09/14 2024 429
Original by XinOu
Author | Guang Chen
Editor | Zhao
After the major platforms loosened restrictions on "only refunds," the second major burden on merchants, returns and exchanges, has also begun to loosen. Starting on September 12, Taobao announced that it will officially launch the Return Guarantee service for all Taobao and Tmall merchants, directly addressing the issue of high return and exchange costs for merchants.
"It's a disaster. During the 618 period, our sales were 10 million yuan, but refunds alone reached 3.5 million yuan, and returns and refunds reached 3.8 million yuan, resulting in an overall return rate of 80%. After all that hustle, we actually lost more than 600,000 yuan," This is not an alarmist statement but a true case from a merchant who made headlines on Weibo this June for their operations on a new platform.
This "terrifying" return situation is not an isolated case in recent years. Especially since the second half of this year, cases such as "a 1,400 yuan washing machine refunded solely due to installation issues," "an 11 yuan online purchase refunded and then compensated with 800 yuan," and "20,000 sellers banding together to resist unreasonable sole refunds" have continued to emerge.
Source: Weibo
As sole refunds and shipping insurance have been embraced and intensified by e-commerce platforms in recent years, merchants have increasingly become victims of freeloading and exploitation. Under the tacit approval of some e-commerce platforms and irrational bias in their rules, extreme cases of malicious refunds by buyers have left many merchants helpless and unable to seek compensation.
In the current economic environment, the trend of alternative consumption is on the rise. With price wars escalating on platforms, product quality is increasingly compromised, and consumer satisfaction has hit a low point. Many platforms have resorted to sole refunds and return shipping guarantees to cater to buyers' rising demand for refunds and returns. However, the abuse of sole refunds and the increasing costs of return shipping guarantees have eroded the profit margins of many merchants, pushing some to the brink of bankruptcy. Merchants have had to continually reduce product costs to ensure profitability, leading to a vicious cycle of declining quality and profitability.
Ultimately, merchants, consumers, and platforms in the e-commerce industry are all affected, spiraling downward into a deteriorating environment.
Where lies the root of the problem? Is it buyers' excessive demands, merchants' inadequate responses, or platforms' unfavorable policies? From the final outcomes and intermediate processes, it seems that all three factors are at play. So, which link needs to be adjusted to reverse this vicious cycle?
Some merchants have begun using inferior but cheaper products to offset the growing pressure of return and refund costs, while some buyers have responded negatively with lower prices and fewer purchases in the face of a deteriorating e-commerce environment. Clearly, both merchants and buyers appear powerless and passive.
In this predicament, platforms have taken the lead in easing restrictions on merchants, providing some relief. Prior to the launch of the "Return Guarantee" service, Taobao had already begun setting boundaries for sole refunds - in late July, Taobao officially launched its new experience scoring system, which clearly grants merchants greater autonomy in handling after-sales issues based on their experience scores. At the same time, the platform upgraded its identification models, firing the first shot against "malicious sole refunds."
Although the ultimate effectiveness of these measures remains to be tested by the industry, their emergence is undoubtedly a positive signal. In a healthy e-commerce ecosystem, the reasonable interests of both consumers and merchants should be fully protected.
Only in this way can the industry, which has just bid farewell to its wild growth phase and is moving towards maturity, successfully navigate countercyclical trends, achieve truly sustainable development, and move forward towards the next 20 years.
1
Price War + Sole Refunds + High Returns
Merchants' Costs Skyrocket
E-commerce has become increasingly challenging in recent years, as most merchants can attest.
On the one hand, the economic environment is unfavorable, consumer purchasing power has declined, and merchants are forced to lower prices. On the other hand, competition among e-commerce platforms has intensified, leading to excessive price wars among merchants that compromise product and service quality. This has resulted in an increasing number of customer complaints, negatively impacting all parties involved.
Since the end of last year, various platforms have begun offering "low-price weapons." Guided by the pursuit of absolute low prices, these platforms have taken turns entering the fray.
One of the most representative tools is the "auto-price-matching" feature. Some merchants have stated that the result of price wars among competitors is that consumers suffer. "We changed suppliers six times in a week, from imported materials to domestic materials and even recycled scrap. Consumers think they're getting the same thing at a lower price, but in reality, the materials have been downgraded to the worst quality. The same price buys products of significantly lower quality, with some being several times worse for only a few yuan cheaper."
Under the pressure of platform price wars, merchants are forced to lower product and other costs, inevitably leading to a decline in product and service quality. Sole refunds and shipping insurance have become tools and policies for platforms to address consumer dissatisfaction with low-quality products and services. However, as the balance between merchants and buyers, platforms have undoubtedly tilted towards buyers, placing increasing pressure on merchants.
Xu Li runs her own clothing store on several e-commerce platforms, and business has become increasingly challenging in recent years. Especially after the introduction of sole refunds, freeloading has become more prevalent. If they don't ship, the buyer can complain about delayed shipment or out-of-stock, and the merchant will have to pay a 30% compensation. If they do ship, the buyer can request a sole refund, leaving the merchant with nothing.
Xu Li says she has to smile and bear it with increasingly demanding buyers. "If you don't respond promptly, the platform will fine you 20 yuan. If you sue the buyer, your entire store may be shut down by the platform," she laments.
If sole refunds leave sellers at a loss, are returns and refunds any better?
According to Xu Li, the situation may be even worse. She says that maintaining returned and refunded items is an additional cost. "We iron and package our beautiful dresses in fancy boxes and send them out, but some people return them after more than ten days, and sometimes even after a month, stuffed in dirty, torn bags, smelling of sweat or perfume. Many items can only be sold at a low discount after maintenance, while many others have to be discarded as scrap," she says, frustrated. "Others lose money to make a name for themselves, but I lose everything."
In addition to being burdened by sole refunds, merchants are also plagued by returns and exchanges.
Li Wei sells customized ceramic tiles on e-commerce platforms and typically ships them after confirming the model. Sometimes, customers receive the tiles but decide to return them. The platform unilaterally blames Li Wei's side and rules that they must bear the round-trip shipping costs of 3,600 yuan. "My total sales are only 2,900 yuan, and they want me to pay 3,600 yuan in shipping costs. It's better to just give it to the customer for free," Li Wei laments, having faced this issue for some time.
To address the rising return rate across the industry, various e-commerce platforms have introduced various forms of return shipping guarantees to avoid disputes between merchants and consumers over who should bear the shipping costs, thereby reducing merchants' losses in the return process.
However, with the involvement of "gray industries," these return shipping guarantees have been heavily exploited by "wool gatherers." Some professional wool gatherers collude with courier stations to buy products with return shipping guarantees, earning a profit by claiming the difference between the reimbursed shipping cost and the actual paid shipping cost. As a result, a service originally intended to enhance consumer experience and reduce merchant after-sales costs has become a source of pain for some merchants due to the "gray industries."
Moreover, although the names of return shipping guarantees vary among major e-commerce platforms, the prices have increased significantly due to the involvement of "gray industries" and the rising return rate across the industry. Many merchants on Xiaohongshu complain that the cost of shipping insurance per order has risen to 3 to 5 yuan. A small jewelry store owner, Abao, admits that he was shocked when he saw the quote, saying, "The price is even higher than if I were to bear the buyer's return shipping costs myself."
This phenomenon also plagues merchants in the case of sole refunds. Some wool gatherers engage in extortion tactics commonly seen in movies and TV shows, such as demanding "a pack of cigarettes or your store is in trouble." They typically make sudden and malicious bulk orders and immediately request sole refunds.
One merchant helplessly states, "Sometimes, even paying 'protection money' doesn't guarantee peace. If they see you're weak, they'll just keep extorting you even more."
2
Loosening "Sole Refunds"
Launching "Return Guarantee," E-commerce Accelerates Anti-Internal Competition
Unreasonable "sole refunds" and high after-sales costs have become a "tight collar" for merchants on platforms and the final straw for many.
According to Guangzhou Daily, a women's clothing merchant complained online about a return rate of up to 80%, which went viral and resonated with many peers. Some merchants lament, "The return rate for summer clothing this year has almost reached 90%. Selling ten pieces and returning nine is the norm." Others have shared their own refund rates: Product A had 2.1059 million exposures and a transaction refund rate of 84.38%; Product B had 434,500 exposures and a transaction refund rate of 93.33%...
Behind this lies a "gray industry" that ultimately unbalances the scales between consumers and merchants. Buyers can easily return or refund products, but sellers are powerless to respond.
Finding a new balance between merchants and consumers is a crucial issue that the e-commerce industry urgently needs to address.
Previously, many e-commerce platforms have announced the abandonment of "absolute low-price strategies."
After 618, Taobao Group made it clear in a closed meeting with merchants that it would reduce its reliance on "five-star pricing power" and weaken its absolute low-price strategy. In mid-August, Douyin E-commerce adjusted its business objectives, no longer prioritizing "pricing power" and focusing on GMV growth in the second half of the year, after initially prioritizing low prices.
With prices already at rock bottom across the industry, platforms are de-emphasizing price wars, allowing merchants to retain profits. With a basic guarantee of product and service quality, there is no need to impose harsh penalties on all merchants.
July of this year marked a significant turning point.
At the end of July, Taobao boldly announced the loosening of restrictions on "sole refunds." Merchants with store experience scores of 4.8 or higher are granted autonomy in handling returns and refunds, with higher scores conferring greater autonomy. Taobao also upgraded its abnormal behavior recognition model for sole refunds after receipt of goods, rejecting unreasonable sole refund requests.
This is the first e-commerce platform to publicly reject unreasonable "sole refund" behavior.
Loosening restrictions on sole refunds has had an immediate impact on reducing conflicts between merchants and consumers and curbing abnormal sole refund requests. According to Taobao platform data, within the first week of implementing the new policy, the number of "sole refund" cases handled by the platform decreased by approximately 20%.
Li Ying, who runs a clothing business, notes the difference. "Mainly, it's much more peaceful now. My heart doesn't race as much. There are fewer sole refunds, especially the strange ones that are now automatically intercepted by the system, saving us the trouble of dealing with them. For normal sole refunds, we handle them through communication with the buyer," she says.
Regarding return shipping costs, Taobao's newly launched Return Guarantee service directly reduces costs for sellers.
Calculations show that the Return Guarantee is expected to reduce merchants' return shipping costs by 2 billion yuan annually. Compared to merchants' current return shipping costs, subscribing to the Return Guarantee will reduce costs by at least 10% and up to 30%. Assuming a 20% reduction, if Taobao merchants spend a total of 10 billion yuan on shipping insurance per year, a 20% reduction would amount to a savings of 2 billion yuan. For merchants paying 3 to 5 yuan per order in shipping insurance, this is indeed a welcome relief.
Especially with Double 11 approaching, these two issues will be of utmost concern to merchants. Loosening restrictions at this time undoubtedly allows more merchants to enter the promotional season unencumbered, giving them a boost for the year's performance.
Under the trend of optimizing the business environment initiated by Taobao, 1688 also announced that starting from early September, it will severely crack down on malicious "wool gathering" and "sole refunds" and optimize the "sole refund" rules. JD.com launched a reverse price protection service, providing direct compensation to merchants who have purchased "shipping insurance." Meanwhile, platforms like Douyin and Pinduoduo have also taken measures such as reducing merchant commissions and deposit requirements.
Li Ying feels that "platforms are intervening less and imposing fewer hard requirements. Now it's more up to us. Business is tough, but I hope platforms can offer more benefits to those of us making a living on them, sharing profits to get through tough times together."
After the first shot fired by the pioneers, everyone has taken action, and everything seems to be changing for the better.
3
Closing Thoughts
In biology, decomposers, producers, and consumers each have their roles, and a healthy ecosystem enables all organisms to thrive. The same is true in the e-commerce world. Merchants, as providers of goods and services, need a fair business environment to offer high-quality products and services; consumers are the lifeblood of the e-commerce market, and their satisfaction directly affects market activity and credibility; platforms, as crucial bridges between merchants and consumers, bear the responsibility of maintaining market order and ensuring transaction security.
Building a healthy e-commerce ecosystem requires platforms to establish reasonable rules. Only when platforms can effectively coordinate the relationship between merchants and consumers and ensure fair and transparent transactions can all three parties benefit.
Amid a series of industry disruptions over the past year, e-commerce players have been passively caught in a downward spiral, with no winners. After the toughest 618 in recent years, with Double 11 approaching, e-commerce players have little time to waste and must get back on track.