After launching the “9.9” offer, can Taobao no longer handle the situation?

This article starts from Taobao’s recent move to revamp the App homepage and replace the previous Juhuasuan channel with the 99 Special Sale channel, and discusses the essential needs of consumers behind low prices. Let’s take a look.

Taobao has been making a lot of moves recently.

Recently, Taobao redesigned the homepage of the App, replacing the previous Juhuasuan channel with the 99 Special Sale channel. In addition, starting in March this year, Taobao began internal testing of the "same price comparison" function on the user side and launched the "5-star price power" grading tool on the merchant backend.

The left picture is before the Taobao App was revised, and the right picture is after the revision

All these actions point to "low price" and "cheapness". In fact, as early as February this year, Alibaba set "price power" as one of Taobao's five major strategies for 2023.

Taobao's "low price" war had already reached a climax in 2019. Before that, Alibaba's focus was still on competing with JD.com, emphasizing "consumption upgrade". By the time it came to its senses, Pinduoduo, which focuses on the sinking market, had quietly grown up.

An industry insider described that when Pinduoduo was still small, Alibaba wanted to use the light cavalry "Taobao Special Price Board" to deal with Pinduoduo's large army, but finally found that Pinduoduo had become an army group, and now Alibaba can only use the army group to fight back.

In 2019, Alibaba restarted Juhuasuan, launched a 10 billion subsidy, integrated the resources of Tiantian Special Sale and 1688, empowered "Taobao Special Edition", and established a C2M business unit. In 2021, "Taobao Special Edition" was renamed "Taobao Special Edition" and has been operating independently ever since. But judging from the results, neither Juhuasuan nor Taobao Special Edition made much of a splash.

The war between Alibaba and Pinduoduo continues to this day, and this year JD.com has also joined the low-price battlefield. With JD.com launching a 10 billion subsidy, the real purpose behind this "low-price war" has exposed the dangers of some e-commerce platforms - revenue growth slowed down, GMV growth declined, and ACC (annual active buyers) data stagnated. This year's low-price strategy is no longer as simple as besieging Pinduoduo.

When mainstream e-commerce platforms are all emphasizing low prices, a new round of competition has just begun.

Since the beginning of this year, Alibaba has repeatedly emphasized that it is not "pursuing low prices blindly" but pursuing "good products at good prices" and "price power". From this information, Alibaba also understands that the real competition lies beyond low prices. But this is a more difficult road.

01 Taobao is anxious after launching the 99 special sale?

Recently, Taobao launched the 99 Special Sale Channel on the homepage of the App. Xiaolu, a user located in a county in Jiangsu, showed Kaibo Finance that the 99 Special Sale Channel appeared in the most prominent position on the homepage alongside Taobao Live and Taoxianda. Currently, Taobao has only opened this channel to some merchants and users, and it is expected to be fully launched at the end of April.

Judging from the current 99 Special Sale page, the main selling points are cheap prices and free shipping, and the products cover multiple categories such as daily necessities, food, stationery, mobile phone accessories, clothing and socks. Industry insiders said that daily necessities and food were also the two categories that Taobao Special had focused on operating and had the largest GMV contribution.

Xiaolu noticed that Taobao's 99 Special Sale channel currently has two product sales modes: one is N yuan purchase, including the N yuan 3-piece mode (mainly 3 yuan/9.9 yuan 3 pieces) and the N yuan capped mode (mainly 4.9 yuan/9.9 yuan/14.9 yuan/19.9 yuan capped).

There is also a rush buying mode, including flash sales starting at 9 am and rush buying starting at 9 pm.

Xiaolu said that although the products on this channel are cheap, he has no desire to buy them and is not a suitable user for them .

Firstly, the product interface is too hodgepodge, and the recommended products such as windshield washer fluid and electrical tape are rarely used in daily life; secondly, I like high-quality products and I am worried that the quality of the products in this channel is not up to standard; most importantly, I usually have a clear purpose before I open Taobao to buy something, and the recommendation model of the special sale channel is relatively inefficient for me, and I have no interest in browsing it.

Taobao’s 99 Special Sale Channel makes it hard for people not to think of Taobao Special Sale. In fact, the two are inextricably linked .

Sean, the former operator of Taobao Special, told Kaibo Finance that in terms of personnel deployment, the special sale channel is now in the charge of Zou Yan, the former product manager of Taobao Special; in terms of product interconnection, the 99 special sale channel mainly features products from factories in industrial belts, and the partners are mainly merchants that have settled in the "Taobao Factory". The M2C (manufacturing direct consumption) model accumulated by Taobao Special will be introduced into Taobao.

"Tao Factory" was incubated by the Tiantian Special Sale Factory Store. Previously, it had entrances on both Taote and Taobao, but on Taobao, one had to search to enter.

Therefore, some people believe that the 99 Special Sale Channel is, to some extent, providing a new traffic entrance for Taobao Factory merchants.

However, some people in the e-commerce industry believe that merchants ultimately focus on conversion. Even if merchants are given more traffic from the main site, if the user groups do not match, there will still be a problem of low conversion rate, and it may be difficult to achieve the desired effect of Taobao in the end .

In addition, compared with Tmall's brand merchants and Taobao's operational merchants, Taobao factory merchants are mostly industrial belt merchants. The prices of their products are indeed very low, but their concept and ability of user service are relatively low, making it difficult for them to be competitive.

Recently, according to 36Kr, Taobao Tmall is undergoing a new round of adjustments. The former head of the Industry Operation and Development Center, Chuixue, left for personal reasons. The center will be split into three industry development departments. Among them, Industry Development Department 1 will be headed by Wang Hai (Qigong), the former head of Taobao Special and 1688, and will include the B series (1688), Taobao Special, and the apparel industry.

Many industry insiders said that all these changes are sending a signal that Taobao, which was previously operated independently, is gradually returning to its parent company Taobao.

Of course, the 99 Special Sale is just one of Taobao's moves in low-price competition. Starting in March this year, Taobao began testing the "same-item price comparison" function while launching a "5-star price power" grading tool on the merchant backend, which evaluates star ratings based on price competitiveness and matches different product search traffic rewards.

Xu Bing, a sportswear seller on Taobao, said that since last year, as consumers' shopping concepts have become more rational, major brands have been developing low-priced, alternative products. JD.com, Kuaishou, and Douyin platforms have begun to focus on the low-price market. JD.com has launched a 10 billion subsidy, Kuaishou and Douyin have also opened low-price discount areas in their malls, and Taobao will naturally follow suit.

Platforms are competing for "low prices" in the hope of providing consumers with a better shopping experience, but merchants may be in a relatively passive position. Xu Bing explained that if merchants do not actively respond to the platform's quotation rules, it will be difficult to enjoy traffic distribution. If they participate in it, the profits of low-profit products will be further squeezed.

It is reported that Taobao requires all factories in the industrial belts to provide "quality assurance" services for their products. However, some merchants pointed out that most merchants in the special sale channels are for clearing inventory and shortening sales lines, and the user experience remains to be seen.

02 Can Taobao succeed in offering low prices?

Since Pinduoduo went online, Alibaba has been trying to use low prices, mainly using the two products Juhuasuan and Taote to resist. However, the two products have been developed for many years, have been cold and restarted several times, and their positioning is awkward so far, and their overall performance has been below expectations.

In March 2018, when Pinduoduo was about to go public, Alibaba launched the Taobao Special Price Edition App, which was managed by the "Everyday Special Sale" team of the Taobao Business Group. By 2019, it further integrated Everyday Special Sale and the supply center of 1688 to establish the C2M business unit. The team moved out of the Xixi Park in the summer of 2020 and operated independently.

In May 2021, the C2M Business Unit was renamed Taobao Special Business Unit, and Taobao Special Edition was renamed "Taobao Special", which was led by Wang Hai, the former general manager of 1688.

The background for such a big change is that as of the end of 2020, Pinduoduo had 788 million active buyers, which has exceeded Alibaba's 779 million ACC in the Chinese business sector during the same period.

With the high expectation of "sniping Pinduoduo", Taote has been changing its core indicators in the past three years - from DAU to AAC and then to DAC/MAC (daily/monthly active users). Sean believes that except for the successful experience accumulated in the first year of DAU, the actions in the other two years have changed in order to achieve the goal.

Alibaba mentioned in its annual report for fiscal year 2022 that among the more than 300 million ACCs, more than 20% of Taobao ACCs are users who have never shopped on Taobao or Tmall before. This also means that 80% of the 300 million ACCs are users overlapping with Taobao and Tmall. The cost behind this is that Alibaba's operating profit in fiscal year 2022 decreased by 41.6 billion yuan .

Based on Orient Securities' estimate of Alibaba's core business comprehensive quarterly losses, Alibaba's average investment in Taobao is expected to be around 10 billion yuan each quarter.

Since then, Alibaba has started to reduce costs and increase efficiency, reducing investment in Taobao. By this year, Taobao's voice has gradually faded, and it is gradually showing signs of returning to its parent company.

The reason may be that, on the one hand, the factory supply integrated with 1688 is a unique supply channel that distinguishes Taobao from Pinduoduo, but there is no obvious difference in other aspects. As an ordinary consumer, there is no need to download Taobao, 1688, Taobao and Pinduoduo at the same time.

Most importantly, whether it is factory merchants or users, Taobao Special and Taobao's main site have a high degree of overlap. In order to find growth, Pinduoduo has begun to "explore upward" in the past two years to attract high-order customer groups. If Taobao Special "explores upward", it will compete with the main site, and its positioning will be even more awkward.

Sean believes that overall, Taobao's positioning has gradually changed from a defensive product to a product that is "independent of users and oriented towards bosses", " but growth should be the result rather than the goal ."

Taote is not the first product launched by Alibaba to compete with Pinduoduo.

Alibaba launched the group-buying business Juhuasuan in 2010. After briefly winning the "Thousands of Group Wars", Juhuasuan was spun off from Taobao in 2012 and became one of Alibaba's seven business groups.

In 2014, Alibaba and JD.com were in the midst of a fierce battle. Juhuasuan, carrying the goal of "consumption upgrade", retreated to the front and middle stages and became a "marketing tool" that provided data operations and marketing support to Tmall. It was merged into Tmall at the end of 2016. It was during this period that Pinduoduo rose. In 2019, Juhuasuan was restarted and launched a 10 billion subsidy. Together with "Tiantian Specials" and "Taobao Flash Sales", it formed the Juhuasuan business unit to target the sinking market.

With step-by-step strategic changes, Juhuasuan has gradually lost its original positioning of focusing on cost-effectiveness and group buying, and now it has even lost the opportunity to appear on the homepage of the Taobao App. After ups and downs, everything seems to have returned to the starting point.

Juhuasuan has a similar fate to Taobao - no autonomy, unclear positioning, and reliance on the main website for support . Zhuang Shuai, founder of Bailian Consulting, said that this may be the reason why Alibaba is launching the "1+6+N" organizational reform this time.

03 What is the e-commerce price war really about?

This year, a new round of e-commerce price wars has started. In addition to Taobao's 99 special sales and a series of actions, in March this year, Liu Qiangdong, who returned to the company, immediately led his team to launch a new round of "price wars" and launched the "10 billion subsidies" channel.

If JD.com's 10 billion yuan subsidy is to reorganize the team and then defend itself, and Douyin's low-price flash sales are to drive shelf e-commerce, then Taobao's move is more like a "timely stop loss" after exchanging high investment for performance.

Although the direct intentions are different, the reason why major e-commerce platforms are focusing on low prices this year is not unrelated to the overall environment. The retail industry will adjust to the changes in user demand. Zhuang Shuai said that in the economic downturn, consumers dare not spend money even if they have money , and the vitality of discount retail and low-price retail will be relatively strong. The continued popularity of live streaming with low-priced goods also shows that the low-price strategy is still attractive.

On the other hand, behind the low-price strategy is commercial competition, and the main purpose is to compete for and retain users and boost performance.

Let's first look at the ACC number . For the twelve months ending March 31, 2022, its ACC number was 882 million. Alibaba will no longer disclose this key indicator starting from the second quarter of 2022. JD.com also did not publicly disclose relevant data for the fourth quarter. The ACC in the first three quarters of 2022 was 580.5 million, 580.8 million, and 588.3 million, respectively.

Looking at the revenue growth rate , Alibaba's revenue in the third quarter of fiscal year 2023 (the fourth quarter of natural year 2022) was 247.76 billion yuan, a year-on-year increase of 2.13%; JD.com's revenue in the fourth quarter of 2022 was 295.45 billion yuan, a year-on-year increase of 7.08%; Pinduoduo's revenue in the same period was 39.82 billion yuan, a year-on-year increase of 46.23%.

In addition, data shows that in 2022, Pinduoduo's GMV is expected to exceed 3 trillion yuan, a year-on-year increase of 22.95%; Alibaba's GMV is expected to reach 8 trillion yuan, a year-on-year decrease of 1.47%; JD.com's GMV is expected to reach 3 trillion yuan, a year-on-year decrease of 8.81%.

When the three data are compared together, it is not difficult to see that Pinduoduo, which has already impressed users with its "10 billion subsidies", has reaped a lot of benefits. It is also logical for Alibaba and JD.com to break through the bottleneck by increasing their low-price strategies.

However, although the low-price strategy is important, it cannot become the core competitiveness of e-commerce platforms. The final success or failure of the e-commerce war depends on the richness of the platform's supply side and the operational sophistication of improving user experience.

Data shows that in 2022, the number of Pinduoduo and Tmall stores will exceed 10 million, and JD Retail is connecting its own operations with POP to expand the number of merchants.

Zhuang Shuai said that each e-commerce platform has its own advantageous categories, but SKUs need to be updated every year. According to the product recommendation logic of these platforms, the current SKU supply is far from enough. Especially for channels like 9.9 yuan, whether they can recommend and match the products that consumers need and whether they can achieve differentiation on the supply side is the core competitiveness.

In addition, the creation of consumption scenarios, after-sales and logistics services are the essential needs of consumers and the direction of the platform's efforts.

"It is impossible for a platform to offer the lowest price for all products. Once low prices become the standard for all e-commerce platforms, consumers are back to the starting point. The platform's battlefield should be beyond low prices." Zhuang Shuai pointed out that low prices can attract consumers to the platform, but what ultimately determines whether they place an order is the supporting services and the quality of the goods. However, the core competitiveness of each platform is becoming less and less obvious.

Xu Bing observed that for the platform, the core is still the supply chain. The platform needs to attract investment and cooperation for high-quality and low-priced goods, work with merchants to discover potential products, and cooperate from top to bottom to develop products that consumers need.

In recent years, in the competition for incremental markets, the thinking of major e-commerce platforms has begun to change from user-oriented to competitor-oriented . However, what users need may not be low prices, but the products they really need. "Market competition should not be a life-and-death struggle, but a struggle for success. This requires platforms to stop blindly pursuing large and comprehensive services, but to further meet the stratified needs of consumers," said Zhuang Shuai.

Many industry insiders said that under the low-price competition, platforms should ask themselves three questions: Can they offer truly low prices and low prices that match user needs? In addition to low prices, is there any additional value to attract users? And have they balanced the interests of the platform and merchants in the process of low-price competition? Only by answering these three questions can the platform and the industry develop in a positive direction.

At the request of the interviewees, Xiaolu, Sean and Xubing in the article are pseudonyms.

Author: Su Qi; Editor: Jin Yufan

Source public account: Kaiboluo Finance (ID: kaiboluocaijing), focusing on live streaming e-commerce, new consumption, and focusing on in-depth content.