Is this year's Double 11 a watershed for the e-commerce industry?

In a series of actions such as multiple rounds of stimulus policies and huge consumer subsidies directly distributed to the public, the Chinese consumer market and "Double 11" have reached another turning point.

When low-quality and cheap products are everywhere on the Internet, the one-sided extreme low price no longer constitutes a carrot to attract customers, but has instead become a stick that harms merchants. The extreme low-price competition among e-commerce platforms has shifted from a white-hot state to a more stable one. Previously, there were rumors in the media that major e-commerce platforms have been "returning to GMV" and beginning to make business decisions based on sales.

In the past five years, the e-commerce industry has taken a tortuous detour. R & D innovation and brand upgrading have not been discussed, and price wars have become the industry theme. This Double 11, benign competition has replaced vicious involution, and there is finally some glimmer of hope.

The sales scale of mature brands has returned. Taking the data released by Tmall as an example, this year's Double 11 saw an explosion of brand products. High-unit-price products in various industries and well-known big brands have returned to the "C position". As of 0:00 on the 11th, 79 brands in the Tmall beauty track have exceeded 100 million yuan in sales, 139 in home appliances and home furnishing, 34 in 3C digital, and 66 in clothing...

To a certain extent, the choices and investments of these brand merchants among different platforms affect the distribution of the commercial territory of Double 11.

And the brand choices are driven by the choices of consumers. Just as Miura Sho said in "The Fourth Consumption Era": "The ultimate meaning of consumption lies in how to live a fulfilling life". Whoever can provide greater value to customers with quality and service will have the opportunity to stand out in Double 11.

Chinese e-commerce has finally come full circle and begun to return from "price competition" to "value competition".

01 Brand products explode, Tmall expands its fundamental market

The explosive momentum of this Double 11 has already shown signs earlier.

Data monitored and summarized by the Office of the Leading Group for Ensuring Smooth Logistics and Unimpeded Transportation under the State Council shows that from October 21 to November 3, the cumulative express delivery volume of postal and courier services has exceeded 8.11 billion pieces. Last year, the State Post Bureau announced that during the "Double 11" promotion (November 1 to November 16, 2023), the cumulative express delivery packages received were 7.767 billion pieces.

The express delivery volume in the early 14 days of this year's Double 11 has already exceeded the express delivery volume received in the core 16-day period of last year's Double 11.

Statistics from Star Map Data also show that as of October 30, the cumulative sales of the 2024 Double 11 across the entire network have reached 845 billion yuan. The report states: "This figure not only sets a new historical sales record for October but also demonstrates the continued enthusiasm and high participation of consumers in the Double Eleven Shopping Festival."

Based on information from various sources, it can be inferred that the momentum of this year's Double 11 is highly related to the explosion of mature brand products.

For example, during the period from October 14 to November 5, the data agency "Analysys" calculated that the beauty and skin care industry on Taobao Tmall increased by 18.3% year-on-year.

Which products are "leading the rise" in this?

Tmall announced on November 3 that in the beauty and skin care category, the sales of high-end brands increased by nearly 30% year-on-year, while new beauty products priced above 500 yuan increased by more than 200%. The number of international big brands on the sales list has increased compared to last year. As of today, several international brands such as La Mer, Helena Rubinstein, SK-II, CPB, MISTINE, Kiehl's, and Tom Ford have increased by more than 50% year-on-year. The basic domestic product market is stable, and Proya continues to maintain the top position. Functional skin care products of domestic brands such as Collypink and Recoveree are growing rapidly.

In the clothing and sports outdoor categories, high-unit-price clothing such as Tactical Jacket / Outdoor Assault Jacket / Windbreaker, coats, and down jackets priced above 1,000 yuan have seen an increase in sales. In the 3C digital category, domestic Android flagship phones priced above 4,000 yuan have shown a significant growth, with the transaction volume increasing by 57% compared to the same period last year.

Some emotional emerging categories also showed a strong explosion in this year's Double 11. Statistics from the data agency "Jiuqian Zhongtai" show that emerging categories such as trendy toys, outdoor, and pets have seen an explosion, "showcasing the diversified and upgraded consumption demand trend". In these several tracks, Taobao Tmall's market share in mainstream e-commerce platforms is more than 60%.

One of the driving forces behind these changes comes from the government's "trade-in" subsidy. The "trade-in" subsidy, which has been carried out nationwide and covers home appliances, digital products and other goods, can be superimposed with the platform preferential mechanism of Tmall Double 11 for the first time this year. Coupled with the discounts provided by brand merchants, the price of some products can be as low as 5.5 discounts.

The above-mentioned report released by Analysys pointed out that taking advantage of the government subsidy, the home appliances and home furnishing category of Tmall increased by 27.6% year-on-year, and the 3C digital category increased by 27.2% year-on-year. Both the growth rate and market share have reached the top level in the industry.

In other industries, the "trade-in" subsidy cannot fully explain the growth rate pattern in the Double 11 promotion, and the brand choice plays a more fundamental role.

The return of high-priced, big-brand, and emotional consumer goods to the center of the promotion also means that the trend of all merchants desperately competing for low prices from white-label to brand-name products in the past few years has been reversed from the consumer side.

In the past few years, with the rise of white-label products, the e-commerce industry generally believed that only consumers in the top 20% of income seemed to value brands.

However, after the public's disillusionment with the "low price across the entire network", Chinese e-commerce consumers, like Japanese consumers thirty years ago, have returned to rational and diverse needs, paying more attention to quality goods and services.

02 Returning from "price competition" to "value competition"

Providing greater value to the market is the original intention of e-commerce.

In the past 20 years, Chinese e-commerce has carried one blue ocean after another, one new brand after another, and one new product after another. Dispersed demands are aggregated by the Internet, creating an explosive commercial space. The brand flagship store system and the higher information symmetry requirements of the platform have also "rectified" many industries represented by electronic digital products.

However, in the past few years, "value" has first given way to "price", and then to the extreme low price that even sells at a loss.

A report in "China Business News" told a case:

A merchant in Jinjiang, Fujian produced a popular pair of slippers priced at 6 yuan per pair. Due to the low price, it received platform traffic tilt and became the best-selling product in the same category. However, soon after, a merchant in Hebei launched the same product with the same picture, priced at 5.5 yuan per pair. The two sides took turns lowering the price until the Hebei merchant reduced the product price to 4.5 yuan per pair - the cost of this slipper is 5.1 yuan per pair, and the selling price of 4.5 yuan is far lower than the product cost.

Merchants have been suffering from involution for a long time, but in a buyer's market, no one can stay out of it. At the same time, due to changes in the international situation, some low-quality production capacity in China that was previously mainly for export will continue to face clearance, and the domestic e-commerce's capacity to accommodate these cheap goods has also reached its limit.

The platform must encourage merchants to create value instead of blindly lowering prices.

Chen Weiye (nickname: Chuduan), the president of the Taobao Platform Business Unit, pointed out the "three major chronic problems" in the industry at the Tmall Double 11 launch conference: low-price involution, high return shipping cost, and malicious only refund.

Before Double 11, Taobao Tmall also set out to solve these three major problems.

Low price is still important to Taobao, but the idea is to operate products in different price bands rather than just by lowering prices.

This year's Double 11, Taobao's brand low-price channel "Hundred Billion Subsidy" has been upgraded to "Hundred Billion Super Subsidy", and the total order volume has exceeded 100 million orders as of November 3. In the past year, this low-price product portfolio has received considerable attention and investment. According to Taobao's announcement, the number of cooperative merchants for this year's Hundred Billion Subsidy has doubled, and the number of single products with a transaction volume of over 10 million has exceeded 100,000.

The highly anticipated "Experience Score" system of Taobao aims to become an evaluation standard that measures value rather than just price. On July 26, Taobao Tmall announced the full launch of the new version of the Experience Score system, covering multi-dimensional indicators such as product quality, store service, and after-sales logistics. For merchants with a high Experience Score, the platform will give more traffic tilt.

According to the announcement by Taobao Tmall, two months after the official launch of the new "Experience Score", the proportion of high-experience-score merchants with a score of 4.8 and above on the Taobao Tmall platform has exceeded 36%.

The "Experience Score" makes the service standards "white-boxed" based on the price of each price band and the corresponding service quality, and directly announces these standards. At the same time, hundreds of thousands of merchants have stepped out of the low-price involution and begun to focus on providing customers with value that matches the price.

While the "Experience Score" is exerting its effect, Taobao's large model intercepts more than 400,000 unreasonable only refunds every day. The product "Return Insurance", which aims to reduce the return cost, has effectively countered the continuously rising return cost during Double 11.

For example, the packaging of skateboards is usually a box more than one meter long, and the shipping cost of one product is 20 to 30 yuan. During the Double 11 period, the order volume increases, and the return shipping cost has become a challenge for many stores.

After the Taobao store "Nishan Extreme" that sells skateboards opened "Return Insurance", the store owner Banya said: "We used the service of Return Insurance as soon as it was available. Now Return Insurance can cover 20% to 30% of our return cost, which is about 6 to 7 yuan per item. This has greatly reduced the pressure on our small and medium-sized merchants."

Before Double 11, Taobao further reduced the service fee of "Return Insurance", with the reduction rate concentrated at more than 40%, and the maximum reduction rate can be as low as 75% after superimposing industry subsidies and new merchant discounts.

Although these measures cannot completely eradicate the various problems of Chinese e-commerce for the time being, Taobao Tmall has at least taken an important step in promoting merchants to return from the "price war" to the "value war".

Now, it's up to consumers to vote with their feet.

03 What does the platform rely on to "win votes" for Double 11

What do consumers want? This question may not be generalized.

The more than 42 million 88VIP members want more discounts on mature brand products.

In the past year, the number of Taobao's 88VIP members has continued to maintain double-digit growth, forming a top-level e-commerce paid membership scale in China. Taobao Tmall has been increasing the rights and interests related to members. This Double 11, the issuance of large coupons for 88VIP has doubled, and the number of coupons that each person can receive has increased from 2 to 4.

Relevant business leaders once revealed, "More than half of the sales of top brands on Tmall are contributed by 88VIP." This group of core high-purchase consumers of Taobao Tmall has a higher recognition of brands. Giving this group of consumers more discounts can better help brands accumulate customer assets.

Therefore, in the past year, the scale of the 88VIP annual cooperative brand has increased by more than 300% year-on-year.

This year's Tmall Double 11, the contribution of 88VIP to the brand explosion is even more significant. From the start of the pre-sale to 24:00 on the 31st, the number of 88VIP members who placed orders and made purchases increased by more than 60% compared to the same period last year, and the per capita purchase amount increased by more than 30%.

During the Double 11 period, the transaction volume of 88VIP members of the skin care brand La Mer (Lamer) accounted for more than 90% of the entire store. During the internal purchase event of the domestic beauty brand Proya from October 20 to 23, the transaction volume of 88VIP members accounted for more than 70% of the entire store's transactions. Among them, the number of new 88VIP customers increased by more than 600,000, and the transaction volume of new 88VIP customers accounted for more than 60% of the entire store's new customer transactions.

Young people born after 1995 and 2000 attach more importance to the platform's diverse supply, new brands, as well as simplicity and convenience.

Tmall established the "Treasure New Brand" project in 2019. In April this year, Tmall proposed that the two projects of "Treasure New Brand" and "Super Brand Day" will jointly incubate 100 new brands with sales of over 100 million yuan. By the start of the Double 11 sales period, 469 new brands have won the first place in their respective trend categories, more than 100 more than during the 618 promotion.

More convenient payment options will also benefit industries that young consumers are interested in.

Before Double 11, Taobao Tmall announced that it will add WeChat payment on the basis of supporting payment methods such as Alipay and bank cards. After this interconnection, the data agency "Insight Data Research Institute" estimates that the new user space added by Taotian is 152 million, and the incremental GMV scale is 576.3 - 1,088.3 billion yuan. Under an optimistic expectation, the incremental GMV can reach 2 trillion yuan.

According to a report from "Jiuqian Zhongtai", trendy toys, pets, and outdoor tracks have all shown strong explosive power during this year's Double 11. Taobao Tmall platform accounts for as high as 70% of the e-commerce sales in the Chinese trendy toy industry. During the early stage of the Double 11 promotion (October 14 - 24), the explosive power is still as high as 252%.

In previous years, the trend of consumption stratification has already been observed by the industry. On this basis, the platform's strategy of stratified operation for different goods and groups of people is becoming more mature.

But some common characteristics remain unchanged.