In 2024, the growth driven strategy of e-commerce platforms is undergoing a transformation, with giants shifting from the "price power" competition between platforms at the beginning of the year to a greater focus on GMV growth and comprehensive optimization of user experience.
Although growth challenges still exist, e-commerce platforms have begun to seek new solutions to prioritize consumer experience, attract and retain users from the perspective of ecological construction by optimizing merchant services and improving product quality.
From August to September, Pinduoduo's "Billion Dollar Reduction Plan" has been intensively implemented, successively launching preferential strategies such as reducing technical service fees and promotion service fees, lowering store basic deposits, solving logistics transfer fees in remote areas, and unlimited after-sales appeals. This series of measures covers the entire chain from front-end operations to logistics after-sales, aiming to help lower the entry threshold for merchants and alleviate operational pressure.
In the just passed second quarter financial report, Pinduoduo clearly stated that it will continue to deepen its high-quality development strategy and improve ecological construction from a long-term perspective. Our platform is an interdependent community composed of merchants, users, and operation teams. Merchants are important partners for us to serve consumers well together. "During this financial conference call, Zhao Jiazhen, Executive Director and Co CEO of Pinduoduo Group, emphasized the importance of merchants and the positioning of the platform.
Since its inception, Pinduoduo has stood out in the fierce competition of e-commerce due to its strong low price capability and "good service" that positions consumers. With the growth of the platform, Pinduoduo has gradually shifted from its previous high-speed growth model to seeking long-term stable operation. Among them, building a good ecological environment for high-quality merchants has become its new strategic core.
The recent series of subsidy measures for merchants may appear to directly incentivize them with funds, but in reality, they are platforms striving to fulfill their role as a bridge between merchants and consumers.
Through such actions, as Zhao Jiazhen said, "We grow together with high-quality business partners, providing high-quality products and services to platform consumers, and satisfied consumers can bring continuous power to the overall ecosystem. This is the key to our long-term healthy development
Why Hui Shang?
In 2023, the e-commerce industry is attempting to reshape user mindset through a radical 'price war'. Low prices, as an important competitive advantage in the retail industry, have shaped many growth myths, and almost all platforms and merchants have been involved in this competition.
However, as we enter 2024, the negative effects of the increasingly fierce "price war" strategy are gradually becoming apparent. When the price bottom lines of all platforms gradually align, low prices cannot become a differentiation advantage, and ultimately the growth effect is limited, nor does it curb the growth of competitors.
Even merchants are overwhelmed. In the context of continuously shrinking profit margins and soaring return rates, it is not uncommon for the industry to "pass off inferior products as good" in order to achieve low prices, resulting in a negative vicious cycle where platforms, merchants, and users find it difficult to benefit.
Recently, some e-commerce platforms have begun to proactively adjust their strategies. Pinduoduo's "Billion Dollar Reduction Plan" aims to fundamentally solve the problem of growth. After re examining its value proposition, e-commerce platforms have realized that consumer needs should be given top priority.
The core of retail lies in providing cost-effective products and high-quality services, which is also the core value of e-commerce platforms for consumers. Therefore, when Pinduoduo chooses to invest in merchants, it is actually investing in users. Ultimately, these investments can improve the quality of goods, meet the diverse needs of users, and then give back to the platform itself.
In mid August, Interface News exclusively reported that Pinduoduo will offer refundable technical service fees to merchants who register to participate in on-site resource slot activities. When merchants participate in most promotional activities on the platform, including billion yuan subsidies, flash sales, platform promotions, 9.9 yuan special sales, trendy prices, multiplayer groups, etc., any order that undergoes a refund transaction can enjoy the right to refund technical service fees.
By the end of August, the policy had been further upgraded, and the use before pay technical service fee for participating merchants had been reduced to 0.6%. In September, the plan of "10 billion yuan relief" was increased, and all the transfer orders in remote areas were spelled out. 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 Xinjiang, Xizang, Gansu, Ningxia, Inner Mongolia and other remote areas will be borne by the platform.
These policies have brought tangible benefits to businesses. Zhou Huaishan (pseudonym) is a seller born in the 1990s. In 2019, he opened his first online store on Pinduoduo platform, opening up the path of online sales of yam. By only operating in surrounding provinces, Zhou Huaishan's business has already achieved an annual sales volume of five to six million yuan.
With the expansion of his business, Zhou Huaishan also wants to buy his high-quality yams in farther parts of the country. Xinjiang, Xizang, Inner Mongolia, Gansu and Ningxia, with a combined population of nearly 90 million, are markets that many people want to do, and Zhou Huaishan is no exception. However, high logistics costs have always been a problem in front of them.
The problem was finally solved today. Zhou Huaishan calculated that the shipping cost for a 3kg order of yam directly shipped from the local area to Xinjiang by SF Express was over 50 yuan, while the selling price of yam was only over 20 yuan, less than half of the logistics cost. Now the platform bears the logistics transfer fee. When we send the goods to the transfer warehouse, the SF logistics fee is only seven or eight yuan, which is much cheaper
After several years of entrepreneurship, Zhou Huaishan's yam field has expanded from the initial 20-30 acres to 100 acres. After further sales on Pinduoduo last year, he also acquired 160 acres of yam field in one go. This year, the policies supported by the platform have been successively released, which has given him bolder ideas. "The market has become bigger, and the operating threshold has been lowered. Next year, at least 200 acres of yam land will be needed," Zhou Huaishan said with longing.
With the backing of the platform, Zhou Huaishan, like many merchants, can allocate more funds and energy to enhance his comprehensive service capabilities, including good prices, good goods, and good services, thereby driving sales growth and ultimately achieving feedback to the platform.
The intention behind the new strategy
From the perspective of the company, after 9 years of establishment, Pinduoduo has already transformed from the cracks of e-commerce entrepreneurship and become one of the absolute giants in domestic e-commerce. Its rocket like development speed has created a myth of e-commerce growth.
However, the incremental space of the domestic e-commerce market is gradually reaching its peak, and the overall industry environment is returning to exploring the stock. Pinduoduo has also chosen to lay a foundation and continue to evolve at this time.
In the latest Q2 performance, Pinduoduo's revenue from various businesses has slowed down to varying degrees. However, from the attitude of the management at the financial report meeting, it can be heard that they have anticipated the decline in performance growth rate and have a calm attitude.
Even in the past few quarters, it has been repeatedly emphasized to the outside world not to overly focus on short-term financial data, but to pay attention to the intrinsic value of the company. Until today, Pinduoduo has steadfastly embarked on a high-quality transformation, sacrificing short-term benefits in exchange for lasting economic benefits.
On the other hand, from the perspective of the platform's ecosystem, due to its rapid growth, Pinduoduo did not have much time to sort out its relationship with merchants in the past. In history, it has also caused direct conflicts due to its positioning as a consumer. Now, the pace of the platform has slowed down, which can promote the mutual growth of the platform and merchants, patiently building a healthy and sustainable ecosystem.
For example, in the new "Billion Dollar Reduction" plan, Pinduoduo has opened up the right to appeal for abnormal orders to merchants, further reducing their after-sales costs. Previously, in order to solve problems more efficiently, the platform's positioning was usually biased towards consumers, and the success rate of appeals for abnormal orders was not high. This extensive management approach that treats all merchants equally has become a double-edged sword.
From the perspective of merchants, Zhou Huaishan saw that the platform's after-sales appeal is divided according to the level of the store. Previously, their store only had a few abnormal order appeal permissions per month, and they would first evaluate the possibility of successful appeals. "Because there are only a few opportunities in a month, if you fail, you cannot appeal anymore
But now the situation is different, the authority has been relaxed, and almost every unreasonable after-sales order from a consumer will be appealed, and most of them can be approved. For example, if there are 50 abnormal yam orders per month, estimated to be 30-40 orders, the platform will approve them all
According to Zhou Huaishan's estimation, this alone can increase income by nearly a thousand yuan per month. For high-quality merchants, the platform no longer overwhelmingly supports consumers, but becomes the support and confidence for their growth. With further opportunities for evidence, it can not only prevent freeloaders from taking advantage, but also ensure that honest consumers do not suffer losses. The overall cost of merchants is reduced, and consumers can truly benefit.
From an industrial perspective, the new policy of "billions of subsidies" has also promoted the upgrading and transformation of the entire industrial chain. By supporting new quality merchants and new quality industrial belts, Pinduoduo has indirectly promoted the optimization and structural adjustment of the industry.
In the past agricultural era, due to insufficient productivity, the quality and quantity of commodity supply were relatively scarce; After entering the industrial era, large-scale production technology has solved the problem of insufficient commodity supply, but quality is still scarce.
Today, on the basis of ensuring quantity, the platform may be able to make more policy preferences for high-quality products and merchants through its own efforts, allowing them to naturally survive and improve the overall supply quality. This measure demonstrates the platform's keen insight into market trends and deep understanding of the industrial ecosystem.
After the shift, Pinduoduo's long-term investment
With the changing trend of e-commerce environment, various platforms are investing and cultivating their internal strength.
The effectiveness of investment actions varies on different platforms due to differences in merchant and user profiles and models. The search traffic logic of traditional e-commerce requires a massive number of SKUs to meet users' search needs, resulting in high traffic costs; The matching logic of Pinduoduo's product search for people has lower traffic costs compared to other platforms, and more importantly, it links high-quality structured and rich products to users more efficiently.
Six years ago, when Pinduoduo implemented the "billion yuan subsidy", it was aimed at establishing a user mindset of "low-priced authentic products" in the minds of consumers. Although it was questioned by the outside world about the high marketing costs, the direct price subsidy did successfully attract a large number of price sensitive users to Pinduoduo, increasing the platform's user stickiness and market share.
Today, Pinduoduo's "billion dollar reduction and exemption" policy once again brings out a huge amount of real money, attempting to establish a "high-quality development" mindset for the platform. Even the platform is prepared to sacrifice short-term profits and long-term investments for this.
During the second quarter earnings conference call, Chen Lei, Chairman and Co CEO of Pinduoduo, stated that the company is still in the investment stage due to fierce competition and uncertainty brought by the external environment on multiple lines.
In the future, Pinduoduo will invest heavily in the trust and security of the platform, support high-quality merchants, and tirelessly improve the merchant ecosystem. "We believe that sacrificing short-term profits is necessary, and we expect profits to have a significant downward trend, but we are prepared to firmly and tacitly invest in the long-term health of the platform," said Chen Lei.