We may no longer need shopping festivals to stimulate consumption

“ Double Eleven preview: is the price war enough?

Frankly speaking, although the level of attention is much lower than in previous years, various companies recently held their own Double Eleven press conferences one after another, which also seemed very lively.

After all, since this year, several major e-commerce platforms in China, such as Taotian, JD, Xiaohongshu, Pinduoduo, and Douyin, have each experienced business or organizational structure and personnel adjustments. For the three listed companies, Ali, JD, and Pinduoduo in particular, Double Eleven is an important stage for testing these adjustments and reshaping the capital market's confidence in the company.

At the same time, we have been stressing since the beginning of the year that consumption habits are gradually returning to their first principle — good quality and low price; after three years of masks, consumer confidence is still slowly recovering, and consumers are very careful about spending.

Under such a general trend, each platform launched its own fancy promotion method this year, and several of them continued their “X billion subsidy” campaign throughout the year. This allows consumers to buy sufficiently cost-effective products in normal times, so there is no need to concentrate on releasing demand on Double Eleven as in previous years.

What's more, the phenomenon of running away is getting worse year by year, stretching the Double Eleven front from the first two or three days to more than 20 days, and it no longer has the sense of ceremony of settling accounts at 12 o'clock at night. It can be said that today, Double Eleven has gradually lost its position of “aggregating traffic and promoting transactions”. This shopping festival, which was created by Ali, needs to find new value points in competition among various platforms.

Also, for this reason, this year's Double Eleven, from a certain point of view, should be the year with the greatest homogenized competition. Currently, all platforms are using the banner of “lowest price,” and have introduced promotional methods such as official discounts and full cross-store reductions, etc., and spend real money to increase traffic support. They not only vow to compete for consumers' “low price mentality,” but also attract more merchants to open stores on their platforms.

But when all platforms claim to be the lowest price, what's the point of a price war? After 14 years of development on Double Eleven, where will it go in the future? Looking at this year's Double Eleven with these questions, we may be able to come up with some answers.

01 The core of competition is low prices

Let's first explain our point of view here:

Low price competition among e-commerce platforms is not blind and disrupts low prices in the normal market. Instead, it uses subsidies to make products as cost-effective as possible. At the same time, with some promotional activities, consumers can also feel “lost in wool” while receiving products.

For consumers, the biggest appeal of e-commerce shopping festivals such as Double Eleven is low prices. This year's 618 was the case. Competition surrounding price power is already the focus of competition on various platforms; yet by Double Eleven, competition for low prices will only be strengthened, not weakened.

Among all platforms, Taobao, which founded Double Eleven, is considered to have taken the lead and set the tone for this “low price mentality” battle.

In March of this year, Dai Shan, who was previously in charge of the “digital commerce sector,” officially became CEO of Taotian Group at the end of the month; after that, Ma Yun officially returned to China, and Ali immediately began a major “1+6+N” reform. What is certain is that after all of this reform is completed, Taotian will become none of the most important assets under Alibaba's listed companies, and its importance is self-evident.

In May, Ma Yun summoned various business leaders of Taotian Group and held a small-scale communication meeting. Ma Yun judged that the next step was Taobao rather than Tmall's chance, and that Alibaba e-commerce should “return to Taobao.” Ma Yun said at the conference that Ali's past methodologies are probably not applicable and should be quickly changed; he also indicated three directions for the Taotian Group: return to Taobao, return to users, and return to the Internet.

According to Alibaba's financial report for the first quarter of fiscal year 2024 (Q2 2023), Taotian Group's revenue for the second quarter of this year reached 115 billion yuan, an increase of 12% over the previous year. In particular, customer management revenue from domestic retail businesses left four consecutive quarters of negative growth and began to gradually return to the performance track that e-commerce bosses should have.

Therefore, for Dai Shan, on the one hand, it is fulfilling her mentor Ma Yun's strategic plan, and on the other hand, continuing this year's growth momentum, once again making Taotian the most beautiful boy in the entire e-commerce industry. The first Double Eleven after taking office was a battle that must be won.

Recently, at the launch conference of Tmall Double Eleven, the three major industry development centers and horizontal departments such as users, platforms, and live streaming all set “the lowest price on the entire network” as the core KPI. According to currently publicly available information, Taobao and Tmall will add two types of products during the Double Eleven period: one is low prices across the Internet, and the other is official discounts. Along with these two types of products, Taobao has also launched a “overpriced purchase must be paid” price insurance service.

According to Taotian's explanation, a low price on the entire network means a guarantee of the lowest price on all e-commerce platforms during the same period. The official discount means that there is no need for consumers to round up orders across stores, and the price of a single product has dropped by more than 15%. At the same time, the total reduction across stores over the years will continue to exist, but more traffic will be skewed towards the lowest prices on the entire network and products that support official cuts.

Judging from the investment plan, there have also been adjustments compared to previous years. For example, the price comparison standard was adjusted from the price listed in previous years to the price after this year's inclusive voucher (approximately equal to the price at which consumers purchased the product separately). In order to avoid a situation where the product price was suddenly raised before Double 11 and then later discounted, the inspection period for product prices was also relaxed compared to previous years.

This series of initiatives shows Taotian's determination to establish itself as the “lowest price on the entire network,” yet other platforms are also unwilling to lag behind in this regard.

On the other side, since Liu Qiangdong returned to the helm of JD at the beginning of this year, he has been making drastic adjustments to JD's strategy. Beginning in March, the “10 billion subsidy” was launched, vowing to re-consolidate my “low price” consumer mentality. However, this series of actions by Liu Qiangdong did not salvage the capital market's distrust of JD.

Currently, JD's stock price closed at $24.4 last Friday, close to the high of $104 in 2021. However, the main concern of the market for JD is whether it can still maintain its own market share in the e-commerce market, where there are wolves before and tigers later. Therefore, this time on Double Eleven, JD must prove itself.

At the Double Eleven press conference on October 20, JD announced that it would make “really cheap” throughout the Double Eleven process, and that the number of 10 billion subsidized products would be doubled from 618:00; it would provide consumers with benefits of reducing 50 yuan for every 299 yuan completed across stores, plus a 20 yuan subsidy. Those businesses that provide low-priced products and quality services will also get more exposure.

Looking at a few other platforms, Douyin and Kuaishou both mention the keyword “low price on the whole network” in their investment rules; Xiaohongshu is also preparing to work hard this year to compete head-on with other platforms in terms of network-wide low prices; Pinduoduo couldn't wait to start their own Double Eleven promotion on October 20.

It can be said that this year's Double Eleven places unprecedented emphasis on low prices, and the scale of participation is far greater than in the past.

02 What about anything other than the low price?

After reading the introduction above, I'm sure you have a similar feeling: from the beginning of the year to the end of the year at low prices, can't e-commerce platforms save any new work?

Although it seems, the behavior of various companies that emphasize “low prices across the network” is somewhat retro, like how e-commerce platforms competed with each other more than ten years ago when they first became popular. However, in reality, after so many years of evolution, it is not difficult for these e-commerce platform companies to keep prices to a minimum through heavy bleeding on Double Eleven; what is difficult is how to efficiently squeeze the moisture in all aspects.

Here, many technical aspects are involved, such as whether to master efficient recommendation algorithms, the ability to control the supply chain or even the industrial belt, and the ability to collaborate with the platform's content ecosystem. At the same time, it is necessary not only to support merchants that can sell high-quality products at low prices, but also to introduce some fresh business formats and gameplay.

In other words, low prices are a gimmick to compete for users, an excuse to attract traffic, and the competition between you and me that revolves outside of this core is one of the major highlights behind this Double Eleven.

At the press conference on October 20, while pursuing low prices, JD aspires to ensure that the original service is not downgraded, and also promised that low prices will not be at the expense of partner growth, not at the cost of squeezing the interests of partners, and that small and medium-sized businesses participating in Double Eleven will make money.

Since this year, disputes surrounding or targeting small and medium-sized businesses, like the “low price mentality” competition for consumers, have been the main theme of competition among e-commerce platforms in China. Just after the exchange meeting organized by Jack Ma mentioned above, Taobao first started small to medium businesses, followed by Tmall and launched the “Thousand Stars Project,” which is preparing to incubate 1,000 new brands with 10 million transactions, 100 with transactions exceeding 100 million dollars, and 10 with transactions exceeding 1 billion dollars.

On the eve of 618 this year, Ali's mother also launched the “Dragon Leap Program”. Through 300 million red envelope subsidies and 10 billion traffic support, she helped businesses in three areas: crowds, products, and event venues. Even the logo changed from the previous “Tmall 618” to “Taobao Tmall 618.”

However, after JD's “Chunxiao Plan” was announced, it was announced that it would provide individual sellers with a quick entry channel, a 0 yuan trial operation, and a 2,100 yuan new store package. The number of new businesses added increased by 240% year on year, and the number of new businesses added reached a record high. In particular, the number of businesses in the fashion, home, and supermarket categories is growing rapidly.

Coupled with the various policies of platforms such as Douyin to support small to medium businesses, it is clear that behind this e-commerce war against low prices, the importance attached to small and medium-sized businesses has been raised to an unprecedented level. The emergence of this kind of strategy is actually inevitable.

JD developed with a big brand and self-operated model, and is naturally attractive to big brands and big merchants; although Taobao started with small to medium businesses, with the previous resource bias towards Tmall, the importance attached to small to medium businesses declined markedly. It's not surprising that the two made similar choices. Essentially, after “choose one of two” was stopped, big brand merchants were able to open stores on every platform, weakening their marginal contribution to the two e-commerce giants.

Today, the bigger the brand, the less dependent they are on a single platform. With the rise of small and medium-sized businesses, Pinduoduo has had a huge impact on Ali and JD in terms of market share; Douyin, which is gaining popularity with content, shows a state where large and small businesses eat everything. In order to cope with this new market pattern, giants will naturally prioritize adopting a “make up for shortcomings” strategy layout.

However, there are the largest number of small to medium businesses in the market, and they are also the ones with the most difficult to make money and have uneven products. How to embrace small and medium-sized businesses while avoiding the downfall, bring consumers high-quality products at low prices, and form their own competitive advantage is an issue that all platforms must consider. Whoever does a better job is likely to see their performance soar.

03 epilogue

The first time I was deeply impressed by Double Eleven was in 2014. That year, I grabbed a Bank of China PS4 on Tmall for less than 1,900 yuan, which made me happy all day long.

But right now, as a consumer, I'm not looking forward to this year's Double Eleven. Well, maybe it's because there are too many things to worry about in my life; a shopping festival that happens at the end of the year doesn't distract me much; it may also be because there's really no need to compare and compare platforms and buy products in the midst of exhaustion.

Maybe I'm more suited to a simple and direct shopping method that can solve my needs in one stop. It doesn't need to be too fancy, not even really “the cheapest on the whole network”; it only needs to be “the most worry-free on the whole network”, just lie quietly in my phone's memory.

Having said all this, I'm not saying that Double Eleven no longer needs to exist, but I really hope it will have some new changes. Along with the rapid development of e-commerce over the past 14 years, Double Eleven is no longer just for Taobao. All e-commerce companies must think carefully about how they can make this biggest festival created by the Chinese Internet industry survive for a long time.$Alibaba (BABA.US)$$JD.com (JD.US)$$PDD Holdings (PDD.US)$

Disclaimer: This article is for learning and communication only and does not constitute investment advice.

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