicating that a full refund was available and noting that the goods could be handled by the customer. Aunt Wu clicked the "Agree" button to complete the refund.

Aunt Wu feels that the refund-only function is a kind of protection for herself. Her original words are: "At least we don't have to worry about buying bad things or the goods are not the same as described. The platform will help us refund directly, saving us time arguing with the merchants." Aunt Wu, who only has a junior high school education, explained the original intention of setting up the refund-only function - to help consumers reduce after-sales costs, especially to protect the rights and interests of vulnerable consumers.

As we all know, Pinduoduo started out by relying on the low-end users outside the Fifth Ring Road.

2018 was the turning point when the number of Pinduoduo users began to surge. According to QuestMobie's data that year, low education, 45+ years old, and female (housewife) were the key words in Pinduoduo's user portrait. This group of people generally came into contact with the Internet relatively late, and they do not have as much online shopping experience as users in first-tier cities. For example, Xiaoxiao and Aunt Wu did not even start intensive online shopping until Pinduoduo appeared. In many after-sales disputes, they often play the role of "vulnerable consumers."

The uniqueness of the user base led to the emergence of the refund-only function on Pinduoduo first. Refund-only simplified the return process, improved the consumer experience, helped Pinduoduo retain the user base in third- and fourth-tier cities, and gradually achieved the victory of "surrounding the cities from the countryside".

To some extent, refunds are only for the "silent majority", a group of people who rarely express their opinions online. As for the "freeloaders" who have caused many businesses to complain, those who are not in the right certainly dare not speak out. We can only guess the portrait of this group of people from the descriptions of the businesses: shrewd, greedy, and lacking a strong sense of morality.

2. After “Cats and Dogs” followed suit

Anna lost her money and didn't get the goods back.

Four months ago, Anna only sold her beauty devices through offline stores, so she opened her first online store to increase sales. She chose the e-commerce channel out of trust, but the new refund-only policy was unacceptable to her.

On December 25, 2023, Taobao changed the public notice of the "Taobao Platform Dispute Handling Rules". The most critical modification is "Taobao has added a rule based on the platform's own big data capabilities to identify multiple dimensions and make quick refunds or returns for after-sales initiations that meet relevant circumstances by buyers."

Taobao only refund rules | Image source Taobao

JD.com immediately followed Taobao and revised the "General Rules for Handling Transaction Disputes on JD.com's Open Platform", which shows that JD.com will only support refunds in transaction disputes. The new handling rules came into effect on December 29. Unlike other platforms, JD.com's refund-only policy is relatively mild, "users need to negotiate and agree with merchants before they can only refund."

JD.com has added a new refund-only policy丨Source: JD.com

On December 26, the day the new platform rules came into effect, a disputed order in Anna's store was directly judged as "refund only." It was an order with a total price of 450 yuan, which was signed by the buyer on December 10.

"The other party initially applied for a return and refund. After we received the returned goods, we found that there were fewer items and the packaging was damaged, so we refused to accept them and said that we did not agree to a refund or could only refund part of the goods." Anna wanted to end the refund process by refusing to accept the return and then communicate with the buyer again, but she didn't expect:

"The buyer directly applied for a refund only. Xiaoer (customer service) intervened and agreed to the buyer's refund only application, so we ended up losing our money and not getting the goods back."

Anna told Hedgehog Community that although the new regulations will not be issued until the end of the year, Taobao has already experienced only refunds and quick refunds when handling disputed orders as early as the second half of 2023. Before the new regulations were announced, Anna had experienced another refund dispute in December. At that time, the platform directly refunded 730 yuan to the buyer before the merchant received the return.

Whether it is Taobao or JD.com, the purpose of imitating Pinduoduo's "refund only" policy is nothing more than to improve the consumer experience and thus stimulate the growth of platform users. However, as they are between consumers and merchants, e-commerce platforms will naturally not completely ignore the interests of merchants.

Taobao has set a restriction to prevent malicious refunds by freeloaders: "The platform will combine product quality information and consumer credit models to determine that the product has quality problems and is not suitable for return. High-credit users will receive a quick refund." At the same time, Taobao supports merchants who are maliciously refunded to complain to manual customer service.

Douyin e-commerce has given relatively clear guidelines for refunds only. Long before Taobao and JD.com, Douyin e-commerce had updated a regulation on refunds only in September 2023: For merchants whose product praise rate is lower than 70%, Douyin has the right to support consumers with refunds only and free shipping for returns during the after-sales process until the product's praise rate returns to more than 70% for 7 consecutive days.

Douyin e-commerce only has refund policy | Image source: Douyin

However, the platform’s refund-only policy does not bring a sense of security to merchants.

More than one merchant expressed concerns about the platform's misjudgment. Rational merchants would analyze: "The platform's standards are too vague. They say that they still use big data models to make judgments, but isn't big data a black box after all?" Impatient merchants made "outrageous remarks": "What standards do they have? I think they actually have no standards. They just blindly support buyers."

Merchant Lele is a purchasing agent on Taobao, and recently encountered a refund-only situation. "At first, the buyer complained that I delayed delivery due to shortage of goods, and then after we delivered the goods, she applied for a refund-only situation. We complained to four different Xiaoer (Taobao customer service), and the four people gave us four different suggestions for handling the matter."

Some shop assistants determined that there was no problem with the customer and insisted that Lele ship the goods according to the buyer's requirements; some shop assistants suggested that Lele tag the buyer, file a complaint or negotiate a solution privately. "They themselves can't explain the rules of the platform clearly. How do we sellers deal with this kind of situation?"

Anna decided to sue the platform. It only took her 30 minutes to submit the evidence and complaint to the Internet Court: "Our store only sells a few thousand yuan a month, and the two refunds added up to more than a thousand yuan. I insisted on suing just for 'money'." There are many merchants who do this. On Zhihu and Xiaohongshu, more and more merchants are sharing their litigation experiences.

The more common practice is that merchants who rely on the platform have no way out, but they can include the loss of refunds into their own operating costs, and ensure that they can make a profit even if there is a 20% refund ratio by reducing production costs or raising product prices. This part of the cost will eventually be paid by every ordinary consumer.

3. Question, understand, and transcend?

Many people would use “questioning Pinduoduo, understanding Pinduoduo, and surpassing Pinduoduo” to describe the adjustments made by Taobao and JD.com this time.

This actually involves three levels of progression. At first, everyone "questioned" why Pinduoduo chose this refund model that seemed destined to "bad money driving out good money"; then they "understood" that in the current buyer's market where supply exceeds demand, platforms have to please buyers if they want to grow; as for "surpassing", since JD.com and Taobao platforms have a larger proportion of high-priced goods, the impact of refunds on merchants alone is indeed greater than that of Pinduoduo.

Before the sword in your hand is swung, the sharp blade on the other side may hurt you.

Taobao and JD.com have made a series of adjustments around "low prices" in the past year. In March 2023, JD.com launched the "10 billion subsidies"; during the Double Eleven promotion, Taobao also launched the slogan of "the lowest price on the entire network", and even set an internal goal of "lower than Pinduoduo and Douyin".

As Pinduoduo has grown into a strong "latecomer" in the e-commerce industry, the anxiety of traditional e-commerce platforms is growing. While trying to return to low prices, it is not difficult to understand why they imitated their competitors' "refund only" function. But the real problem is that it is difficult for other platforms to achieve the same effect by imitating Pinduoduo's moves.

In the "impossible triangle" of consumers, platforms, and merchants, Pinduoduo's balance has always been built around the sinking market. This means that even if the platform's refund rate is very high and merchants have complaints, Pinduoduo is still a choice for merchants with "simple operation, easy orders, large traffic and low customer acquisition costs", so that the three parties can maintain a balance.

The e-commerce industry is in a real buyer's market. Although merchants have complaints, they can understand the helplessness of the platform. Merchant Mao Mao sighed: "It's not that Taobao and JD.com have to learn from Pinduoduo. There is a current oversupply in the market. In order to compete for limited user resources, they will naturally try every possible means. Now Taobao and 1688 are also learning from Douyin's short video sales. Everyone wants to retain users."

However, a considerable number of merchants often value the content ecology and tone of the platform. Rather than quickly placing orders, they care more about whether their sales platform can maintain its brand value. In this case, on the one hand, refunds alone are not very effective in helping brands attract high-quality customers, and on the other hand, refunds alone cannot help small and medium-sized merchants reduce operational pressure.

The likely result of this is that the balance that has been hard-won between consumers, platforms, and merchants will be broken. In the long run, "refund only" will likely become a slogan that will be difficult to implement and will ultimately come to nothing.

(At the request of the interviewees, all names in this article are pseudonyms)

Author: Ah You; Editor: Director; WeChat public account: Hedgehog Commune