Following in the footsteps of Pinduoduo, Taobao will now support "refund only" options. How do you view this change? What impacts do you think it will bring?

Pinduoduo has already become the teacher of Taobao.

Once you look at the rules, you can quickly get a refund.

Asking customer service, the platform has no authority to refund, please negotiate with the seller.

For refunds, the Pinduoduo experience is still better; the payment arrives even before the courier is received.

Big Data Technology Empowers Easy Identification of Most Malicious Refunds

With the support of big data technology, identifying the vast majority of malicious refunds becomes a relatively straightforward task.

Taobao’s policy is also clear: it is not blindly facilitating quick refunds. Instead, it combines product quality information with consumer integrity models, making comprehensive data-driven decisions about whether a product’s quality issue justifies a return. High-credit users receive quick refund support.

However, when it comes to Pinduoduo’s “Refund Only” policy, its practical effect seems to loosen constraints on certain buyers engaging in malicious refunds, resulting in a lot of dissatisfaction among sellers.

Let’s take a potentially “malicious” interpretation of Pinduoduo’s logic:

Pinduoduo might indeed have a similar integrity model, but it may still allow some “slip through the cracks” for malicious refunds. In essence, it sacrifices the interests of a small portion of sellers to attract a larger number of buyers.

Compared to other e-commerce platforms, Pinduoduo started later, and its user base is relatively more price-sensitive, with more users seeking bargains.

Similar information spreads quickly and attracts corresponding users.

From this perspective, Pinduoduo’s positioning is very precise.

When the user base is large enough, sellers will have to develop on this platform, even if they incur some losses.

(The above content is purely speculative, and any resemblance is purely coincidental.)

The development history of Taobao and Pinduoduo is different, and they have significant differences in their business models.

Anyone who has sold on Taobao will understand that from the moment they join, Taobao sellers must continuously pay fees to Alibaba, buy store decoration, purchase rankings, and invest in advertising…

In a sense, sellers are the true “customers” of Taobao.

It would be challenging for Taobao to adopt an approach like Pinduoduo, which directly undermines sellers. An increase in malicious refunds, once consensus forms between buyers and sellers, would likely lead to a mass exodus of Taobao sellers, putting pressure on Alibaba’s revenue.

So, while Taobao’s “Refund Only” policy and Pinduoduo’s “Refund Only” policy may appear similar on the surface, they represent two fundamentally different approaches.

Alibaba’s Unique Path: Innovation and Challenges

Looking back at history, Alibaba thrives on continuous innovation and isn’t inclined to imitate others. No matter which competitor Alibaba tried to emulate, it rarely succeeded.

1. Alibaba excels in innovation, pioneering domestic services like Taobao, Alipay, DingTalk, Hema, and Alibaba Cloud.

2. Alibaba’s approach to innovation is geared towards maximizing profits, even if it appears less attractive. Alibaba’s ventures either yield substantial profits or quickly face decline.

3. Imitation isn’t Alibaba’s strong suit, as most attempts at imitation have ended in failure, such as Tao Te, Taobao Short Videos, and Alipay’s social features.

Alibaba’s sole hope lies in a swift economic recovery. When the economy rebounds, platforms like Taobao, which focus on e-commerce shelf space, perform well.

The rise of Pinduoduo coincided with a decline in Taobao’s dominance, primarily driven by consumer price sensitivity. During economic downturns, people become more price-sensitive, but as the economy prospers, Alibaba’s personalized shopping strategies, like “a thousand faces for a thousand customers,” become more effective, as consumers are less swayed by price and more influenced by their interests.

In retrospect, one might realize that Ma Huateng (Tencent’s founder) set a trap for Jack Ma (Alibaba’s founder) by keeping Alibaba boxed in.

Tencent’s social market remains robust and unchallenged, while Alibaba’s e-commerce dominance is at risk if it fails to deliver exceptional service and pricing.

In the early years, Alibaba and Tencent competed vigorously, entering markets like social media, new retail, and ride-sharing. In those days, both had their wins and losses, with Alibaba often finding itself neither winning nor losing. Alibaba even introduced ventures like Hema Fresh, Yonghui Superstores, and government cloud systems, achieving moments of success.

However, in hindsight, the Alibaba vs. Tencent competition brought little benefit to Alibaba’s overall development. As per the second point, Alibaba’s greed led it to explore any profitable opportunity.

Each project in Alibaba’s competition with Tencent was an added advantage for Tencent. These new ventures expanded the application scenarios for WeChat, strengthening Tencent’s social empire and generating additional revenue. In contrast, these projects became a handicap for Alibaba. Businesses like Yonghui and Hema Fresh essentially revolved around shopping, encroaching on Alibaba’s core e-commerce territory. What’s worse, Alibaba kept moving talent from its core Taobao ecosystem to these new acquisitions, depleting the energy of the Taobao Group.

From 2014 to 2019, Alibaba was preoccupied with the war against Tencent, boasting about its many accomplishments. Alibaba diversified its business and expanded its workforce. However, Alibaba neglected the core Taobao business, ultimately allowing Pinduoduo to overtake it through innovative strategies.

As Wang Chuanfu (founder of BYD) told Lei Jun (founder of Xiaomi), “For a big company, it’s okay to lose money with the wrong strategy. What’s truly terrifying is losing several precious years!”

This advice holds true for Jack Ma, as well, in his interactions with Ma Huateng.

The First Person to Offer Free Antivirus Software Was Quite Remarkable; The Rest, Not So Much…

The first person who offered free antivirus software was quite remarkable, but the second, third, fourth… had no impact whatsoever.

What Attracts Consumers?

Attracting consumers involves shipping insurance, honest delivery without false claims, and avoiding extended pre-order periods.

The most central issue is that on Pinduoduo, you can get free shipping for items priced at two or three yuan, while on Taobao, many sellers don’t offer free shipping even for items costing one or two hundred yuan, and the shipping fees can be quite high. In the end, at the heart of the business battle lies the ultimate core: competing for customer experience.

The Evolution of E-commerce Platforms: The Impact of “Refund Only”

In the past, when consumers purchased counterfeit or low-quality goods on Taobao, it was challenging to seek recourse. While sellers were often willing to accept returns, they frequently demanded that users leave a five-star review.

During that time, Taobao had its fair share of counterfeit goods, but genuine products were also available. To avoid falling victim, consumers typically had to be cautious when making purchases.

However, the situation is different on Pinduoduo. Counterfeit goods are so prevalent that some online influencers constantly use fake Pinduoduo products to boost their viewership.

It can be said that the “refund only” policy is a response to the unique environment created by Pinduoduo. Originally, Taobao did not require such a policy. However, due to Pinduoduo’s rapid market growth, Taobao had to adapt and make some changes.

The “refund only” policy is undoubtedly unfair to merchants, but it is much more convenient for consumers. In reality, when consumers interact with merchants, they are at a disadvantage because they haven’t physically received the product. Consumers can only judge the authenticity of a product based on pictures and text descriptions, and instances of receiving subpar or incorrect items are quite common. For example, I recently purchased some snacks on Pinduoduo and found that they were missing approximately 10% of the quantity. Many people are concerned that the “refund only” policy might be exploited, but merchants also find ways to take advantage of the system. On platforms like Taobao, Xianyu, and Tmall, there are numerous examples of counterfeit and imitation products.

I remember that in the early years, Taobao was known for counterfeit goods. The “refund only” policy may harm the interests of merchants, but in reality, there is no perfect solution that can satisfy both sides. This move may indeed hurt some Taobao sellers, but it can win the hearts of users.

Indeed, some individuals may attempt to exploit the platform, but this is a matter for law enforcement agencies to address. Alibaba cracked down on such activities last year, and the results were promising. Therefore, there is no need to be overly concerned about harming merchants.

Additionally, it is hoped that some people will not engage in zero-cost shopping. Individuals who did so last year have already been arrested and sentenced, including one who was a university student.

Source

The Diverging Paths of Taobao and Pinduoduo: Quality vs. Discounts

A friend of mine who runs a factory told me that some of the subpar products they manufacture are not necessarily discarded; they can be sold on Pinduoduo. Consumers on Pinduoduo aren’t very picky; at most, they’ll request a refund, but since they’re buying subpar products, it doesn’t bother them much.

So, following Pinduoduo’s lead in this matter isn’t suitable for Taobao, as Taobao and Pinduoduo have completely different positioning and strategies.

I’ve made purchases on Pinduoduo, and indeed, the prices are somewhat lower, but, to be honest, the quality is quite poor. For instance, a supposed “ultrasonic eyeglass cleaner” priced at 9.9 yuan turned out to be a fraud – it contained nothing more than a vibrating motor, nowhere near an actual ultrasonic cleaner. It was purely a scam.

In this regard, Taobao is much better, but it still has its issues. I often encounter unscrupulous sellers who resell returned products from other consumers, so seeking bargains always comes at a cost. Nowadays, I mostly shop on Tmall, and I always inquire about shipping insurance to avoid any surprises.

Therefore, Taobao doesn’t really need to adopt Pinduoduo’s “refund only” policy, and quality-conscious consumers don’t need to take advantage of it either. However, Taobao could offer comprehensive shipping insurance, allowing customers to return products at no cost if they’re dissatisfied. I believe this is crucial.

Furthermore, they should rigorously monitor product quality and remove underperforming or frequently complained-about sellers to create a safer and more satisfying shopping environment. This is the core competitive advantage.

Taobao should truly aim to follow the path of JD.com, strictly controlling the quality of products on the platform, providing higher-quality services, and overall offering lower prices than JD.com. Only then can they carve out a successful niche. Following Pinduoduo’s brute-force tactics, constantly bombarding users with pop-ups for red envelope rewards every 30 seconds, may make consumers feel like they’re saving money at first, but they end up disappointed, and it ultimately becomes a futile endeavor.

Pandering to low-end consumer groups, indulging in tacky “grab the red envelope and slash prices” activities, and forcing users to download Pinduoduo software at every turn, all while offering cheap but extremely low-quality products – this approach is not what we need.

I hope these e-commerce platforms engage in healthy competition, as more significant competition benefits consumers. However, I don’t wish for this kind of competition – harassment, scams, selling subpar products as if they were top-notch.

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Public Account: “hardy Chat”

Discussing economics, current events, real estate, all from a young person’s perspective.

E-commerce Strategies: Pinduoduo vs. Taobao

I just saw a post in a group yesterday that goes like this:

Pinduoduo’s practice of spoiling consumers and suppressing merchants is no longer just an industry consensus; it has become common knowledge for anyone who shops online.

As a user of both Pinduoduo and Taobao, I quite like buying subpar products on Pinduoduo because if the product doesn’t meet expectations, I can apply for compensation, which is usually honored. Previously, I purchased a smartphone with a subsidy of billions on Pinduoduo, and due to a price guarantee, I had the seller refund me 230 yuan within a month.

Spoiling consumers, suppressing merchants, and taking a biased stance have allowed Pinduoduo’s market share to grow rapidly over the past few years, driving up its stock price.

This time, Taobao has chosen to support “refund only,” clearly seeing it as the core “ace in the hole” for Pinduoduo and has decided to follow suit.

For consumers, this is undoubtedly a good thing.

However, precisely because Pinduoduo “spoils” consumers in this way, some big brands refuse to enter Pinduoduo and choose to sell leftover, defective, returned, or second-hand products there.

If you want to assess the stability and diversity of product quality, you should look to “Tmall.” In this regard, Pinduoduo still can’t surpass Taobao.

Not long ago, I wanted to buy a book by a niche British author, so I first looked on Pinduoduo:

I paid 11.8 yuan, but when I received the book, the quality was extremely poor, like a low-quality photocopy, with thin pages that were almost translucent, far from the advertised images.

So, on the same day, I decided to return the book and get a refund, with no additional postage cost. I did save money, but I wasted time.

Feeling that I didn’t want to waste any more time, I directly opened Taobao’s Tmall:

Tmall offers a “one fake, four genuine” policy, which is twice the price of Pinduoduo but guarantees authenticity.

When I received the book, it was indeed genuine, and the quality and packaging were excellent, making me feel that the money was well spent.

Based on these past shopping experiences, if I want to buy genuine products and ensure quality, I will prioritize Taobao’s Tmall. If I want to buy small, non-quality-dependent items like garbage bags, then I will pay attention to Pinduoduo.

Returning to the main point, although Taobao has also introduced “refund only,” it comes with several clarifications:

This rule is interpreted by the public as following in Pinduoduo’s footsteps, but according to reports by Interface News, Taobao’s approach is not mere imitation; it’s an adjustment based on “refund only.” Taobao has a mechanism designed to consider both product quality information and consumer integrity models, using comprehensive data to determine whether a product’s quality issue justifies a return. High-credit users support quick refunds. Additionally, for some highly controversial “refund only” actions, Taobao provides a quick appeal channel for merchants. If they encounter unreasonable quick refund requests, they can appeal.

This is where Taobao excels - learning, not copying.

While Pinduoduo caters to consumers and suppresses merchants, Taobao offers solid protection to its merchants.

The upcoming e-commerce battle is bound to be exciting.

As a consumer, I am looking forward to it.

Pinduoduo vs. Taobao: Different Approaches to E-commerce

Pinduoduo initially positioned itself with the lowest status but the highest momentum in terms of its operations.

When we look at Pinduoduo’s refund process, the “one-click refund” doesn’t require buyers and sellers to argue. In case of any issue, it’s generally seen as the seller’s fault. This strategy directly controls the flow of transactions.

Taobao, on the other hand, has a more conservative approach. Alibaba always tries to strike a balance between customer and merchant interests. However, it depends on the context.

The context here is “difficulty in determining fraud,” with elements of rent-seeking added to the mix. So, for platforms like Pinduoduo, JD.com, and Taobao, the most effective way to retain users is to act as the “judge.” By giving consumer rights priority, you establish your flow. With flow, merchants are more likely to cooperate. Without you, their business logic falls apart. This creates a positive feedback loop.

Taobao, as the pioneer of the industry, made a significant mistake by directly cutting into merchant profits. Instead of selling merchant “direct traffic” at the cost of time and money, it could have provided free traffic, taken a small cut, sold advertisements, and done further financing. This approach would have been more profitable and improved service quality.

Internally, I have a feeling that Pinduoduo is somewhat like a budget version of Walmart in the United States, playing with market share strategies. The company may not have much capital on its books, but by controlling the source of goods, it can influence pricing. Every time it adjusts the profit margin on a product, it effectively doubles it. While Pinduoduo follows the internet path, the tactics are quite similar.

But at this point, it seems that Taobao’s attempt to mimic Pinduoduo has come too late. Consumer habits, once adapted, involve a certain energy cost from the consumer’s perspective. If we look at the bigger picture, Taobao seems to have lost its business positioning. There’s JD.com above, Pinduoduo below, and Taobao appears to be stuck in the middle, not clearly defined.

It’s better to be a durian and have some people love you passionately and others dislike you, than to try to be universally liked and not succeed. That’s something that not even RMB (Chinese currency) can achieve.

Pinduoduo’s Rising Influence in E-commerce

What seemed insignificant, “cutting prices,” has now become a major player in the e-commerce market.

Following their low-price strategy, Pinduoduo has once again had an effective move imitated by multiple platforms—“refund only.” Recently, Taobao released a public notice regarding changes to its “Taobao Platform Dispute Handling Rules.”

In summary, sellers with numerous negative reviews or violations, when subject to complaints, will now be automatically determined by the platform to offer a refund or partial refund.

Just a few days ago, Pinduoduo’s market value on the US stock market briefly exceeded that of Alibaba, making it the top Chinese concept stock in the US stock market. Although Alibaba regained the lead in market value by the end of the day, the difference was less than 2 billion USD.

Following this, an Alibaba employee posted on the internal network saying that what seemed insignificant, “cutting prices,” has now become a major player.

Jack Ma himself commented on the post, congratulating Pinduoduo on its decisions, execution, and efforts in recent years. He acknowledged that anyone can achieve greatness, but those who reform for the future and are willing to pay any cost and make sacrifices are truly worthy of respect.

According to the Tianyancha official website, Pinduoduo currently has 29 member companies, including 4 core companies and 1 listed company.

According to Pinduoduo’s financial report for the first three quarters of 2023, their total revenue reached 68.84 billion RMB, a year-on-year increase of 93.89%, with a net profit of 15.537 billion RMB, a year-on-year increase of 46.73%.

It’s worth noting that in 2016, Alibaba and JD.com had a combined market share of 86%, while Pinduoduo’s market share was only 1%. Today, Pinduoduo has become one of the e-commerce giants.

In an era where consumers are becoming increasingly price-sensitive, Pinduoduo’s combination of price reduction and “refund only” has rapidly captured the minds of consumers in the lower-tier market.

Looking back at this year’s keywords, “cost-effectiveness,” “special forces tourism,” “Luckin 9.9,” and “Kudi 8.8,” it seems that the downgrading of consumption among young people has also contributed to the success of Pinduoduo’s low-price strategy.

Aside from its successful marketing strategy, Pinduoduo’s success also relies on its talent pool, and its compensation packages may be one way to retain talent.

Pinduoduo is known for its competitive salaries and stock incentives. Even recent graduates can receive salaries 30% higher than those offered by Tencent and Alibaba.

A Java engineer with 5-6 years of experience at Pinduoduo can earn a million RMB annually, which is quite normal.

It’s worth mentioning that technical positions at Pinduoduo can receive up to 16 months of salary, two months of overtime pay, and probationary salaries that are not discounted, with salary increases twice a year.

What do you think of Pinduoduo’s benefits and compensation packages? Feel free to leave your thoughts in the comments!

PS: Tianyancha is here with an exclusive discount business code. Open the Tianyancha member page here and enter code “114837” for a maximum discount of 100 RMB.

The Controversial “Refund Only” Feature: A Consumer’s Perspective

No merchant likes the “refund only” feature. After all, when a product has already reached the hands of the consumer, why should they receive no payment at all?

But from a consumer’s perspective, if the only option is to return a product for a refund, who should they turn to for compensation when they’ve experienced disappointment due to purchasing an unsatisfactory item?

The “refund only” feature has two advantages:

1. When consumers purchase unsatisfactory products and use the “refund only” feature, it causes financial losses to the merchant, providing consumers with a sense of satisfaction in retaliating against the seller.

2. Pinduoduo, starting as a platform for unbranded products, gains consumer trust for purchasing lesser-known brands' products through the “refund only” feature. Without this option, consumers may prefer to buy products from well-known brands to reduce the chances of returns.

Consumers certainly appreciate this feature, but it also attracts many deal-seeking consumers to the platform, which Pinduoduo is well aware of.

However, at present, regardless of how dissatisfied merchants may be with this feature, they can’t do without Pinduoduo.

Interestingly, this feature, despite merchant complaints across various platforms, has actually made more consumers favor Pinduoduo, perceiving it as genuinely consumer-friendly.

The “refund only” feature is essentially a tool that platforms use to appease consumers at the expense of merchants.

In the past, platforms like Taobao had made headlines for cracking down on malicious refund requests.

Consumers and merchants find themselves in an asymmetric position of offense and defense.

The Cost of “Refund Only” and Its Impact on Sellers and Buyers

There’s a fundamental question here: Who bears the cost of “refund only”?

Many people assume, perhaps wrongly, that the cost is solely borne by the seller since they are seen as being in opposition to the buyer. In reality, sellers can offset the cost of some buyers' refunds through various means, including but not limited to raising prices across the board, providing less product, or falsely advertising product quality. The end result is that the majority of the cost for “refund only” is shouldered by other “honest” buyers who did not request refunds.

Whether it’s on Taobao, Pinduoduo, or any other platform, sellers open shops to make a profit. If they consistently operate without a profit or suffer losses, eventually, no one will be willing to run an online store. Ensuring that sellers can make money is essential for the sustainability of the market, a concept commonly referred to in economics as the “Participation constraint.”

When market rules like “refund only” are forcibly imposed, they inevitably significantly increase the costs for sellers. The direct consequences can lead to one of the following scenarios:

1. Some sellers with low profit margins exit the market, reducing the supply.
2. Some sellers raise their selling prices, including providing less product or falsely advertising quality, to ensure their profits remain positive.

Regardless of which effect is more prominent, the result is likely to be higher prices and reduced quantity of goods, a typical economic effect known as “supply reduction,” with both buyers and sellers in the market bearing the costs. In many cases, the overall cost borne by all buyers far exceeds the cost incurred by the sellers, causing “honest” buyers to pay the price for the “refund only” buyers.

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Related answers:

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• Why is there a saying that “cash is king” during economic downturns or even economic crises?
• How should we view the SEC’s investigation into Alibaba’s financial issues on Singles' Day?

Ah, typing can be quite tiring.

The Fundamental Issues Behind Taobao’s Challenges

It’s not about “refund only”; it’s about a deeper problem. Taobao’s struggles stem from excessive fees at every level of the supply chain, more ruthless than the East India Company during the Opium Wars.

Without addressing this foundational issue, trying to emulate Pinduoduo’s strategies won’t make much difference.

For sellers, it’s a daily grind of buying search placements, inflating order numbers through fake orders, and participating in Taobao’s promotional events, all while barely making a profit.

Delivery personnel face exorbitant fines, leading to high turnover rates.

Local delivery point owners often subsidize their operations by driving ride-sharing vehicles.

Couriers are caught in a never-ending loop of making deliveries.

Consumers are forced to navigate complex promotions and spend more time on the platform, all while paying higher prices.

Expensive

Does Taobao genuinely believe that “refund only” is the reason they’re losing ground to PDD?

It’s about the whole process—the top-down corporate culture that tries to act like everyone’s father.

You say presales aren’t working; they say you don’t understand. It’s always excuses.

You say delivery points are problematic; they say you don’t understand. It’s all resolved with this or that.

They know that high costs, like those from Direct Traffic and fake orders, are driving sellers to Pinduoduo for refund exploitation, but they act oblivious.

Because Taobao is always right. Alibaba is the real deal, and the rest are just fools. They have a duty to educate you.

I’m always right.

They squeeze sellers from the top, treat users like fools from the bottom, never bothering to think from anyone else’s perspective.

The grand logic is revenue. When they get desperate, they copy, but even copying doesn’t impact their revenue.

This time, they introduced “refund only” and piled on terms like “however,” “maybe,” “mechanism design,” and “big data.”

The underlying logic of “refund only” isn’t about reducing user rights protection costs or improving user experience.

I’ve already gone through the hassle of requesting a refund, and now you’re lecturing me?

Why doesn’t Alibaba dare to implement a one-size-fits-all approach like PDD? Some claim it’s because Alibaba has big data to prevent such things.

Stop making excuses.

Sellers make CNY 2,000 a month on Taobao by working non-stop for a month.

On Pinduoduo, they make CNY 6,000 a month by fulfilling 4-5 orders a day.

Why?

The premise for copying “refund only” is that it can’t affect the overall market.

No business can affect the revenue from Direct Traffic.

Does Alibaba dare to eliminate Direct Traffic?

I doubt anyone would dare mention it to Jack Ma.

So, we’re left waiting for change.

Pinduoduo: Cheap, Whether Genuine or Fake

Pinduoduo offers both real and fake products at cheap prices.

Taobao, on the other hand, has become somewhat redundant thanks to Tmall. Most people prefer to shop on Tmall.

Who do you think remains on Taobao? Don’t they realize it themselves?

Supporting “refund only” only makes things more painful for small businesses. They end up leaving since they barely get any orders each month, and dealing with refunds on top of that makes it even harder.

Taobao won’t bear this cost; it’s the merchants who have to pay. It’s a case of the big store bullying the little one.

Taobao vs. Pinduoduo: Different Survival Logics

Taobao and Pinduoduo have different survival logics. While both have implemented “refund only,” they cannot be as lenient towards buyers as Pinduoduo.

I suspected when I saw the title that Taobao would surely set some requirements, and according to the news, Taobao indeed has a mechanism.

It will consider product quality information and consumer integrity models, comprehensively assess product quality, and whether it is inappropriate for returns. Currently, it only supports high-credit users for quick refunds.

What sets this apart from Pinduoduo is that Pinduoduo allows refunds immediately when consumers want them, which is not very merchant-friendly. Taobao, on the other hand, evaluates specific cases using big data, making it much more merchant-friendly.

Why can Pinduoduo disregard merchants completely? This is due to Pinduoduo’s unique advantage.

Currently, for similar products on different platforms, Pinduoduo has a significant price advantage!

Why are Pinduoduo’s prices cheaper?

The price is determined by cost and profit. Even if you want to operate on thin margins, if the cost cannot be reduced, low prices cannot be sustained.

The biggest cost for e-commerce sellers is what? Marketing or, in other words, traffic. And this is precisely what Pinduoduo can solve.

Through WeChat’s nationwide marketing, Pinduoduo saves sellers from paying platform marketing and promotion fees, eliminating the biggest cost.

Although, as more and more sellers enter Pinduoduo, the platform distributes traffic to sellers willing to pay for promotion.

However, WeChat channels are not cut off, meaning many merchants still have the opportunity to get organic traffic.

Pinduoduo’s sellers leverage WeChat, utilizing everyone’s social connections to achieve explosive marketing. This cost advantage is envied by any other e-commerce platform.

Secondly, Pinduoduo lowers logistics costs through economies of scale.

Pinduoduo’s shipping isn’t “you buy, I ship” but rather “you all buy, and then I ship.” Shipments are only dispatched once a certain quantity is reached.

This mechanism ingeniously utilizes “group buying.” When users see low prices but have to buy in groups, they try to mobilize their network to place orders together, increasing the order volume.

With the increase in order volume, sellers gain bargaining power and negotiate lower delivery prices.

Originally, a delivery fee of 8 yuan per order can be negotiated down to 2 yuan per order. From the perspective of the courier company, this is still profitable.

Courier companies also worry about orders and have the intrinsic motivation for “thin profit, more sales.”

With logistics costs remaining constant, the larger the order volume, the lower the logistics cost per item. The lower the logistics cost, the more orders you can get through price advantages, creating a positive feedback loop.

Through the Pinduoduo platform, seller traffic costs decrease, and logistics costs decrease.

With these two major costs under control, can prices not come down?

After the cost reduction, services like a 7-day no-reason return, free return shipping, and door-to-door pickup by SF Express can be easily implemented.

For consumers, choosing Pinduoduo means you don’t have to worry about anything after paying; just wait for the delivery. If you don’t like it, you can return it instantly.

For Pinduoduo, with logistics costs under control, the number of return consumers is minimal, and it can even be used as a signature attraction for attracting traffic.

Therefore, Pinduoduo has a stronger motivation for “return protection” on the platform. After all, they have the traffic, and they are not afraid to offend you, the seller.

But Taobao can’t go down this path. Its traffic costs cannot be reduced, its logistics strategy has gone wrong, and it dare not offend sellers too much.

While Taobao’s support for “refund only” is a good start, if logistics and marketing costs don’t come down, the gap with Pinduoduo will only get wider over time.

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Taobao’s Evolution Towards Resembling Pinduoduo

Taobao is starting to become more like Pinduoduo (which, to a large extent, was once Taobao itself). This is a typical case of “convergent evolution under similar natural selection.” Faced with harsh competition, to avoid elimination, one’s “phenotype” needs to align with that of the “fittest.” In the natural world, this phenomenon, where different genotypes exhibit similar phenotypes due to similar environmental conditions, is quite common.

During the time when Taobao emerged, Chinese consumers had far less bargaining power against merchants. Limited logistics, inadequate transportation, information asymmetry, and localized consumption environments often put sellers in a monopolistic or semi-monopolistic position, making them very powerful.

Taobao’s arrival tilted the balance of power significantly in favor of buyers, breaking geographical constraints and making buyers' shopping choices completely unrestricted (even in regions not covered by eastern merchants, local residents no longer had to rely solely on offline shopping). Information asymmetry was fundamentally reversed, and prices became transparent across the internet.

Of course, later on, in a relatively less competitive environment, Taobao grew rapidly, shifting its focus towards its own financial KPIs and funneling traffic towards Tmall. This resulted in relatively less attention and benefits given to buyers, especially price-sensitive consumers.

In this context, Pinduoduo emerged, gradually encroaching upon the user base that originally belonged to Taobao. The two platforms started to compete in a similar ecological niche, but Pinduoduo did not pose a direct threat to the cornerstone of the Taobao ecosystem. With a large enough market, Taobao could have continued to thrive, even if it fully exited the market segment focused on by Pinduoduo.

However, with the economic downturn since the onset of the pandemic, “consumption downgrade” has become widespread. Against the backdrop of layoffs and salary reductions, the price-sensitive consumer group has grown significantly. Pinduoduo’s presence in the lower-tier markets continued to expand, with surges in traffic and revenue.

As one side grew, the other side declined, and the competition for the same ecological niche between Taobao and Pinduoduo intensified. Taobao could no longer ignore Pinduoduo’s dominance in the lower-tier markets. However, Pinduoduo’s success also indicated the correctness of its “strategy.” For Taobao to achieve a Pinduoduo-style success (or at least avoid losing more of its user base to Pinduoduo), it had to become more “like” Pinduoduo.

The introduction of Pinduoduo-style “refund only” is one step in that direction.

The Far-reaching Impact of Business Decisions in the E-commerce Industry

In many cases, the individual business decisions or actions of a company cannot be analyzed and interpreted solely from an isolated perspective. Instead, it is essential to consider their long-term impact on the overall development trends of the industry.

E-commerce platforms are no exception. Their development has been significantly faster compared to traditional industries, rising rapidly with the growth of the internet. In just over 20 years, they have completed what would have taken many other industries centuries to evolve. However, this process still generally follows the universal laws governing the development of all industries, following a spiral or step-by-step upward trajectory. Often, a transformative change is first introduced by one company, followed by others who quickly follow suit, adding improvements and innovations within the existing framework. Eventually, new industry standards are established, driving the overall progress of the industry.

In this regard, Pinduoduo is clearly at the forefront. Although the company has been in existence for less than a decade, it is currently thriving, with its market capitalization on the U.S. stock market even surpassing that of the industry giant, Alibaba. While the two are not on the same scale in terms of total asset size, net profit, and market share, Alibaba still maintains an overwhelming advantage. Nevertheless, in certain areas, a group of newcomers represented by Pinduoduo are rapidly rising and gaining widespread recognition among consumers, demonstrating their market presence.

As an emerging industry, internet-based e-commerce places a greater emphasis on future technological advancements rather than relying solely on economies of scale, which are often associated with traditional industries and can lead to industry monopolies. Even for today’s leading companies, their advantages are often temporary. If they fail to adapt and innovate, they may be replaced by emerging competitors in a relatively short time. Taobao, for example, recognizes the potential challenge posed by newcomers like Pinduoduo, despite their smaller size but rapid growth. Rather than underestimating these up-and-coming companies, Taobao chooses to learn from their strengths to enhance its own products and services. This undoubtedly has a positive impact on the overall development of the e-commerce industry.

The Success Story of Pinduoduo: A Discussion on its Secrets

Following Pinduoduo’s strong performance in the third quarter, its stock price surged, and its market capitalization now exceeds that of Alibaba, being four times that of JD.com. This year, the trajectory of Pinduoduo’s stock price has diverged from that of Alibaba, JD.com, and others.

So, what is the magic behind Pinduoduo’s success in the realm of “group buying” shared among friends? Today, we will discuss the secrets of Pinduoduo’s success:

1. Focus on Agricultural Products: Pinduoduo initially started with a focus on agricultural products. Agricultural products align with the national policy of supporting agriculture, and for producers of these products, it’s either sell them or let them go to waste. This gives significant bargaining power to the distribution channels. This is one of the major reasons why successful e-commerce platforms like Pinduoduo and Dongfang Zhengxuan concentrate on agricultural products.

2. True C2M Model: Pinduoduo pioneered the Factory-to-Customer (C2M) model, enabling more contract manufacturers to sell their products on the platform under white-label branding. China, known as the world’s factory, has a massive number of first-tier brand contract manufacturers. Their presence on the Pinduoduo platform essentially opens a second growth curve for factories beyond contract manufacturing. With China’s manufacturing industry facing overcapacity and industry consolidation, lower prices are not an issue. For consumers, getting products from the same factories as branded goods at lower prices is an attractive proposition.

3. Purely Platform-Based with No Self-operation: Pinduoduo operates purely as a platform provider, joining forces with consumers to gain the upper hand over merchants, forcing them to compete on price. This approach is fundamentally different from companies like Alibaba and JD.com, which have self-operated businesses and essentially extract value from consumers. Pinduoduo uses the white-label model to encourage more brand suppliers to join and directs traffic primarily to sellers offering the lowest-priced products. It provides consumers with excellent services, such as the “No-Reason, Timely Refund” policy, which makes merchants reluctant to compromise on quality, even at low prices.

This is precisely what Taobao learned from Pinduoduo with the introduction of its “Only Refund” policy—providing consumers with straightforward services!

Consumer upgrading doesn’t necessarily mean buying more expensive items but rather obtaining higher-quality products for the same price, thereby improving value for money.

Pinduoduo has charted a course of surrounding cities with rural areas, helping numerous young consumers and their relatives achieve consumer upgrades. As the economy has slowed down in recent years, young users in first-tier cities have also started to prioritize value for money. They suddenly realized that even after various discounts, prices elsewhere were still not as attractive as slashing prices directly on Pinduoduo.

Pinduoduo’s third-quarter report, with a 93% profit growth rate, indicates that this low-price assassin is making a significant impact on traditional e-commerce. Additionally, Pinduoduo’s overseas e-commerce TEMU business, established less than a year ago, is experiencing rapid growth. Its sales in the third quarter of this year have already exceeded $5 billion, with a full-year total expected to surpass $18 billion.

Pinduoduo’s success teaches us a valuable lesson: old tricks won’t hold up in the long run, only sincerity can win hearts. This is also the path that Taobao and JD.com must take to catch up.

Taobao Adopts “Refund Only” Policy: A Step Closer to Pinduoduo

Recently, Taobao announced its intention to change the rules related to dispute resolution on the Taobao platform, and these changes have officially taken effect as of today.

The notification highlights three key changes:

1. Addition of rules for Taobao to use its own big data capabilities to identify multi-dimensional factors for buyer-initiated after-sales requests that meet certain criteria, allowing for quick refunds or returns based on the rules.

2. Supplementing the rules for handling payments in cases where sellers have delayed or forcibly shipped items without the buyer’s consent.

3. Introduction of clauses for supporting refunds in cases where buyers have refused delivery for products eligible for “7-day no-reason returns” or as determined by the platform.

The most significant change among these is the first point. In simple terms, when a buyer wants to return a product, Taobao will now use its platform’s big data analysis to determine if the seller has a history of negative information or if there are issues like improper product descriptions, misleading information, or counterfeit goods. In such cases, the platform will directly support quick returns or refunds.

The second point is relatively straightforward and deals with situations where sellers ship items beyond the agreed-upon timeframe without the buyer’s consent. If a buyer requests a refund in such cases, the system will automatically process the refund. If the seller cannot recall the delivery, they bear the loss when “refund only” is supported.

The third point relates to the “7-day no-reason return” policy, which is already common across most platforms.

The overall industry environment and market competition are pushing Taobao to make changes. Its traditional advantages may no longer be sufficient to sustain it for years to come. Without adapting to the changing landscape, Taobao could become a mere speck of dust in the development of e-commerce in the internet era.

Some time ago, when Pinduoduo’s market value surpassed that of Alibaba, there was a widely circulated joke on the internet, suggesting that Alibaba needed to focus on various aspects, including organization, retrospectives, empowerment, migration, discussions, co-creation, funnels, middle platforms, key drivers, loops, and alignments, among other internet “buzzwords.”

In contrast, Pinduoduo’s agenda seems much simpler—meetings only need to discuss two things: price reduction and “refund only."

Over the past few years, Alibaba has been steadily losing ground, and its dominant share of the e-commerce market has been significantly eroded.

In recent years, Douyin e-commerce has grown rapidly, while Kuaishou and Pinduoduo have shown stable growth. These three platforms have collectively taken market share away from JD.com and Alibaba, with JD.com experiencing a minor decline and Alibaba facing a significant one, dropping from around 75% to the latest 45%. While Alibaba still appears to be an internet giant, it’s actually at a critical crossroads.

The Matthew Effect in the internet industry is accelerating, and if this trend continues for another 4-5 years without intervention, Alibaba may well be overwhelmed by the combined forces of Pinduoduo and Douyin.

After more than 20 years of development, Alibaba has transformed into an ecosystem, whereas Pinduoduo remains just a platform. Establishing a platform is not difficult, but building an ecosystem is a formidable challenge.

A large ship is difficult to steer, and any great company is willing to transform itself. It remains to be seen whether Taobao dares to make that commitment. Personally, I am optimistic about Taobao’s “transformation."

Questioning Pinduoduo, Understanding Pinduoduo, Becoming Pinduoduo. Let’s Take a Look Together.