Can the “lowest price” save e-commerce platforms?

This article introduces Kuaishou's preparations for the "new mall" and its reiteration of "price power", as well as the strategic planning of other e-commerce platforms around prices. Friends who are interested in e-commerce operations can take a look.

Price wars may become the highlight of e-commerce platforms this year and the first means to acquire and retain users in the era of inventory.

According to a recent report by Ebrun, Kuaishou is preparing for a "new mall", which will start attracting investors in February this year and will be launched to users on a large scale in March. In addition to the need to compare prices when registering for the first time, the products participating in this activity will also need to be compared at fixed intervals after being approved, and the range of off-site price comparisons must be the lowest in the entire network.

It is not difficult to understand why Kuaishou has taken such a move. At a time when e-commerce platforms have entered the era of stock competition, the business of major e-commerce platforms has already tended to fall into a bottleneck, and the growth rate of Pinduoduo and Douyin e-commerce is still considerable. Industry data shows that in 2022, Alibaba's e-commerce GMV for the whole year was 8 trillion, a decline of 1.47%; JD.com's GMV was 3 trillion, a decline of 8.81%; Pinduoduo's GMV was 3 trillion, an increase of 22.95%; Douyin's GMV was 1.4 trillion, an increase of 75%; Kuaishou's GMV was 0.7 trillion, an increase of 7.69%.

Therefore, in response to the e-commerce war, each platform had to quickly come up with a response plan.

Kuaishou has focused on its mall and reiterated the “lowest price”; JD.com has launched a 10 billion yuan subsidy; Alibaba has set “price power” as one of Taobao’s five major development strategies this year… It can be seen that in the process of continuous learning and penetration between shelf e-commerce and content e-commerce, both are using “low prices” as a breakthrough in competition , but can low prices really boost users’ consumption enthusiasm and repurchase rates?

1. Preparing for a new mall, Kuaishou reiterates the “lowest price”

According to media reports, Kuaishou is focusing on the "mall" and has clearly emphasized the importance of the "lowest price". According to Ebrun Power, the "New Mall-Best Selling Support Plan Investment Document (Merchant Version)" mentioned that the "New Mall" is the new shelf e-commerce scene (formerly the entrance to the Kuaishou store) that Kuaishou focuses on operating this year, which meets the diverse needs of users for inquiry, browsing, and purchase. Merchants register their products through the investment system, and after the products are reviewed and approved, they can become products on the shelves of the new mall and receive exclusive support and weighting of tens of millions of traffic.

It is reported that the entrance to Kuaishou's "new mall" needs to be entered through the "Kuaishou Store" on the sidebar of the Kuaishou APP homepage. The so-called "new mall" adds more new columns and operation logic based on the existing channels and product pages of Kuaishou Store.

It is reported that the new mall interface will add at least two new columns, "0 Yuan Try-On" and "Low Price Goods". The new mall's investment categories include food, clothing, beauty and personal care, tea, wine and fresh food, home appliances and sports and outdoor, covering almost most of the major categories of e-commerce. "0 Yuan Try-On" is mainly aimed at merchants in the footwear and clothing industry. Specifically, it refers to products that have opened the three services of pay-later use, freight insurance, and seven-day unconditional return and exchange. Users can open the pay-later use function of Alipay and WeChat to make a 0-yuan purchase and pay after confirming receipt. If you are not satisfied, you can return or exchange the product under the condition of seven-day unconditional return and exchange, and you can pay the free postage through freight insurance. After the whole process, users can try it on for 0 yuan.

"Low-price goods" sets "price standards" for key category merchants, including two items: one is the specified frequency, price comparison when first signing up + fixed period price comparison after approval; the other is the specified scope, the off-site price comparison is required to be the lowest in the entire network. In the just-concluded 38 promotion, Kuaishou e-commerce also focused on " cost-effectiveness " to attract more consumers.

For users, Kuaishou e-commerce has launched subsidies such as live broadcast room consumption funds, interest-free installments, big brand supplements, and holiday-exclusive coupons. During the promotion period, users can enjoy an increase in the amount by recharging consumption funds in the live broadcast room of the anchor participating in the event, with a discount of 1,100 yuan for every 1,000 yuan, and can be directly used for consumption in the live broadcast room. From March 1st to 8th, Kuaishou e-commerce live broadcast room and 38 festival venues also issued "500-80" holiday-exclusive coupons for female users. For brands, the platform has launched a big brand subsidy policy, and some products meet the interest-free installment requirements. Pushing the mall and aiming at the "lowest price", Kuaishou e-commerce wants to further increase user penetration, achieve new users and conversions, and achieve business goals.

The financial report shows that as of the third quarter of 2022, Kuaishou e-commerce has 100 million monthly active users, with a repurchase rate of over 70%. From Q1 to Q3, Kuaishou e-commerce's cumulative GMV reached 588.8 billion. Referring to the GMV data of Kuaishou e-commerce in Q4 2021 and the impact of force majeure such as logistics paralysis caused by the relaxation of epidemic control, Kas believes that Kuaishou e-commerce's annual GMV in 2022 will be around 900 billion, an increase of about 30% compared to 2021.

Media reports show that Kuaishou E-commerce plans to achieve a GMV target of 2 trillion bills of lading by 2025. That is to say, in the next three years, Kuaishou E-commerce must fill the gap as soon as possible and find incremental growth to retain brands and small and medium-sized businesses in order to have the possibility of overtaking competing platforms.

2. Price war becomes the “lifeline” of e-commerce platforms?

When starting a price war, each platform focuses on the consumption potential of the sinking market.

First, consumers are becoming more and more sensitive to prices. At present, the public's desire to consume continues to be sluggish, consumption concepts are gradually turning to rational pragmatism, and products are gradually returning to their use value. Public data shows that in 2010, the scale of China's discount retail market was only 56.5 billion yuan. In 2021, the market scale reached 1.62 trillion yuan, with an annual growth rate of more than 40%.

Secondly, users in the lower-tier markets are the main force in the domestic consumer market. According to QuestMobile's "2022 China Mobile Internet Annual Report", in China's mobile Internet, users aged 51 and above account for 26.4%; users in third-tier and lower cities account for 60.6%.

Nowadays, Kuaishou is not the only platform that uses "price" as the core of its e-commerce business.

As early as 2019, Pinduoduo took the lead in announcing during the "618" period that it would offer a 10 billion yuan cash subsidy to 10,000 of the most popular products on the entire network, including 3C digital products and home appliances where JD.com started. This was considered by the outside world as a surprise attack by Pinduoduo on JD.com.

Through hundreds of billions of subsidies, Pinduoduo has been able to unleash more potential in the lower-tier markets. Its rivals JD.com and Taobao have also adopted the same strategy.

In 2023, JD.com launched a "10 billion subsidy" which was considered to be aimed at Pinduoduo.

On March 2, JD quietly launched the "10 billion subsidies" campaign, four days earlier than originally scheduled. However, at that time, the "10 billion subsidies" campaign did not have a homepage entrance, but was just a link to be opened. On March 6, JD's 10 billion subsidies campaign was fully launched, covering all categories of goods. When users open the JD APP, they can see the "10 billion subsidies" channel in a prominent position on the homepage, and the campaign is always online.

It is worth noting that JD.com has also proposed a "double compensation for overpriced purchases" service, that is, after users purchase goods with the "double compensation for overpriced purchases" service logo on JD.com, if they find that the price of the goods on the day of payment is higher than Pinduoduo's 10 billion subsidies and Tmall platform, users can apply for the double compensation service.

To explore the reasons why JD.com launched the “10 billion subsidies” at this time, we can look back at its performance in 2022.

Before the 2023 Spring Festival, JD.com Group CEO Liu Qiangdong once denounced the management, especially the retail business executives, at a JD.com business management training meeting. "The executives talked too much about fancy stories, but talked too little about cost, efficiency, and experience."

Liu Qiangdong believes that senior executives have deviated from the core of the business strategy - namely, cost, efficiency, and experience. If the core strategy is not well grasped, it will be difficult to lead the team in the long run. "If the customer experience of the retail business is divided into three elements - price, quality and service, low price is "1", and quality and service are two "0s". If the low price advantage is lost, all other so-called competitive advantages will be reduced to zero ."

JD.com’s latest 2022 annual financial report also specifically stated that “10 billion subsidies”, “double compensation for expensive purchases” and “everyday low prices” are not short-term promotions for individual categories, but are aimed at the long-term pain points of the retail industry . By attracting more users, continuously optimizing supply chain capabilities, reducing costs and improving efficiency, improving low-price mechanisms, and improving basic capabilities, it is an important part of JD.com’s efforts to create an ultimate experience around products, prices and services.

It is not difficult to see that JD.com is determined and puts all its efforts into providing 10 billion subsidies, relying on low prices to gain the hearts and minds of users. According to media reports, JD.com will give discounts to merchants who receive 10 billion subsidies. After the product is successfully bid and selected for the 10 billion subsidies, JD.com will automatically reduce the official discount of merchants with this label to 0.6% . Some products will also receive platform subsidies, so the actual income of merchants is the bid price plus the official subsidy. In the past, JD.com's commission rate for self-operated products was 10%-20%, and the commission rate for POP merchants was 3%-8%.

In the earnings call, Alibaba Chairman and CEO Zhang Yong said that price subsidies are not new. Every once in a while, someone will take the initiative to provide some price subsidies, hoping to reverse the situation and gain an advantage through subsidies. However, looking back at history, no company can change the situation through its own continuous price subsidies. Ultimately, technology is needed to change the situation . "Technological innovation, including innovation in business mechanisms, will make merchants willing to give their consumers the best products and the best prices. One person cannot subsidize the entire platform."

However, regarding the price war, Alibaba also stated that it has strong financial strength and is well prepared to deal with it.

Earlier, LatePost reported that Alibaba's management has determined Taobao's five major strategies for this year, namely live streaming, private domain, content, local retail and price power. "Price power" has been listed as a key breakthrough target by Alibaba in 2023. Alibaba's main website Taobao APP will be used to implement this strategy, and cost-effectiveness will be implemented throughout Taobao's business.

According to the opinions of practitioners cited by Snow Leopard Finance, Taobao's five major strategies this year actually correspond to five major competitors: live broadcast - Douyin, private domain - WeChat, content - Xiaohongshu, local retail - Meituan, price power - Pinduoduo. With the slowdown of domestic economic growth and the disappearance of the demographic dividend, the price war has made the e-commerce industry more involuted, and consumers may be the relative beneficiaries.

But how many users can the price war win over? Which platforms can successfully break through this price war? These are still unknown.

Author: Lou Xingchui

Source: WeChat public account "CaasData (ID: caasdata6)"