A major change for Taotian, can Alibaba have a glimmer of hope?

Today, Alibaba announced several significant rule adjustments that will have a considerable impact on the company and are worth paying attention to. Here is a summary of the main adjustments by Dolphin Research:

① The most significant adjustment - Taobao, including all merchants on Taobao and Tmall, will be charged a "basic software service fee" of 0.6% of the order transaction amount.

② Starting from September, the annual fees of 30,000 and 60,000 yuan previously charged only to Tmall merchants will be canceled, and those who have already paid the annual fee for 24 years will be refunded.

③ The core indicator for adjusting traffic distribution - "Experience Score": The new experience score system includes "Store Experience Score" and "Product Experience Score (PXI)", which will completely replace the previous DSR (the seller service evaluation system on Taobao). The experience score system will not only be fully applied in scenarios such as mobile Taobao search, personalized recommendations, Alibaba Mama related ad placements, and event registrations for store operations, but will also provide merchants with more autonomy in handling refund, appeals, shipping exceptions, and other after-sales scenarios.

④ With the introduction of the "Experience Score," for merchants with a store experience score exceeding 4.8 points promoted by Taobao recently, they will be "unlocked" for the "refund only" service. Whether to accept "refund only" will be decided by the qualifying merchants themselves, and the platform will not actively intervene to support consumers' "refund only" requests. For merchants in other score ranges, the platform will provide different levels of autonomy based on the experience score and industry nature. The higher the experience score, the greater the merchant's autonomy.

So, what kind of impact will these measures have on Taobao, consumers, and merchants? Dolphin will try to understand:

It can be seen that the series of changes announced by Alibaba this time can be classified into two categories . The first revolves around the fee rules for merchants on Taobao, affecting the platform's monetization rate (which is also a cost for merchants), while the second revolves around changes in consumer experience and traffic distribution mechanisms.

1. How much will the adjustments affect Alibaba's revenue and profit?

Regarding the impact of the first point on fee rules, we can make a quantitative assessment to get the most direct impression:

① The 0.6% technical service fee this time applies to all Taobao and Tmall merchants, but the rule emphasizes that it will only be charged for orders that have been confirmed as received (regardless of whether there is a return or refund). For caution and simplicity of calculation, we roughly estimate that this year's total GMV for Taobao in China is RMB 80 trillion, with the proportion of orders confirmed as received by consumers (regardless of subsequent returns) at 60%. Therefore, 80 trillion * 60% * 0.6% = 288 billion yuan in additional fees.

② However, the company also stated that there are some exemptions for different types of merchants, including: for small and medium-sized merchants whose received payments do not exceed 120,000 yuan per year, the basic software service fee will be fully refunded in cash; for mid-sized merchants whose confirmed transaction amount is between 120,000 and 1 million, they will receive a 50% equivalent advertising coupon for the basic software service fee; for high-spending and wholesale merchants, from September 1, 2024, to December 31, 2024, there will be a maximum charge cap of 60 yuan per order for over 100 categories of products such as computers, mobile phones, refrigerators, and jewelryAnd these overall reduction and refund measures amount to tens of billions of yuan, covering over 5 million merchants. Let's assume the total reduction amount is 5 billion yuan. However, it seems that apart from the first measure of reducing fees for small and medium-sized merchants, the actual effects and sustainability of the subsequent reductions for larger merchants are unknown.

③ At the same time, as Tmall will no longer charge merchants the annual fees of 30,000 and 60,000 yuan, this existing revenue must also be deducted. Since the official number of merchants is not disclosed, Dolphin Research understands that the total number of Tmall merchants is approximately in the hundreds of thousands, and based on online information, let's assume it is 500,000. In addition, prior to this complete cancellation, there were previous fee reductions for Tmall merchants (specifics can be seen in the Tmall 2024 Annual Category Fee Category Software Service Fee List), we roughly accelerate the actual collection rate to be 50%. Therefore, the waived Tmall merchant annual fees = 500,000 merchants * average 45,000 yuan annual fee * 50% payment rate = 113 billion yuan.

④ Combining the above 3 points, based on 288 - 50 - 113 = 125 billion, considering our assumptions have errors, roughly estimating that after this rule change, the additional revenue for Taotian is approximately in the tens of billions to over a hundred billion. This additional revenue can basically be converted into incremental profits by 100%, which can increase Taotian Group's profits by about 6% up and down.

⑤However, corresponding to Taotian's newly announced "basic service fee," Alipay also coincidentally announced that it will no longer charge payment service fees starting from September. Although it is currently unclear how long Alipay will continue to waive payment processing fees and whether it will be collected through other entities or channels in the future. But based on the current situation, the payment processing fee rate also starts at 0.6%, if completely waived, to some extent, the final cost for merchants will actually decrease. However, since the entity collecting the payment processing fee is not Taotian Group, the calculation of Taotian's revenue increase is not affected. But how Taotian and Alipay will internally communicate and allocate this increase and decrease in revenue in the future, we currently do not know.

2. Weakening the "value for money", rebalancing the scale between "consumers" and "merchants"?

In fact, there have been reports a few days ago claiming that Taotian has internally started to weaken the emphasis on absolute price competitiveness, instead focusing more on indicators such as GMV and ACC rather than order volume. The logic of traffic distribution no longer overly emphasizes the factor of price competitiveness. This time, the main reference indicators for traffic distribution have been adjusted to "service score" and the addition of "technical service fees", to some extent confirming the previous rumors of weakening price competitiveness. At the same time, Douyin recently announced that it will weaken the emphasis on low-priced products and similarly shift towards prioritizing GMV as the primary indicator.

We believe that whether it is Alibaba or Douyin returning from a focus on low prices to a focus on GMV, on the one hand, the company is responsible to shareholders and the capital market, and a marginal return is more conducive to financial performance (focusing on low prices benefits order numbers and user numbers, but is not conducive to revenue and profit in the short to medium term).

Another perhaps more important reason is that Taotian and Douyin are both known for their brand merchants, and being overly consumer-centric (such as only refunds, etc.), and overly emphasizing low prices and tilting traffic towards small and medium-sized merchants, to some extent, damages the core interests of brand merchants on both platforms. This adjustment is a measure to rebalance the scale that was previously overly tilted towards consumers and small and medium-sized merchants. After all, an overly tilted scale obviously cannot be sustained in the long term.

Reflected in performance , this rebalancing will obviously benefit Taotian's revenue and profit growth in the short to medium term.

For previous Alibaba analyses by Dolphin Jun, please refer to:

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