Dylan Zhang, operator of the official e-store of Belgium fish oil brand WHC, which ranked as the top healthcare product store on Tmall Global, said his team takes the Singles' Day shopping season seriously. His office in the central city of Zhengzhou is adorned with small flags carrying inspiring slogans such as "be energetic everyday" and "battling is cool".
Zhang, who co-founded his company called InReady in 2015, is participating as a Singles' Day merchant for the WHC brand for the sixth straight year. This year feels different, he said.
Policy changes have resulted in less pricing pressure on merchants, according to Zhang, a departure from years-long practices that pushed sellers to attract consumers with ultra-low prices. New measures this year are proving more supportive of merchants, including Alibaba's commitment of 10 billion yuan worth of resources dedicated to helping merchants boost traffic.
"It is such a sigh of relief for us," said Zhang. "Earlier this year, we were still urged [by Tmall] to offer the lowest price across all platforms. But sometime after the 618 shopping festival [in June], less emphasis was placed on pricing."
In August, Alibaba began to loosen a controversial "refund without return" policy, which allowed customers to demand a refund without returning products they were unsatisfied with, a rule many merchants felt was being abused.
Li Yuan, who has been selling trainers on Taobao for four years, said he had returns automatically approved by Taobao without an option to dispute. "It's a very, very big headache for every merchant, and I'm glad to see Alibaba step up and do something about it."
This reflected a broader strategy from the e-commerce giant to build more trust with merchants. It was also seen as answering a recent call from the government to end unhealthy competition.
In July, China's Politburo released a statement that included a line condemning "involution", a term used to describe shrinking opportunities in a highly competitive environment.
Other platform operators have also made operational changes to prevent what some saw as a race to the bottom in price and product quality. Pinduoduo, for example, started ejecting sellers of counterfeit products in September.
Alibaba's core strategy is to take a step back from managing its sellers, giving them more autonomy in daily operations, according to Zong Bu, who oversees merchant service experience at Taobao and Tmall Group (TTG).
"Our thinking is to eventually remove merchants from 'ineffective involution', and push them to provide high-quality services," Zong said at a recent media event in Hangzhou.
In another merchant-friendly move, Alibaba launched a new service ahead of Singles' Day called Tuihuobao, which reduces the logistics costs of returns for sellers. It also upgraded its artificial intelligence (AI) tools, which merchants can use for free to a limited extent.
"The return service is a big thing," said WPIC's Cooke. "It means not only are merchants seeing strong GMV [gross merchandise value], but operationally, it's also getting much easier."
Since initiating its largest ever corporate restructuring last year, the Hanghzhou-based tech giant has been trying to recapture its former glory while grappling with a domestic economic slowdown and fierce competition from new rivals. After taking the reins as Alibaba CEO in September 2023 and head of TTG in December, Eddie Wu Yongming has pursued a "users first" and "AI driven" strategic focus, signalling that the company was refocusing on its bread-and-butter e-commerce and cloud businesses.
Two months after tweaking its refund policy, TTG said an average of over 400,000 refund requests were being rejected per day. Meanwhile, Tuihuobao has served more than 1 million merchants, helping them cut the logistics costs of returns by 30 per cent by October.
As Alibaba's relations with merchants improve, e-commerce competition has started to calm down as Big Tech firms have begun to dismantle their walled gardens. Merchants on Taobao and Tmall can now choose to accept payments from Tencent Holdings' WeChat Pay, for example, and sellers on JD.com can choose to use Alibaba's Cainiao logistics service.
"The overall competition has begun to stabilise and slow down," Kenneth Fong, head of China internet research at UBS, said in a media briefing in late October. "Internet companies used to fight with each other, but now they are cooperating."
Competition among these companies is now ramping up in overseas markets as they pursue cross-border e-commerce strategies to hedge against weak consumer spending at home.
In July, Alibaba announced a pan-clothing global free shipping plan for eligible merchants on Taobao and Tmall, allowing them to sell directly to consumers outside the mainland, in a response to the rising success of Shein and Temu overseas.
Fong said cross-border e-commerce is a "big opportunity" for Chinese firms.
"Companies are not doing this by offering discounts or stealing business from other countries," he said. "Instead, they have price advantages because of reshaped supply chains and improved efficiencies," he said.
Moves to improve opportunities and benefits for merchants have allowed sellers to grow their GMV. For Taobao, though, a new challenge has emerged: the platform is struggling to make money from merchants.
An advertisement promoting Tmall's Singles' Day sales at a bus station in Beijing on October 29. Photo: Simon Song alt=An advertisement promoting Tmall's Singles' Day sales at a bus station in Beijing on October 29. Photo: Simon Song>
Analysts have noted a gap between TTG's customer management revenue and GMV growth in the past few quarters, suggesting that the rise in GMV was not leading to a proportionate rise in merchant commissions.
To step up monetisation, TTG undertook two major efforts this year. Earlier this year it launched Quanzhantui, a paid digital marketing tool. In September it changed its technology service fee for Tmall merchants from a fixed annual rate to a percentage of GMV, which Taboao sellers must now also pay.
More than 250,000 merchants used Quanzhantui to sell 1.3 million products on the first day of Singles' Day sales, Alibaba said last month. Yet it remains unclear what kind of impact the service will have on revenue.
Huang Tao, co-founder of the clothing store Bellkenidea Studio on Taobao, is one of the merchants using the marketing tool to boost traffic during Singles' Day.
"It's getting more and more intelligent," Huang said. "In the past few years, there were many so-called hidden rules in the marketing process, which needed merchants to keep operating and slowly figure them out. Now I know where my ads are placed and what kind of people they are reaching."
WPIC's Cooke said he believes Alibaba's shift in merchant policies will eventually help drive up advertising revenue. "The fact that Alibaba is showing more respect to the brands will allow them to spend more on advertising," he said.
With Singles' Day set to conclude on November 11, Alibaba's final sales performance will be closely watched by analysts and investors as a barometer of how much impact its new strategies are having and for China's consumer spending recovery.
InReady's Zhang is optimistic. He said he is confident his Tmall store is on track to reach 100 million yuan in sales - nearly 40 times higher than in 2019, when he first took part in the event. He expects continued sales growth in the coming years.
"Today's best performance is tomorrow's baseline, " said Zhang, referring to one of Alibaba's six company values that he has taken as his own motto. "This sentence has been repeatedly verified in our experience over the past five years."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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