Pinduoduo's "billion dollar reduction" is truly implemented in the business operations of merchants.
The basic deposit for the store has been reduced from 1000 yuan to 500 yuan, the technical service fee for use before payment orders has been reduced from 1% to 0.6%, and the logistics transfer fees for remote areas will be borne by the platform... Each transaction is a significant cost reduction for merchants.
As stated by Chen Lei, Chairman and Co CEO of Pinduoduo, at the financial report conference, Pinduoduo will invest billions of resources to vigorously support new quality merchants and new quality industry belts with product and technological innovation capabilities, significantly reduce transaction fees for high-quality merchants, and is expected to reduce 10 billion yuan in the next year.
Several policies have been particularly favorable to businesses, and trust in the platform has also been enhanced, "Chen Caibin, the e-commerce operations manager of Shantou Chaoting Food Co., Ltd., told 21st Century Business Herald reporters.
Industry insiders analyze that since its establishment, Pinduoduo platform has reached a considerable scale, and ecological governance is also a necessary measure. The management has also reached a consensus and is prepared to sacrifice short-term profits for long-term investment.
Building a healthier and more sustainable e-commerce platform is the current development focus of Pinduoduo. This not only attracts more merchants to join, but also enhances the shopping experience for consumers, thereby achieving a win-win situation for the platform, merchants, and consumers.
Effectively reduce costs
Merchants opening stores on Pinduoduo usually need to pay a deposit, technical service fees, and other expenses including advertising and logistics, which are important components of their costs. And Pinduoduo's "billion yuan reduction" this time basically covers all the aspects mentioned above.
In terms of deposit, the deposit required for merchants to settle in is divided into basic deposit and category deposit, with the basic deposit reduced from 1000 yuan to 500 yuan. At the same time, the initial deposit for newly established personal and corporate stores will also be reduced to 500 yuan. It is reported that the first batch of merchants to enjoy this policy have covered nearly 70 categories.
Duoduo's margin is already very low in the industry, "Chen Caibin told 21st Century Business Herald reporters. This reduction further lowers operating costs, especially for businesses operating multiple stores. For merchants or individual businesses that have not yet settled in, the entry threshold will also be lowered.
In terms of technical service fees, Chen Caibin stated that previously, a 0.6% technical service fee was charged for each transaction order. If a 'use first, pay later' policy is used, an additional 1 point of technical service fee will be added on top of this.
Recently, Pinduoduo launched a refund policy for technical service fees for merchants who have registered to participate in the on-site resource slot activity. After users initiate a refund, the platform will refund 1% of the basic technical service fee for first use, then pay orders and 0.6% of the basic technical service fee for other orders proportionally.
Subsequently, Pinduoduo upgraded the "Technical Service Fee Refund Benefit". Orders generated by merchants participating in resource slot activities, in addition to enjoying the service fee refund benefit, reduced the rate of using and paying technical service fees from 1% to 0.6%. In other words, for orders generated by merchants using and paying later, the technical service fee was directly discounted by 60%.
As a result, the cost of each transaction for merchants can be reduced, and the preference of consumers to use first and pay later can be more widely applied, further enhancing the shopping experience for consumers while keeping merchant costs under control.
On the other hand, logistics in remote areas is also one of the main pain points for businesses. In the past, when purchasing goods in Xinjiang, Xizang and other regions, it was usually necessary to send the goods to the transit warehouse first, and then forward them to consumers from the transit warehouse. This process would incur transit costs. Chen Caibin told reporters that their previous transit fee was over ten yuan.
Considering cost issues, some merchants have not opened sales services for remote areas, while others adjust product prices based on the location of consumers to cover logistics.
For the transfer orders in remote areas now, the merchants only need to send the orders to the transfer warehouse, and the logistics transfer fees of the transfer warehouse for the second shipment to remote areas such as Xinjiang, Xizang, Gansu, Ningxia, Inner Mongolia, etc. will be borne by the platform. At present, the new exemption measure has covered all merchants on the Pinduoduo platform. Industry analysis believes that this move is beneficial for reducing consumer consumption costs and business sales costs.
Another major investment for businesses is in advertising and marketing. Chen Caibin told reporters that in the process of selling goods, merchants usually conduct advertising promotion, which incurs certain promotion costs. But consumers may choose to refund after placing an order after seeing the advertisement for various reasons. In this case, even though the consumer did not ultimately complete the purchase, the promotional fees paid by the merchant for the transaction were actually spent.
Now, Pinduoduo has launched a "promotion service fee refund right" for merchants. For orders where consumers make a full refund before shipment, the platform will automatically refund the corresponding amount of promotion software service fee to the merchant as a promotion red envelope, without the need for the merchant to file an appeal.
For us, this change has a significant impact, "Chen Caibin calculated to the reporter. In the past ten days, the promotion fee has been basically refunded by three to four points.
Based on the current monthly promotion fee of around 600000 yuan, according to the current preferential policies, we can return approximately 20000 yuan in promotion fees, "said Chen Caibin.
Based on his own business situation, he calculated that after the implementation of several reform policies, the total cost could be reduced by approximately 0.2%. For large-scale sellers, this is not a small amount.
Building a merchant ecosystem
By reducing various costs, Pinduoduo's subsidies have effectively alleviated the financial pressure on merchants, especially in the fiercely competitive e-commerce market. A healthy merchant ecosystem is the key to the sustainable development of the platform.
In order to further optimize the user experience of merchants, Pinduoduo has upgraded its after-sales service system, opened a green channel, and established a special after-sales service team to fully support merchants in appealing against abnormal orders, malicious complaint orders, consumer negative experience orders, etc. After successful appeal, the platform will compensate for the relevant orders.
At the same time, Pinduoduo has also made special adjustments to the appeal service for merchants' after-sales disputes, no longer limiting the number of times they can appeal. At present, this new benefit is undergoing preliminary testing and is expected to cover all merchants in the near future.
Chen Caibin said that in the past, when consumers raised demands, the platform would intervene and directly refund them. If the order was unreasonable, the merchant would need to appeal to the platform, but the number of appeals was very limited. "We have tens of thousands of orders a month, and after-sales accounts for about 2%, but the number of appeals is only ten times
This change is also very important in Chen Caibin's opinion, undoubtedly protecting platform merchants. Industry analysis suggests that both internal and external merchants on the platform will enhance their trust in Pinduoduo.
This is related to Pinduoduo's development strategy.
In the past year or so, Pinduoduo has been committed to deepening its high-quality development strategy, gradually establishing and implementing the "Billion Ecological" project, providing resource support to high-quality merchants and products, promoting the growth of small and medium-sized enterprises and high-quality merchants, and improving the overall service efficiency and quality of platform merchants.
Pinduoduo is also attracting more brand merchants to enter the market. According to its data, among the newly added merchants with billions of subsidies, the number of agricultural product merchants increased by 83% year-on-year, the number of digital home appliance merchants increased by 86% year-on-year, and the number of beauty merchants increased by 105% year-on-year. Merchants in categories such as food, department stores, maternal and child care, personal care, clothing, sports, outdoor, home, and overseas shopping maintained high-speed growth, and domestic and international brands are accelerating their influx of billions of subsidies.
At the just concluded Q2 2024 financial report conference, Chen Lei stated that Pinduoduo's high-quality development path will enter a new stage, and will continue to build a healthy and sustainable platform ecosystem through both "strong support" and "resolute governance".
Continuously investing in the platform ecosystem and reducing billions of transaction fees means that future revenue and profits will be affected, but Pinduoduo still firmly chooses long-term investment.
For Pinduoduo, it is moving towards a more diversified and high-quality e-commerce platform. With the continuous deepening of brand strategy, Pinduoduo is expected to achieve longer-term development in the e-commerce field.
Mo Daiqing, Director of the Online Retail Department at the E-commerce Research Center of NetEase, believes in an interview with 21st Century Business Herald that the cost reduction strategy implemented by the Pinduoduo system has indeed reduced operating costs for businesses to a certain extent and helped enhance their profitability. However, whether these measures can translate into actual revenue growth for businesses is also influenced by the effectiveness of their own business strategies and the complex and ever-changing market environment.
When facing these cost reduction measures, businesses should adopt a positive attitude, fully utilize the cost advantages they bring, and deeply optimize their own business strategies, focusing on improving product quality and service levels to attract more consumers and promote sales growth. In addition, merchants need to maintain a keen observation of market dynamics, timely understand market trends, competitors' strategic adjustments, and other information in order to respond flexibly and ensure the effectiveness and competitiveness of their business strategies.