Source | BohuFN
Author | East Fence
Pinduoduo, known for its low price, is currently experiencing a thrilling "retaliation action".
The incident originated on March 25, when Pinduoduo launched its self-operated store "Duoduo Welfare Society", but it was hastily removed from the shelves and closed the store 4 hours after the new product was launched. The reason is that a large number of merchants poured into the store to maliciously place orders, apply for "refund only" after placing orders, and scold Pinduoduo and founder Huang Zheng at customer service.
After this battle, the war quickly spread to other brands on the platform. On March 28, dozens of brand stores in Pinduoduo were similarly "attacked" because someone pointed out that the agency operation behind it was once Leqi Technology and the company founded by Huang Zheng.
On March 29, a screenshot of the widely circulated Pinduoduo Xiaoer (customer service) circle of friends showed that "this is the most exaggerated malicious smashing of stores in the industry" and "will resolutely resort to the judicial authorities." On April 3, Pinduoduo Xiaoer once again released a circle of friends saying that the organized and premeditated "smashing" behavior is still continuing, and the stores and goods of the platform's "tens of billions of subsidies" have become the main targets of the attack.
(Source: Internet)
According to reports, the number of small and medium-sized merchants on the Pinduoduo platform adds up to about 8 million, and they are all more or less dissatisfied with Pinduoduo's platform policy, and the contradictions mainly focus on the "refund only" policy - customers receive refunds directly from the platform without returning the goods, while the merchants are "empty". So much so that some merchants call Pinduoduo "Somalia", believing that its practices are no different from pirates.
Some merchants wrote a "letter to millions of merchants", in which they "bitterly resented" the "overlord clause" of the Pinduoduo platform, and called on merchants to continue this "uprising" action and strive for a "fair and just business environment".
(Source: Internet)
Here, discerning people can see that this incident is actually a concentrated outbreak of merchants' grievances against Pinduoduo.
In the face of the frontal sniping of Jingdong's "tens of billions of subsidies" and Taobao's "99 special sale channel", Pinduoduo, which urgently needs to maintain its low-price advantage, "tears its face" with merchants at this time. Pinduoduo's 2023 is a bit difficult.
01 When the merchant decides to turn over his "rice bowl"
It is undeniable that Pinduoduo and small and medium-sized businesses have also had a "honeymoon period".
At that time, in the face of the significant improvement of the conditions for entering the Taobao Mall, the small and medium-sized merchants who were "expelled" launched the "Taobao October Siege" incident, and launched attacks on the large merchants of the Taobao Mall through malicious clicks, malicious refunds and other means.
Four years later, in 2015, Pinduoduo, which holds Tencent's traffic support, was born, and the "0 commission" and 0 platform service annual fees, the entry conditions were much lower than Taobao, which undoubtedly became a new destination for small and medium-sized businesses that had nowhere to go due to Taobao's monopoly.
(Source: Internet)
With the group links in the WeChat group and the magic advertisements in variety shows, Pinduoduo, established in September 2015, achieved 100 billion GMV in 2017, and behind the more than 869 million active buyers in 2022, it is also inseparable from the support of these more than 8 million small and medium-sized businesses.
In the early days, Pinduoduo's compatibility also led to a mixture of platform merchants, which once became synonymous with fake goods and inferior goods. In order to retain consumers, "refund only" was officially launched in early 2021. Although the original intention was to protect the rights and interests of consumers and curb the sales of counterfeit and shoddy products, many qualified sellers of products were harassed by the "wool party".
According to the "Unicorn Excavator" report, some merchants have tested, such as using the buyer's account to buy a dress, take the wrong shot, the platform will automatically pop-up show that you can apply for only a refund, in addition to "money and goods", frequent chargebacks will also affect the merchant's "product experience" operation indicators, once the score drops below 2 points, there is basically no organic traffic.
The platform unconditionally favors consumers in the handling of such incidents, even if the evidence provided by the merchant is complete during the appeal process, the platform will most likely support the buyer's refund only, "becoming the umbrella of the white party".
A platform merchant said indignantly that Pinduoduo's only refund, in promoting the evil of human nature, has formed a "refund-only" "wool" industry, specializing in helping others "only refund", and the refund is successful after the account is five or five.
On the other hand, Jingdong and Taobao also have mature refund complaint mechanisms, but they are mainly communicated by users and merchants, and the initiative is still handed over to merchants, rather than infinitely amplifying the rights of the platform.
In addition to only refunds, it can also be seen through Pinduoduo's financial report data that Pinduoduo's main revenue also depends on "merchant wool", especially advertising business, such as merchants bidding to buy product keywords and the search ranking of the platform, as well as banners, links and logos.
In 2022, Pinduoduo's main business recorded a large increase in advertising and commission revenue, with the former achieving revenue of 102.722 billion yuan, a year-on-year increase of 42%, accounting for about 78% of the total revenue; The latter rose 95% year-on-year to 27.627 billion yuan.
The rise in Pinduoduo's advertising revenue may also mean that it is becoming more and more expensive for merchants to advertise in Pinduoduo, especially after the growth of Pinduoduo users has stagnated and moved towards stock competition.
Guosen Securities' research also confirms this. From 2017 to 2018, with the significant growth of traffic and merchants on the platform, Pinduoduo began the process of commercializing advertising, and successively launched a variety of merchant promotion tools against Alima, and advertising quickly replaced self-operated business as the main source of income. Moreover, with the intelligent upgrade of Pinduoduo's promotion tools, the advertising unit price of merchants has increased from 1 yuan per transaction in the early stage to a minimum of 4 yuan per transaction.
When the profits of merchants are repeatedly compressed, the subsequent results will directly lead to cutting corners and flooding defective products, and ultimately harming the rights and interests of consumers, while promoting "bad money to drive out good money", after all, "it is too difficult to make money by doing Pinduoduo".
As Pinduoduo moves towards the road of upgrading, small and medium-sized sellers "sink" in terms of product prices, profits and exposure, and the living space is seriously squeezed.
And this may be the real trigger for Pinduoduo's "bombing of stores" by sellers - Pinduoduo turned around, but the interests of small and medium-sized businesses were not cared for.
02 Pinduoduo into the online version of "Outlets"?
Starting from user demand, e-commerce platforms must at least achieve one of the poles of "more, fast, good, and saving", and Pinduoduo has achieved "saving" and deeply rooted in the hearts of the people, but only selling cheap goods can only make a hard money, and the batch of "outside the five rings" consumers that Pinduoduo initially caught has a limited ceiling of spending power.
Compared with the heavy asset investment required by "more" and "fast", it is relatively easier for Pinduoduo to upgrade to "good", and the specific way is to invite well-known brands to settle in and build and support "Pinduo" to achieve brand upgrading. In this way, it can not only enhance the richness of products, enhance the image of Pinduoduo, but also earn more profits with the high premium of the brand, and sell advertisements to brands with strong financial resources, "killing three birds with one stone".
In fact, Pinduoduo's brand upgrade can be traced back to 2018, when Pinduoduo launched a "new brand plan" to support 1,000 factories in various industries; As of September 13 of that year, the number of brands settled in the Pinduoduo Brand Pavilion has reached 500. However, this move also attracted Taobao's vigilance, and the "Tmall choice of two" dispute followed. Subsequently, in 2019, Pinduoduo shouted the slogan of "tens of billions of subsidies".
By October 2020, more than 1,500 enterprises had participated in the customized research and development of Pinduoduo's "New Brand Plan" and launched more than 4,000 customized products. During the 618 period in 2022, Pinduoduo launched the "Super Star" plan for brands, that is, it allows flagship stores to maintain brand tonality at high prices, and the platform subsidizes to achieve price reduction and dumping, with remarkable results.
According to the statistics of Guojin Securities, the "Super Star Program" has successfully introduced 3,000-5,000 brands, involving all categories of clothing, food, housing and transportation, including Clarins, Nature Hall, Anta, Xtep, COACH, Pechoin and other well-known brands, and many brands are flagship stores.
However, not all brands are willing to settle in Pinduoduo, and brands that are unwilling to accept Pinduoduo's low-price sales strategy have switched to entering through second- and third-level distributors.
For example, the well-known sports brand Adidas, although it has received strong support from Pinduoduo, it still enters under the name of "Adidas Official Outlet Store", and most of its products are defective or tailed goods.
According to LatePost, for those international brands that have built a multi-level distribution system offline and stable profit sharing, Pinduoduo's discount will destroy their original price system, resulting in no interest in the offline distribution system. After all, if it's cheaper to buy online, why buy offline?
In addition, some settled brands refuse to label "tens of billions of subsidies", and Pinduoduo can only achieve discounts in the form of consumption coupons.
Perhaps for Pinduoduo, becoming a special-round, low-priced but limited sales variety genuine shopping mall similar to outlets is also a good choice for the transition period of brand upgrading.
Huang Zheng once said, "Pinduoduo wants to do business for people outside the fifth ring road, and upgrading is the perspective of the people inside the fifth ring road." But now, Pinduoduo has been on the road of "upgrading" for many years, and from the perspective of consumers, Pinduoduo has long penetrated into the "five rings", after all, in the current time when people's consumption is becoming more rational and the price system is more transparent, "white-collar workers may not account for millions of luxury goods, but they account for a few dollars more than garbage bags." ”
However, the impact of the "outside the five rings" background on which Pinduoduo started still continues, just like brands with high-end positioning, it is difficult to enter Pinduoduo in person, and the price has been reduced to "outside the five rings".
03 The "outside the five rings" label engraved into DNA
In fact, the concept of "people outside the fifth ring" is Pinduoduo's fire, and Pinduoduo's rapid rise in the sinking market is also because it cuts to the real needs of "people outside the fifth ring".
From the user portrait, this part of the population is mostly middle-aged and elderly, will not use online shopping software to search, will not play WeChat, consumption concepts have been stereotyped, and like low-priced goods.
Therefore, at the beginning of its establishment, Pinduoduo used recommended e-commerce to avoid the search link; Meet the demand for low prices with the rush model and the explosive logic of low-price priority; Even in remote areas, free shipping is available; And considering that users may return and exchange goods inconveniently, a "refund only" policy has been introduced.
This model has indeed held up a number of brands, allowing previously unseen white-label goods to enter thousands of households, but it has also compressed the survival space of merchants in the platform policy adjustment and traffic fee price increase again and again.
And it turns out that compared with brand owners, Pinduoduo's main money-making force is still white-label merchants.
According to the analysis of Guosen Securities, from the background rules of Pinduoduo merchants, the goods receiving Pinduoduo's "tens of billions of subsidies" require the lowest price in history and the lowest price on the entire network, and it is difficult to pay Pinduoduo's advertising expenses for a long time after the brand profit subsidy is given to consumers; Moreover, after the brand reaches the agreed advertising rate, Pinduoduo will also provide a certain amount of traffic subsidies, and at the same time provide free resources such as the resource position of the brand's "tens of billions of subsidies" and the pit of large promotion activities. After deducting a lot of cost input, the profits that Pinduoduo can get from brand owners may not be enough.
On the contrary, a large number of white-label merchants on Pinduoduo are highly bound to platform profits, and their tolerance for platform traffic fee increases is also high, which is the main contributor to the platform's revenue increase.
However, as mentioned above, Pinduoduo's consistent low-price-first traffic logic and corresponding decentralized algorithm are also contrary to the vision of winning brands to earn premiums, and if Pinduoduo "insists on going its own way" to modify the traffic distribution logic, it may cause harm to the basic market of Pinduoduo.
Without white-label merchants, Pinduoduo's low-price advantage is like "water without source, wood without root", and it is difficult to gather a large number of consumers, let alone the imagination of brand upgrading. What's more, Pinduoduo's low-price moat is being repeatedly challenged, with JD.com launching "tens of billions of subsidies" in the front, and Taobao homepage "99 Sale" on the back, while Douyin and Kuaishou on the other side are also constantly deepening live broadcast e-commerce, and white-label merchants have more choices than before.
(Source: Internet)
Some media pointed out that Pinduoduo's cost-effective business environment has been forcing some businesses to switch to new platforms.
Pinduoduo, who is ready to fight a lawsuit with merchants, can still keep the basic plate of small and medium-sized businesses?
Reference source:
1. Yuanchuan Business Review: Pinduoduo is trying to become like Tmall
2, late Latepost: Pinduoduo brand upgrade: the closer to Tmall, the farther away from Ali
3. Finance: Pinduoduo: The sinking market pattern is clear, and the white card drives the rapid improvement of the charging capacity of the main station
4. Unicorn excavator: Did Pinduoduo, who made numbness, hear the cry in the distance?
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