The deterioration of the business environment caused by the phenomenon of 'bad money driving out good' in low-priced goods and the unscrupulous 'refund only' policy are the core reasons why Taobao is determined to change its platform like it did 20 years ago, thereby influencing the entire industry and bringing e-commerce back to the right track of competing based on internal skills.

Author/Ling Zhuhou

Produced by/Xinzhai Business Review

Over the past five years, the explosion of short video e-commerce with its traffic power has introduced ordinary consumers to the concept of 'lowest price across the network' for the first time - goods that usually cost three to four hundred yuan can now be sold for less than a hundred yuan under the vigorous promotion of live streamers.

Furthermore, the 'refund only' policy, which has been imitated by various platforms, has captured the hearts of a large number of consumers. This has pushed the price war among e-commerce platforms to an unprecedented intensity. This is what is meant by 'traffic supremacy and price kingship'.

Recently, Taobao announced that it will optimize its 'refund only' policy by enhancing merchants' autonomy in after-sales based on the new experience score system, while reducing or eliminating after-sales intervention for high-quality stores. The relevant policy will be officially implemented from August 9th, and the news quickly sparked heated discussions.

One of the major backdrops is that the tried-and-true traffic strategies in the e-commerce industry have started to fail this year. On the one hand, the long-term and excessive use of the 'refund only' policy has given birth to a large number of 'wool-gatherers' who make a living from it, fostering a gray industrial chain in the process.

Some merchants offering 9.9 yuan free shipping have seized price-sensitive customers by offering even lower prices and lower product quality. However, under this logic, the quality of goods has no other obvious advantages besides price, ultimately leading to the deterioration of the entire category, with consumers ultimately footing the bill. This is a typical example of 'bad money driving out good'.

In the end, the e-commerce industry has returned to the traditional selling logic of competing based on 'internal skills.' Whether it's reducing business operating costs or strengthening consumer rights, objectively speaking, improving the experience for both buyers and sellers, obtaining reasonable quality products at reasonable prices, and allowing sellers to 'earn money standing up' is the normal 'way of doing business' in the e-commerce industry. This time, Taobao has taken the lead in being the catalyst that returns the e-commerce industry to the right track.

I. The Cost of 'Low Prices & Refund Only'

Certainly, in terms of the relationship between consumers and merchants, the former is undoubtedly the weaker party. Statistics show that refund issues account for nearly one-third of the top ten types of online consumer complaints. Against this backdrop, the 'refund only' policy is necessary, both to protect consumers' legitimate rights and to effectively punish fake and shoddy products and runaway merchants.

Ms. Chen, an anime figurine enthusiast, purchased two anime figurines online, both of which were pre-order items scheduled for shipment in late February 2024. At the end of January 2024, Ms. Chen repeatedly inquired about the shipping time from the store's customer service, but received no response. It wasn't until more and more buyers like her left comments on the store's product page stating that they couldn't get in touch, the store was gone, or they couldn't get a refund, that she realized the merchant had run away.

The timing of Ms. Chen's incident is long past the wild growth period of the e-commerce industry from 2013 to 2015. In such situations, 'refund only' is undoubtedly an effective after-sales solution.

Undoubtedly, when a platform's growth reaches a bottleneck, the fastest-growing platform's most successful policy is often imitated by others.

Policies have loopholes. After 'refund only,' merchants still have the goods in their hands, and selling more or less is still profitable. They can even earn extra money by selling shipping insurance, which has become a low-profit, high-volume business model for 'wool-gatherers' under the 'no inventory model' following the popularization of the 'refund only' policy on e-commerce platforms in recent years.

The model of earning shipping insurance is also straightforward. Place multiple orders in the same store but ship them separately, then request a refund without reason upon receipt. The merchant needs to compensate 11 yuan for each shipping insurance. In other words, with just a few taps on your phone, you can earn a day's worth of meals. If it's organized as 'militarized freeloading,' the cost of returns borne by merchants can be imagined.

Anyone can see that both 'refund only' without returning goods and multiple compensations for single shipping insurance have unreasonably tilted the balance between merchants and consumers. Unscrupulous merchants should indeed be punished, but law enforcement should not fall into the hands of the cybercrime industry and wool-gatherers, nor should it involve malicious 'refund only' and suspected insurance fraud through shipping insurance.

This has caused a great deal of unjust suffering for a large number of honest merchants due to policy loopholes, and it has also indirectly harmed normal consumers.

Under this premise, merchants have two choices. One is to choose to leave platforms with strict after-sales policies and operate on platforms with normal after-sales policies, which undoubtedly clears out high-quality product sources.

Another type of seller, offering extremely low-priced '9.9 yuan free shipping,' actually doesn't have the above problems because their rigid expenses like material costs are already extremely low, and a few after-sales cases don't affect their profit margins.

However, if the current platform rules only allow such merchants to survive, it will also prevent consumers who demand quality products from purchasing truly high-quality goods, eventually leading to users leaving the platform and a decline in GMV.

The deterioration of the business environment caused by the phenomenon of 'bad money driving out good' in low-priced goods and the unscrupulous 'refund only' policy are the core reasons why Taobao is determined to change its platform like it did 20 years ago, thereby influencing the entire industry and bringing e-commerce back to the right track of competing based on internal skills.

II. Only by being the first to fire the shot can good merchants emerge

When the traffic dividend of platforms disappears completely, and everyone stands on the same starting line, e-commerce will return to the normal track of competing based on 'internal skills': whether it's product quality and richness, the business environment, logistics experience, customer service capabilities, product experience, promotion efficiency, etc., all constitute a scoring table in the minds of buyers and sellers. Only those with high overall scores can win. The era of one-trick ponies is over.

Whoever fires the first shot at this time is more likely to hold the ticket to the next era of e-commerce.

From the reform targeting 'refund only,' it can be seen that among the platforms freely giving away merchants' rights, Taobao has once again become the first to stand up. In the recent intensive adjustment of business operating rules, significant optimizations have been made to 'refund only': stores with an experience score of 4.8 or higher have the autonomy to handle returns and refunds, and merchants in other score ranges also have certain disposal rights.

In addition, there is another change overlooked by the media. Taobao Tmall stated that it would gradually improve the 'refund only' model, using machines to block suspicious 'wool-gatherers' and filter out high-value refunds for manual review. It's impossible for a large number of after-sales cases to be handled by human customer service one by one every day, so the importance of the 'refund only' model is self-evident. These adjustments are not just for high-scoring merchants but are fair to all merchants.

It can also be seen that Taobao is ready for the implementation of the new experience system. More importantly, if merchants who abide by the rules and normal consumers, their actual experience will not be qualitatively different from the past. The improvements to 'refund only' are not aimed at this group of users but at the 'wool-gatherers' and gray and black industries that exploit rules and bugs.

From the perspective of the overall growth of the e-commerce market, some platforms' indulgence in 'refund only' has caused quarterly GMV growth to drop below 30%, down from previous growth rates of over 40%. In addition, through increased efforts in 88vip and the 10 billion subsidy program, Taobao has made low prices increasingly perceptible.

From the third quarter of last year to the first quarter of this year, about 1.1 million merchants flowed to Taobao. This is a return to a business environment where 'experience is king,' bringing high-quality merchants and real consumer experiences back to an organic combination of ecosystems.

Currently, several merchants involved in the beta test said that unreasonable 'refund only' requests have sharply decreased after the optimization, and many abnormal behaviors are directly intercepted by the system. Normal 'refund only' requests can generally be negotiated autonomously. For higher-value orders that merchants are more concerned about, not only will the system not automatically approve them, but they will even be directly sent for manual review.

Unscrupulously pandering to 'price-sensitive' consumers cannot make business easy for everyone.

For transactions between buyers and sellers to normalize, it is necessary for participants to have a good experience in these interactions, including but not limited to consumers' evaluations of products and merchants, merchants' own credit mechanisms, and consumers' behavioral models. Only when platforms are fair and rational can they continuously 'introduce new ideas,' and the platform atmosphere will become better.

III. How will Taobao change the direction of the e-commerce industry?

Since its inception in 2003, domestic e-commerce has been competing based on 'internal skills.' However, two major deviations have occurred since 2020: first, the explosion of short videos and live streaming as new traffic forms has created a wave of successful examples that have caught the wind, and many merchants have not adequately prepared for the dissipation of traffic dividends.

Second, low prices have become the main theme of e-commerce, with platforms, merchants, and users all clamoring for low prices. Eventually, the industry's pursuit of low prices became extreme, with platforms relying almost solely on low prices as a guiding principle, ultimately harming not only merchants but also consumers. The one-size-fits-all approach of 'refund only' and mandatory shipping insurance pushed merchants to cut corners on manufacturing costs, leading to a significant decline in product quality. Consumers received low prices but also low quality, creating a lose-lose situation for both buyers and sellers.

Essentially, for the e-commerce industry to escape the aforementioned 'sick' business environment and return to the essence of selling goods, it requires the joint efforts of platforms and consumers.

In other words, it's about leveling the 'experience' - the comprehensive platform experience consisting of merchants' normal operations and consumers' rights, benefits, and experiences.

From the platform's perspective, it needs to use a series of operational tools to reduce merchants' operating costs and ensure their legitimate rights and interests throughout the sales process. Only after merchants have a 'stable rear,' will product quality improve, and prices will become reasonable.

Starting this year, consumers can also notice that the shopping experience on Taobao is becoming increasingly pure.

On the one hand, this year's 618 shopping festival has become extremely simple, with the biggest change being the elimination of the official pre-sale stage.

At one time, this was a marketing strategy designed by e-commerce platforms to help merchants prepare goods in advance and reduce logistics pressure. However, over time, this mechanism gradually exposed shortcomings in user experience - from seeing discount previews to finally paying and shipping, customers had to wait up to 10 days, a lengthy process with too many variables, resulting in a high return rate.

After the elimination of pre-sales, the previous practice of 'completing quizzes to reach the full discount threshold' has also become a thing of the past.

From the merchant side, at the 2024 Merchant Service Conference held in January this year, Taobao Tmall clearly stated its intention to upgrade the new comprehensive store experience scoring criteria. Under the new scoring system, the 'store experience score' and 'product experience score' will be comprehensively applied to most store operating scenarios on Taobao. Product reputation will be fully linked to merchant operations, and the higher the experience score, the more traffic merchants' stores and products will receive.

In the low-price battle, Taobao is well aware that no platform has an absolute and solid moat. The competition for low-price mindsets will become a long-term war, and it is no longer realistic for other platforms to enjoy low-price dividends steadily like they did in previous years.

When the dividends disappear, everyone stands on the same starting line, and Taobao's well-established ecosystem of good merchants will provide a feedback loop. E-commerce will return to the normal track of competing based on 'internal skills': product quality and richness, business environment, logistics experience, customer service capabilities, product experience, promotion efficiency, etc., constitute a scoring table, and only those with high overall scores can win.

This may also be a kind of cycle. More than a decade ago, Taobao single-handedly ushered in the era of big e-commerce. More than a decade later, Taobao has also chosen to initiate a new round of experience reform. The lose-lose situation between buyers and sellers and the continuous deterioration of the business environment are expected to truly improve with Taobao as the catalyst. As the e-commerce industry is about to enter a new historical trajectory, Taobao is not just a 'switchman' but also a pioneer.