Recently, controversy surrounding the 'only refund' policy on e-commerce platforms has heated up again.

Some merchants have vented their frustrations in media interviews, stating that they have encountered 'malicious only refund' situations and been taken advantage of by 'wool-gatherers' exploiting loopholes in the platform system.

However, a closer look at these reports reveals that even among merchants who have publicly spoken out, the percentage of orders involving only refunds is only in the single digits. Why has the system of only refunds, originally intended to combat poor-quality merchants, ended up amplifying conflicts between buyers and sellers, and even become the 'last straw' that breaks merchants' backs?

Apart from emotional impacts, some merchants' criticisms of the only refund policy largely reflect the difficulties they face in running their businesses. This leads to a question: Among the operating costs of Taobao, JD.com, and Pinduoduo, which one poses the biggest burden on merchants?

01 Taobao introduces 'new rules,' will traffic become cheaper?

On July 26, Taobao made several adjustments to its merchant rules, with measures related to merchant operating costs focusing mainly on two aspects:

First, a basic software service fee of 0.6% of order value will be charged to all merchants within the Taobao ecosystem, including Taobao, Tmall, and Xianyu, eliminating the annual fee previously charged to Tmall merchants.

A widely discussed point is that in the past, Taobao C-stores did not need to pay platform fees based on order value, but now all merchants face a 0.6% basic software service fee. However, many exemption measures have also been introduced. Small and medium-sized merchants receiving payments of no more than 120,000 yuan per year will have their basic software service fees fully refunded. Merchants with transaction amounts between 120,000 and 1 million yuan will receive a 50% discount in the form of advertising vouchers. For high-value orders and wholesale merchants, a cap of 60 yuan per order will be imposed on fees until 2025.

Second, 'efficiency' will be improved in traffic promotion fees, reducing the burden on merchants by increasing ROI and encouraging them to increase paid promotion efforts, which will also enable the platform to achieve stable revenue growth.

Currently, Taobao's traffic promotion fees mainly include Direct Traffic, Gravity Cube, keywords, full-site promotion, targeted audience promotion, and event placement fees. The most discussed topic outside is Alimama's full-site promotion, which began internal testing in April, aiming to lower the threshold for merchants' advertising investment. According to media reports, some merchants participating in full-site promotion have reported a 5%-10% reduction in advertising expenses and a more than 10% increase in GMV and conversion rates. Third-party research data shows that the ROI of top merchants has increased by 5%-8%, while that of mid-tier merchants has increased by 12%-15%.

After the rule adjustments, merchants' operating costs on Taobao platforms mainly focus on four areas:

Store opening and tool fees: Given that deposits and annual fees have been waived, and business tools such as Business Advisor are now free, this portion accounts for less than 1% of costs.

Platform service fees: All merchants must pay a basic software service fee of 0.6%. Tmall merchants must also pay a technical service fee of 2%-5% (commonly known as 'commission'), as well as Tmall points and other fees, accounting for approximately 5%-7% of total revenue.

Traffic promotion fees: These are the costs of 'buying traffic.' Based on Alibaba's data before commission revenue was merged into customer management revenue in Q3 2020, the ratio of commission revenue to traffic revenue was approximately 1:2.4. Even if the full-site promotion reduces some advertising costs, the proportion will still exceed 10%.

After-sales and logistics storage fees: These include costs related to transaction disputes such as shipping insurance and only refunds, as well as fees for storage and other services in collaboration with the platform, accounting for approximately 5% of total costs (varying by industry).

It can be seen that among merchants' operating costs on Taobao, traffic promotion fees may account for more than 50%, far exceeding after-sales costs such as only refunds.

This is likely why Alibaba chooses to return basic software service fees to merchants in the form of advertising vouchers and improve the efficiency of traffic promotion fees. While this may reduce traffic costs to some extent, it is also undeniable that merchants rely heavily on paid promotion.

02 Self-operated vs. POP: Can JD.com achieve traffic equity?

Unlike Alibaba, merchants on JD.com can be divided into two categories, each with different fee standards and operational management models.

The first category is JD.com's self-operated model. The most common arrangement involves brand partners signing procurement and sales contracts with JD.com, with JD.com assuming costs related to invoice taxes, logistics, storage, and after-sales service.

Merchants' operating costs primarily consist of deposits and gross margin protection fees. Depending on the brand and product category, gross margin protection fees generally range from 10%-30%, calculated as follows: Gross Margin Protection = Sale Price x Gross Margin Protection Rate - JD.com Gross Margin. For example, if a product's procurement price is 100 yuan, and the merchant and JD.com agree on a 20% gross margin protection fee, the product will be settled directly at the procurement price if sold for 150 yuan without triggering the gross margin protection clause. If sold for 100 yuan, the gross margin protection clause will be triggered, and the merchant will receive only 80 yuan in payment.

The second category is the POP model, similar to merchants on Tmall, requiring merchants to pay JD.com deposits, transaction service fees, and operational support service fees.

Transaction service fees are the same as Taobao's basic software service fees, charged at a rate of 0.6%. Operational support service fees, akin to 'commissions,' vary by product category, typically ranging from 1%-10%, with some sports categories reaching as high as 20%-50%. For some categories such as sports nutrition, operational support service fees are charged based on a combination of base deductions and advertising deductions. If merchants adopt JD.com Logistics' integrated solution (storage and logistics), they will also incur storage costs of more than 5%.

Regardless of whether it's the self-operated model or the POP model, marketing expenses such as promotion slots, category coupons, and WeChat Moments advertisements account for a significant portion of operating costs.

According to tracking statistics from business consulting firm Jiuqian, the GMV ratio of JD.com's self-operated merchants to POP merchants is 7:3, far exceeding JD.com's expected ratio of 4:6. As mentioned in a report by Logistics & Purchasing magazine, POP merchants spend 100 yuan to acquire traffic resources that self-operated merchants can acquire for only 30 yuan. The conversion rate for POP merchants is around 3%, while that for self-operated merchants is around 20%. Another indicator is the 'double-counting scheme' for self-operated merchants, where 70%-80% of promotion expenses can be used to offset gross margin protection fees.

The issue of 'traffic equity' between self-operated and POP merchants has naturally become a focal point of public opinion: The marketing costs invested by self-operated merchants may not be lower than 15%, while those of POP merchants are generally around 10%. From a traffic perspective alone, it's clearly not a 'fair competition.'

To promote traffic equity, JD.com launched a series of initiatives after 2023, such as the 'Spring Dawn Plan' to lower the entry barriers for small and medium-sized merchants, offering fee exemptions for 80% of categories. JD.com hopes to gain a pricing advantage by passing on benefits to merchants. In terms of traffic allocation, it is rumored that Liu Qiangdong requires that 'price weighting in traffic distribution cannot be lower than 50%.' If POP merchants offer more competitive prices than self-operated merchants, they are likely to receive more traffic.

03 Price competition on Pinduoduo: Low prices equal traffic?

Pinduoduo's operating costs can also be broken down into two main categories.

The first is technical service fees, which include basic technical service fees, category-specific technical service fees, 'Billion Subsidy' technical service fees, and live streaming technical service fees.

Basic technical service fees are commonly charged at 0.6% to merchants registered on Pinduoduo. For virtual goods such as network services, personalized customization, and gaming services, a category-specific technical service fee of 0.1-1 yuan per order is charged. Prescription drugs, jewelry, and other special categories are charged a technical service fee of 1%-5%. The commission rate for 'Billion Subsidy' products ranges from 1%-3%, with most not exceeding 5%. Live streaming technical service fees are charged separately to merchants for orders completed through live streaming channels at a rate of 0.4%-3.4%.

The second is traffic placement, currently including full-site promotion, search customization, oCPX promotion, and multi-scene (event resource positions) placement modes.

The most talked-about topic is 'full-site promotion,' where merchants can choose their bidding strategy based on different needs. For example, low-price products can bid based on 'target ROI,' enabling quick volume acquisition through promotion once the profit and loss ratio is calculated. Merchants with specific requirements for advertising spend returns can choose to bid by 'transaction,' corresponding to the advertising cost per transaction. Based on Pinduoduo's Q1 2024 financial report revenue from online marketing and transaction services, it is estimated that merchants' traffic placement expenses are roughly equal to transaction service fees.

Compared to traffic placement, what may concern Pinduoduo merchants more is the algorithm and traffic allocation mechanism deeply tied to low prices.

Unlike Taobao and JD.com, which previously favored branded algorithms, Pinduoduo's traffic distribution logic is based on low prices for individual products. The lower the price offered by merchants, the more traffic they receive. As long as merchants maintain a low-price advantage, they can naturally attract traffic without needing to spend money on traffic promotion.

This seemingly simplistic logic has its rationale: Small and medium-sized merchants can reflect approximately 15% of their marketing expenses in their prices, creating a price advantage across the entire network and earning Pinduoduo's algorithm recommendations. Merchants can sell their products with less effort, users can purchase low-priced goods, and Pinduoduo continues to deepen its 'low-price mindset,' forming a positive cycle driven by algorithms.

One brand has stated to the media that 70%-80% of their traffic on Pinduoduo comes from recommendations rather than active user searches. If merchants have a pricing advantage, the proportions of commission costs, after-sales costs, and traffic costs can be controlled at 5%-7%, compared to 12%-27% on other platforms. However, the entire operating logic is based on individual products rather than stores, resulting in low product repurchase rates. Even when repurchases occur, they are mostly driven by 'previously purchased' associative recommendations.

As Taobao, JD.com, Douyin, and others all begin to compete on price, it may be the real test for merchants. In the context of 'price comparison across the entire network,' the era of brand premiums has ended, and low-profit, high-volume sales will become the norm, making it all the more important to control marketing expenses.

04 The real mountain: The cost of 'buying traffic'

After 25 years of market competition, the basic operating costs of e-commerce platforms have leveled out. The biggest factor determining whether merchants can make money is precisely the cost of traffic.

A corresponding scene is that more and more brands are beginning to operate on multiple platforms, simultaneously opening stores on Taobao, Tmall, JD.com, Pinduoduo, Douyin, and other platforms. They study user preferences on different platforms and make targeted operational adjustments, either spending money to buy traffic or trading low prices for traffic, unwilling to miss any potential traffic lowlands.

It is precisely small and medium-sized merchants without brand influence, private traffic, or high average order values who feel the most threatened. The lack of brand influence means they cannot obtain natural traffic, and low average order values mean there is little room for promotion expenses, making it impossible for them to compete with branded merchants in marketing... These unchangeable shortcomings make them the most sensitive to costs.

Although the percentage of 'wool-gatherers' among small and medium-sized merchants' orders is less than a single digit, it has become an 'unbearable burden' in an intangible way.

Looking beyond the surface and returning to the essence, when merchants complain about 'only refunds,' it is precisely the e-commerce platforms that need to reflect on how to reduce merchants' traffic costs. A platform that earns substantial advertising revenue while merchants struggle under the burden of operating costs is not a healthy ecosystem.