For most consumers, e-commerce platforms have become an increasingly important presence in daily consumption. As 3.15 Consumer Rights Day approaches, Time Business School attempts to gain insight into the new changes in e-commerce platforms over the past year from the perspectives of consumers and platform merchants.
Looking back at 2023, the competitive landscape of domestic e-commerce leaders has accelerated.
This year is a year for the e-commerce industry to return to low prices. Pinduoduo (PDD. O) used its "low-priced magic weapon" to suddenly deceive the two senior executives of Alibaba (BABA. N) and JD Group SW (09618. HK, hereinafter referred to as "JD"), and brought Alibaba down from the pedestal, winning the title of "market value leader" in e-commerce for more than a month, which was an unimaginable scene in the past.
Faced with challenges, JD.com quickly launched a subsidy channel worth billions, opened up POP investment promotion, and lowered the threshold for shipping costs; Alibaba listed "price power" as one of its five major strategies and implemented a daily low price strategy for the first time during the Double Eleven period.
In addition, although Tiktok was not listed, it launched the "RMB 0 Settling in" activity by virtue of e-commerce live broadcast and traffic entrance bonus, and the GMV (total volume of commodity transactions) of the mall increased sharply, with the potential of coming from behind.
It's not that XX can't afford it, but that XX has better value for money. From finding goods to finding people, the price power struggle, who can laugh until the end in the future?
Consumer: Pinduoduo wins at low prices
From the perspective of total revenue, Pinduoduo is still the smallest among the three major e-commerce platforms in China. In the first three quarters of 2023, Pinduoduo's revenue was only 158.758 billion yuan; During the same period, Alibaba's revenue reached 660.487 billion yuan; And Jingdong's revenue reached 778.585 billion yuan, firmly ranking first.
However, according to Wind data, as of the close of November 30, 2023, Pinduoduo had a market value of $195.887 billion, officially surpassing Alibaba (with a market value of $190.703 billion) and successfully taking the throne as the "e-commerce leader". Afterwards, Pinduoduo's stock price remained at a high level until January 27, 2024, when Alibaba regained the top spot in market value.
As of the close of March 14, 2024, Alibaba's market value was $186.934 billion, surpassing Pinduoduo's $163.682 billion and JD.com's $43.05 billion, continuing to hold the top spot.
From the perspective of market value, although Pinduoduo is still not as strong as Alibaba for the time being, in terms of competitive strategy, Pinduoduo targets the sinking market and successfully carves out a path in the fiercely competitive e-commerce market with low-priced products.
In 2020, Pinduoduo's revenue was only 59.492 billion yuan. In 2022, it has grown to 130.558 billion yuan, with a cumulative increase of 119.45%. During the same period, Alibaba's revenue increased from 509.711 billion yuan to 853.062 billion yuan, a cumulative increase of 67.36%, while JD.com increased from 745.802 billion yuan by 40.28% to 1.05 trillion yuan.
From the perspective of domestic e-commerce business revenue, Pinduoduo's revenue growth is mainly contributed by domestic e-commerce business. In the first three quarters of 2023, its revenue was 158.758 billion yuan, a year-on-year increase of 74.96%. During the same period, JD's domestic e-commerce business revenue was 677.697 billion yuan, a year-on-year increase of 1%; Alibaba's domestic e-commerce business revenue was 348.68 billion yuan, a year-on-year increase of 3.67%.
However, behind the rapid growth of Pinduoduo, many small and medium-sized businesses have sacrificed their interests.
In order to compete for users, Pinduoduo launched the "refund only" model as early as 2021. This mode not only improves the user experience, but also gives the "wool party" and "white whoring party" a chance to exploit loopholes. Businesses may lose money and goods due to this mode.
Out of dissatisfaction with this model, Pinduoduo broke out the "fried shop" event in March 2023. On March 25th of the same year, after Pinduoduo launched its self operated store, some small and medium-sized businesses used the "refund only" clause to bomb the store, ultimately forcing the company to go offline. Subsequently, the anger of small and medium-sized businesses also spread to dozens of brand flagship stores, resulting in heavy losses for these brand businesses.
In the 2023 Q1 financial report conference call, Zhao Jiazhen, Executive Director and Co CEO of Pinduoduo, stated that the company will continue to be consumer oriented and actively respond to various competitions. Even in the face of malicious attacks, the company will interpret it in good faith.
Facing consumers, Alibaba and JD.com equally emphasize user experience.
In the third quarter report of the 2024 fiscal year, Alibaba stated that it will increase investment in improving user core experience in the next year to support its Taotian Group, which is responsible for domestic e-commerce business, in regaining growth and solidifying its market leadership position. Alibaba stated that under the strategy of user participation and price competitiveness, Taotian Group continued to increase interactive content and continuously expand the range of cost-effective products in the current quarter.
In addition, in the 2023 annual report, JD.com CEO Xu Ran also stated that the proactive adjustment measures taken by JD.com have been effective. The clear and firm strategic focus on user experience, price competitiveness, and platform ecology has brought the company deeper and more frequent user engagement, as well as a healthier user growth trend. In 2024, the company will focus on improving user experience and increasing market share, creating more value for users, business partners, and shareholders.
Specifically, last year, Taotian Group, a subsidiary of Alibaba, continued to hold the "Double Eleven Global Carnival Season" event; JD.com attracted attention with its live streaming sales strategy of "no pit fees, no commission from influencers". During the "Double Eleven" period in 2023, JD's transaction volume, order volume, and user numbers reached new highs. In addition, at the end of December 2023, Taotian Group and JD.com also followed the example of Pinduoduo and launched a "refund only" model.
As the e-commerce industry tends to saturate, e-commerce giants are trying to compete for customers through cost-effectiveness and user experience. Tiktok, on the other hand, used the "Sword of Traffic" of the live broadcast e-commerce to attack, with the potential of coming from behind.
On January 15, Tiktok E-commerce released a summary of 2023, which showed that in the past year, Tiktok's shelf scenario business grew at a high speed, with the mall's GMV growing by 277% year on year, and the number of authors whose cumulative GMV exceeded 100000 yuan exceeded 600000. There is still a lot of room for the development of global interest e-commerce, with platform GMV growth exceeding 80% in the past year.
Merchants: Platforms compete to play the "quality card" and "content card"
You get what you pay for, and low-priced products often have poor quality. Pinduoduo's early products also confirmed this, and "low quality" has become a label that Pinduoduo has been trying to tear off.
However, the insufficient number of high-quality merchants is still a weakness of Pinduoduo. In order to attract more high-quality merchants, in May 2023, Pinduoduo launched its third 10 billion yuan project - the 10 billion yuan ecosystem, following the 10 billion yuan subsidy and 10 billion yuan agricultural research. The project aims to allocate resources to high-quality merchants and products, promote the high-quality growth of small and medium-sized enterprises and high-quality merchants, and improve the overall service efficiency and quality of platform merchants.
In addition, due to frequent infringement issues among merchants, Pinduoduo has also been widely criticized. Therefore, during the 2023 Q3 financial report conference call, Zhao Jiazhen stated that Pinduoduo had deepened its commitment to copyright protection through a series of special actions in that quarter.
Taotian Group is also committed to establishing an ecosystem that enables brands and businesses to thrive on the platform, in order to attract more brands and businesses. In its third quarter report for the 2024 fiscal year, Alibaba stated that Taotian Group's platform merchants continued to record double-digit growth in the quarter, marking the fourth consecutive quarter of double-digit growth.
JD is even more sincere, creating more sales growth opportunities for brands and businesses through activities such as "9 yuan 9 free shipping", "JD billion subsidy", and "JD flash sale".
Tiktok E-commerce has achieved rapid growth since it proposed global interest in e-commerce. Therefore, in the past year, it has continued to deepen the "global" construction, focusing on content as the guide, emphasizing the unified development of content and e-commerce, supporting good content and good goods, and stabilizing the stock and increasing it.
Focusing on overseas markets: Alibaba and JD.com take the lead in layout, and Pinduoduo becomes the "dark horse"
With the saturation of domestic internet users, intensified competition on e-commerce platforms has become inevitable.
The report released by iResearch Consulting on March 7, 2024 shows that as of December 2023, the number of independent mobile Internet devices in China has reached 1.393 billion units per month, an increase of only 4 percent over the middle of the year. The market has entered a more mature and saturated stage, with limited incremental space. The competition on e-commerce platforms is intensifying, and prices have become the focus of a new round of competition.
In order to find new growth opportunities, major e-commerce companies have turned to overseas markets. On January 12th, according to preliminary statistics released by the General Administration of Customs, the total import and export volume of cross-border e-commerce in China in 2023 was 2.38 trillion yuan, a year-on-year increase of 15.6%.
As early as 2018, Alibaba and JD.com took the lead in laying out cross-border e-commerce. At present, Alibaba International Digital Business Group, which is responsible for cross-border e-commerce business under Alibaba, has become the fastest growing revenue department among its four major divisions.
Alibaba's financial report shows that in the first three quarters of fiscal year 2024 (April 1 to December 31, 2023), Alibaba International Digital Business Group's revenue was 75.15 billion yuan, a year-on-year increase of 46%. However, currently cross-border e-commerce is in the stage of seizing territory and prioritizing scale growth, while Alibaba International Digital Business Group is still in a loss making stage.
JD connects the international supply chain through JD Logistics. The 2023 financial report shows that JD's revenue mainly comes from JD Retail, JD Logistics, and others. Among them, JD Logistics includes internal and external logistics businesses. In 2023, JD Logistics's revenue was 166.625 billion yuan, a year-on-year increase of 21.27%, which is the fastest growing among the three major businesses; However, the operating profit margin of JD Logistics is 0.6%, lower than JD Retail's 3.8%.
Pinduoduo has become the "dark horse" in cross-border e-commerce with its e-commerce platform Temu. On September 1, 2022, Temu was launched in the US market and dominated the App Store app download chart within three months. It is also rapidly catching up with fast fashion company Shein (Guangzhou Xiyin International Import and Export Co., Ltd.).
Before Christmas 2023, the number of packages shipped by Shein and Temu to US customers surged. According to Ship Matrix, a package transportation consulting company, these two rapidly growing shopping platforms ship an average of about 1 million packages per day in the United States. Although this number still accounts for a small proportion of the total number of packages shipped in the United States every day, it is in a rapid growth trend.
Temu's rapid growth in overseas markets is the main reason for Pinduoduo's rapid performance growth in the third quarter of 2023. Guojin Securities (600109. SH) released a research report on November 29, 2023, stating that Pinduoduo's trading service revenue in the third quarter increased by 315% year-on-year, possibly mainly due to Temu's commission contribution. However, the business is still in the early stages of burning money. According to Bank of Communications International (03329. HK), in the third quarter of 2023, Temu contributed 23% to Pinduoduo's revenue and a loss rate of 18% (accounting for GMV).