Alibaba fires the first shot against "involution"

Author | Liu Baodan

Editor | Zhou Zhiyu

In the past few years, the Pinduoduo model has swept the entire e-commerce industry, but this has also led to extreme internal competition, prompting industry reflection. Now, Alibaba is taking the lead in correcting this trend.

Recently, Taobao announced the optimization of its "refund only" policy. For merchants with a store experience rating of ≥4.8, the platform will not immediately support refund-only requests, but instead recommend that consumers first negotiate with the merchants for a resolution. The higher the merchant's experience rating, the greater their decision-making power.

On July 29th, Alibaba's Hong Kong stocks rose by 4.72%, while its US stocks rose by 2.73% at the close.

In the past few years, emerging e-commerce forces such as Pinduoduo and Douyin have risen rapidly, forcing Alibaba to counterattack and propose a "customer-first" strategy to enhance user retention and repeat purchases. "Refund only" is a result of this strategy. Now, Alibaba is shifting from passive response to proactive transformation, striving to build competitive advantages in product efficiency and market diversity.

As the e-commerce market continues to shuffle, Alibaba, as an e-commerce giant, is taking the initiative to seek new growth points.

Correction

Alibaba is creating its own version of "refund only".

"Refund only" means refund without returning the goods. According to the latest policy, Taobao will implement this policy based on the store's comprehensive experience rating. High-quality stores will have reduced post-sales intervention, while other merchants will receive corresponding autonomy based on their ratings.

In other words, in order to gain greater autonomy, merchants must continuously improve their ability to serve consumers.

According to Wall Street News, the store experience rating is a comprehensive evaluation of data indicators from the past 30 days in terms of product quality, delivery speed, and service guarantee. To raise the store experience rating above 4.8, merchants need to ensure product quality, improve delivery speed, and provide timely and high-quality after-sales service.

Additionally, Taobao provides multiple after-sales service solutions to reduce disputes and financial losses caused by this policy. Furthermore, Taobao has optimized the appeals process for refund-only requests. The platform will invite third-party inspection agencies for random checks, and upon passing, the platform will compensate the losses to the merchants.

Internal sources from Taobao stated that the company's consideration is to optimize the business environment while ensuring consumer rights, forming a more benign and healthy e-commerce ecosystem.

"Refund only" as a post-sales process to protect consumer rights has been a powerful tool for Pinduoduo's rapid rise and market dominance.

At the end of November last year, Pinduoduo's market value reached $195.87 billion, surpassing Alibaba for the first time and becoming the largest Chinese concept stock in the US stock market. Alibaba's position was overturned, leading to an atmosphere of disbelief and sorrow within the company.

On the eve of Alibaba being surpassed in market value, Jack Ma made a rare comment on the internal network, stating, "I firmly believe that Alibaba will change, Alibaba will improve." He said that the era of AI e-commerce is just beginning, presenting opportunities and challenges for everyone. Shortly after, Richard Liu also spoke up for JD.com, which was also facing challenges. He emphasized that they would never lie down no matter what.

Subsequently, Alibaba and JD.com coincidentally adopted Pinduoduo's strategies, from low prices to "refund only", becoming the standard for mainstream e-commerce platforms.

After more than half a year, Taobao has taken the lead in loosening the restrictions on "refund only", to some extent, showing that Pinduoduo's original policies did not fit well with Taobao The above-mentioned insiders stated that in the past two years, many merchants have faced general operational difficulties. While the "no questions asked refund" policy protects consumers, it has also been exploited by some "professional bargain hunters," harming the rights of some legitimate businesses. Taobao aims to correct this by optimizing its policies.

From the perspective of the platform itself, Taobao and Pinduoduo have different positioning, and a one-size-fits-all "no questions asked refund" policy will inevitably impact the platform's ecosystem.

Ma Kaiyue, the founder of Laoma E-commerce Circle, who has been deeply involved in the industry for many years, believes that Pinduoduo, formerly known as Pindao Goods, naturally requires a no questions asked refund policy for fresh fruits and other products. This model is suitable for the mid-to-low-end supply chain, with high acceptance among merchants. However, Taobao is a comprehensive e-commerce platform with various price points, especially Tmall, which is the main area for brand operations. Blindly using the "no questions asked refund" policy will offend merchants.

An anonymous insider revealed that the "no questions asked refund" policy only applies to 10% of the goods within the Taobao system. The company's adjustment is mainly to strike a balance between merchants and consumers for long-term development. "Alibaba is typical of quick changes and adjustments. Internally, they use a horse racing mechanism. This policy has more disadvantages than benefits, so adjustments are being made."

Currently, platforms such as Pinduoduo and JD.com have not followed suit with the "no questions asked refund" policy. The former is the platform that has best implemented this policy and has been doing so for many years, and it will not change due to Taobao's adjustments. JD.com has fewer third-party merchants compared to other platforms, so the need for adjustments is not significant.

Seeking Change

The "no questions asked refund" is just one aspect of after-sales service, but behind this detail adjustment, it reflects Alibaba's shift from passive defense to actively seeking change.

In recent years, with consumer downgrading becoming a mainstream trend, the e-commerce landscape has changed accordingly, and Alibaba's former dominance in e-commerce has faded. According to a global investment research report by Goldman Sachs, the market share of Taobao and Tmall has decreased from around 66% in 2019 to about 44% in 2022. By 2023, this proportion further dropped to 40%.

In response, Alibaba has taken a series of measures. From the largest-ever structural adjustment of one into six, to the management team led by Joseph Tsai and Eddie Wu, and to proposing a strategic direction of "user-first, AI-driven," Alibaba is attempting to regain its dominance on the e-commerce stage.

After more than a year of adjustments, Alibaba has begun to return to a growth trajectory, which is already reflected in Alibaba's financial reports.

According to the financial report, in the fourth quarter of the 2024 fiscal year, Alibaba achieved revenue of 221.9 billion RMB, a year-on-year growth of 7%, an increase of 5 percentage points compared to the same period last year. Taobao and Tmall achieved double-digit growth in GMV, with Taobao and Tmall's GMV growth rate declining compared to the same period last year.

During the 618 shopping festival, Taobao for the first time canceled the pre-sale system and extended the promotion period, showing remarkable performance. According to an iResearch report, the GMV of the comprehensive e-commerce market during the entire 618 period increased by 11.2%, with Taobao and Tmall's transaction volume growth reaching 12%, accounting for 62% of the market share of comprehensive e-commerce platforms.

Behind the scale growth, Alibaba has also sacrificed a lot of profits. Adjusted EBITA for Taobao in the fourth quarter was 38.501 billion RMB, a 1% decrease year-on-year, especially with customer management revenue growing by 5%, lower than the GMV growth rate. This is mainly due to Taobao's increased investment in user experience and technological infrastructure For Alibaba, the next important task is to increase profits on the basis of scale growth, which mainly requires boosting merchants' advertising revenue. To a large extent, Taobao's optimization of "no refund" also aligns with the achievement of this strategic goal.

According to Wall Street News, Taobao held a closed-door meeting for merchants at the end of June, with an important signal being the shift away from pursuing absolute low prices. Previously, Taobao's search weight was based on the "five-star price power", focusing on allocating traffic based on low prices. In the future, Taobao will only use this mechanism in suitable merchants.

Taobao has also introduced a series of policies for merchants, such as optimizing shipping insurance. Wall Street News learned that Taobao and Tmall merchants are expected to receive more subsidies related to shipping insurance, further reducing operating costs. Some policies are expected to be tested in September this year.

From the logic of distributing based on low prices to "no refund", behind these series of policy adjustments, Taobao is regaining the initiative for development.

In the view of Ma Kaiyue, Alibaba's introduction of "no refund" and "five-star price power" is a strategic defensive necessity, but not entirely suitable for Taobao's current stage of development. The e-commerce landscape will not undergo significant changes in the short term, as each platform has its own core user base and platform characteristics. Therefore, this is Alibaba's strategic choice, and there is no need to heavily focus on such policies.

Alibaba is trying to pave a new path. Eddie Wu stated during the Q4 earnings call that for Taobao, the company has some unique strategic path choices. For example, while maintaining the richness of the Taobao market, providing higher product efficiency for some core, fast-moving products to establish Alibaba's unique competitive advantage in the e-commerce market.

E-commerce is still undergoing reshuffling, and Alibaba is beginning to construct a unique strategic path, ushering in a new phase of competition in the e-commerce industry