Double 11 fierce competition for "the lowest price on the entire network" has caused a surge in orders for small and medium-sized merchants

The annual Double Eleven "battle" is here again. As you can see, this year's theme is "the lowest price on the entire network". So, how do the various platforms compete? Who gets the biggest bonus in the competition? What is the development trend of e-commerce? This article makes some analysis.

No one expected that this year's "Double Eleven" would have such an explosive start. Due to the brand's pricing issues in different channels, Hai's, JD.com, and top anchors were involved in a Rashomon. Behind the multiple rounds of tug-of-war among the parties, a core contradiction was laid on the table: the lowest price on the entire network.

On November 11, 2009, only 20 brands participated in the "Double Eleven" event, which created a sales myth of 50 million yuan under the banner of 50% off low prices. Since then, the "Double Eleven" shopping festival has become a hit. To this day, price is still the focus of discussion on "Double Eleven", but this time the low-price competition is full of unprecedented gunpowder.

In the carnival of consumption upgrades over the past decade, the protagonists of "Double Eleven" have shifted from brands and online celebrity stores to super-head anchors, while the voices of small and medium-sized businesses have gradually been drowned out by the overwhelming battle reports. Li Jing, a Taobao seller for ten years, increasingly felt marginalized. On the eve of "Double Eleven" in 2021, she simply closed her three Tmall stores and switched to running private domain stores.

"There's no big splash from the big sales. The high-quality traffic all goes to the live broadcast rooms of the top anchors. We spend money but can't get any traffic or orders. We can only run along throughout the whole process." She lamented to Times Finance.

While a number of e-commerce companies are competing for high-end consumer groups, a force in the sinking market that they have ignored is rising rapidly. Pinduoduo has attracted a group of unactivated e-commerce users like a rocket. In February 2021, Pinduoduo's daily active users surpassed the mobile Taobao APP for the first time. According to data from Huachuang Securities, Pinduoduo's GMV increased by 25% year-on-year in the second quarter of this year, higher than the industry average. The growth rate in the third quarter is expected to be 22%, which will still be significantly ahead of the industry.

The turning point occurred at the end of 2022, when low prices shook the long-silent e-commerce battlefield like a thunderclap. JD.com, which has long focused on high-quality shopping experience, took the lead. Liu Qiangdong said in an internal speech, "Low prices were the most important weapon for JD.com's success in the past, and will be JD.com's only basic weapon in the future."

Five months later, Taobao Group, which had just undergone a major split, held a small-scale internal meeting. Jack Ma reiterated the strategy of "returning to Taobao" and also placed low prices in a position that could not be ignored.

A collective shift among e-commerce giants is brewing, and this year's "Double Eleven" has naturally become the most grand training ground for the low-price strategy.

1. Fighting for the “Lowest Price on the Internet”

At the end of October, a dramatic scene appeared in the official live broadcast room of JD.com during the "Double Eleven" event. What caught my eye was a banner that read "Low price in Li Jiaqi's live broadcast room, 10% off for spot goods". There were many high-priced electrical appliances on the links that day, and 10,000 eyebrow pencils were also given away.

This is not the first time this year that JD.com has been associated with low prices. In the past six months, JD.com has launched the 10 billion subsidy and Chunxiao plans, and the number of third-party merchants has also ushered in explosive growth. The number of new merchants in the first quarter increased by 240% year-on-year, setting a historical high.

"JD.com has adjusted its traffic distribution mechanism. The lower the unit price, the more traffic it has. You can feel the growth pressure on the platform," a third-party merchant told Times Finance.

In addition, JD.com made a major personnel adjustment. Xu Ran, who had only joined JD.com for 5 years, became the CEO of JD.com Group in May this year.

"Xu Ran's style of doing things is very low-key and pragmatic, and he rarely does anything superficial," said a JD employee. In the eyes of industry insiders, Xu Ran's appointment also means that the low-price strategy will be a protracted war. Xu Ran is good at controlling costs and can ensure that profits do not get out of control while improving supply chain efficiency.

Lin Yi, a practitioner in live streaming e-commerce, believes that the underlying logic behind JD.com's challenge to Li Jiaqi is still the open and covert struggles between JD.com and Taobao over low prices. JD.com, which lacks top anchors, urgently needs to get rid of the label of "expensive" and use this hot event to show off the platform's low-price weapon.

On October 20, Tmall held the "Double Eleven" launch conference in Shanghai, and Dai Shan, head of Taotian Group, appeared at the scene. This time, Taotian Group set "the lowest price on the entire network" as its core goal. Including three major industry development centers and horizontal departments such as users, platforms, and live broadcasts, all clearly defined "the lowest price on the entire network" as the core KPI.

During this year's 618, Taotian Group has begun to focus on conveying the mindset of low prices, interacting with consumers from multiple angles through Taobao short videos and live broadcasts, and launching the "Taobao Good Price Festival", an exclusive venue for small and medium-sized businesses.

As a latecomer to e-commerce promotions, Douyin has not yet launched drastic reforms. However, low prices are Douyin's innate genes, and its "Double Eleven" directly launched official discounts, with discounts starting at 15% throughout the entire period.

Since last year, Douyin e-commerce purchasing staff have frequently traveled to the Yiwu small commodity industrial belt to find untapped low-priced hot-selling items. Not long ago, Wei Wenwen, president of Douyin e-commerce, said that in the past year, Douyin e-commerce GMV increased by 80% year-on-year, of which the shelf scene GMV increased by more than 140% year-on-year.

2. Small businesses return to the center

On the pre-sale day of the big sale, Taobao merchant Hua Jie experienced the long-lost "Double Eleven" atmosphere of explosive orders, and the four-piece bedding sets sold in the store ushered in a small peak in growth. She has been away from the main battlefield of the big sale for two consecutive years, relying entirely on her daily strategy to survive the long sales slump.

"This year, the overall sales of stores are twice that of previous years. C stores (personal stores) have finally gained some pride. Previously, the platform had always been providing a platform for top brands to perform, and small businesses could only pay to keep up with them." Sister Hua told Times Finance.

Huajie has experienced the golden age of the booming development of C stores. There are many crown-level merchants with annual sales of tens of millions among the merchants. However, in front of the wealthy big brands, they have become overshadowed, and their sales have been declining year by year.

Before this, Hua Jie regarded Juhuasuan as the only channel to traffic. As long as she could successfully register, it was not difficult to sell a link in one day. However, the strict review of the platform discouraged the fighting spirit of small and medium-sized businesses. According to her, the platform has extremely high requirements for the store's service, product quality, and delivery speed. The overall evaluation of the reported products must be higher than 4.5 points.

"The threshold for small and medium-sized businesses to participate in activities has been lowered a lot. This year, we have successively signed up for the Cool Festival and the back-to-school season, and the sales results are far higher than expected." When major platforms successively offered low prices to attract small and medium-sized businesses, Sister Hua seized this opportunity.

Yumeng is the e-commerce channel manager for a brand. The team had several heated arguments over the pricing of the "Double Eleven" hit products. The choice between profit and sales was ultimately decided with a 20% discount on the price of the product compared to last year.

"We have to go ahead with this year's plan. If we don't follow the price change plan that the platform wants, the authorities may reduce the brand's weight in the New Year Festival." In Yu Meng's view, this price war is related to the overall market in the second half of the year.

Since entering the promotion cycle, similar choices have been made frequently, with platforms and merchants constantly testing each other's price bottom line. Not long ago, Yumeng rejected JD.com's invitation to a 10 billion yuan subsidy event, on the grounds that she wanted to keep prices consistent across channels, otherwise other channels would pass the pressure on merchants.

"In the past few years, there has been little profit in promoting the main models. The bottom prices have been figured out by the platforms. If you add promotion fees and low prices, you will only lose money on every sale. You can only rely on natural traffic to attract customers, and then focus on new products with high profits."

Many e-commerce practitioners told Times Finance that in this online carnival of low prices, the ones who really benefited from the dividends are emerging merchants and C stores. The former generally went through 1-2 rounds of financing, were able to enter the live broadcast rooms of top anchors, and had money for promotion, while the latter were the ammunition of the platform to fight the low-price war and were promoted to the protagonist of the C position.

3. Return to growth or accelerate internal circulation?

However, with major e-commerce platforms hiding their GMV, it is difficult to find an accurate reference value to measure the effect of this low-price war. Recently, Sina Finance launched a survey on "Double Eleven". More than half of the users who thought that "Double Eleven" was unnecessary and had lost its original meaning were surveyed.

Since she is not sure whether the product she wants to buy is the lowest price, Xiaoxiao chooses to shop during off-peak hours. "The top anchors' live broadcasts may be hundreds of dollars cheaper than the official links. If you place an order without doing your homework, you will be cheated." Yanan, a long-term participant of Double Eleven, only purchased two products. The normalization of low prices has eliminated the desire for impulse consumption. "Sometimes, if you stock up too much and the shelf life is exceeded, the loss will be greater. It is better to buy when you need it."

However, for the leading e-commerce platforms, low prices are just the beginning of the battle. The key lies in how to compete for users and form competitive barriers in the existing market.

As an old e-commerce giant, Taobao Group is still on the defensive. A Goldman Sachs global investment research report shows that Taobao Tmall's market share has dropped from 66% in 2019 to around 44% in 2022.

Taobao Group is trying to win back the low-price mindset of users while cultivating content to resist the invasion of short video platforms. In addition to Douyin, the commercialization of Xiaohongshu has also begun to accelerate. Celebrity anchors such as Dong Jie, Zhang Xiaohui, and Yi Nengjing have entered the exquisite female groups in first- and second-tier cities, which has obvious overlap with the customer base of Taobao's top anchors.

Dai Shan said at the Tmall "Double Eleven" launch conference that with the growth of China's economy and changes in the macro environment, consumption upgrades have transformed into consumption stratification. In the multi-level demand segmentation, enterprises can find the corresponding grid, which is a deterministic opportunity.

Taobao's consumer stratification tendency is gradually being implemented on the merchant side. In September, when Yu Meng participated in a category merchant event, she was repeatedly told by the store manager to increase investment in research and development, improve product features, strengthen store content operations, and avoid homogenization. "In the future, we may have to continue to focus on research and development and content, which will require more energy and cost."

The low-price orientation of the platform has made a group of manufacturers eager to move, and they have opened online channels at lower prices. A clothing store merchant found that the manufacturers who supplied him also rushed into the platform's low-price war. "Ordinary merchants are completely unable to compete with manufacturers on price. Since the manufacturers joined, our store's turnover has been reduced by more than half." He told Times Finance.

In recent years, Yu Meng has seen many of her peers return from online to offline in order to build their own channels. "No matter how good the platform's sales are, it is always full of uncertainties and will always be caught up in the ever-changing rules and policies." In her opinion, many times the wealth myths of merchants are just in line with the current development direction of the platform. Once they fail to keep up with the strategic shift, they may very likely fall quickly.

(All interviewees in this article are pseudonyms.)

Author: Xu Xiaoqian, Editor: Zhang Changwang

Source: Times Finance APP (ID: tf-app)