Source: Connect to Insight
Author: Wong Wai Ying

The e-commerce industry's mid-year entrance exam has arrived as scheduled.

On May 18, Kuaishou took the lead in launching 618 pre-sale. Five days later, on May 23, JD launched a pre-sale. Over the next three days, Xiaohongshu, Douyin, and Taobao will start 618 pre-sales one after another.

The month-long e-commerce promotion officially kicks off.

As the first big promotion after a recovery in consumption, the smell of gunpowder in this battle seems stronger than ever.In order to seize consumers, platforms have made every effort. Taobao and Tmall called out “618 with the highest consumer welfare in history”; JD called out “618 with the highest investment in the entire industry.”

The smell of gunpowder also proves that this is bound to be a tough battle.

The 618 promotion has been around for 10 years. Apart from the gameplay being upgraded year by year, the focus of the conversation every year revolves around low prices.Whoever controls the lowest price captures the consumer.

The obvious change is that in the past, low prices were exclusive to big promotion points, but now as industry traffic hits the ceiling, low prices are not exclusive to big promotions; on the contrary, they are becoming more and more normal.

Especially since this year, low prices have become a theme in the e-commerce industry, and have been repeatedly raised by industry players.

Following Pinduoduo opening up the market with low prices and Shakuai's live broadcast room's low prices all year round, price power became one of Taobao's five major strategies in 2023. JD also focused its strategy on low prices this year, and stated that it would start normalizing subsidies of 10 billion dollars.

Looking at the market as a whole, the low price strategy is the result of fierce competition in the market. However, the e-commerce market is not what it used to be; if you want to fight a price war, low prices alone are far from enough. More importantly, the platform has to offer low prices, and the pressure is transmitted to the merchants.

Essentially, after the platform sets up the stage, the test is the merchant's ability to stand on the stage and sing. In the e-commerce industry's stock era, merchants have also realized that protecting profits is more important than tracking sales.

At a critical point in the recovery of consumption, this year's 618 shopping festival received attention from many merchants. For all players, this year's 618 was a sprint battle that must not be defeated.

1. Melee upgrades, different ways to play

For many platforms, the meaning of this edition of 618 is different from previous years.

This was the first major promotion of Taobao Tmall Group after Ali's “1+6+N” organizational structure was adjusted, and Xiaohongshu's first tough battle after speeding up the pace of commercialization. It was also the first time that Xu Ran, CEO of JD, and Cheng Yixiao, CEO of Kuaishou, swung 618.

After many firsts, everyone wanted to get first place in this big exam, and the smell of gunpowder followed.

Looking at the most representative Taobao, Tmall, and Jingdong, one claims to have “the most investment in history and the strongest initiative”, and the other is labeled “historic investment.” As slogans have been released one after another, the gameplay on all major platforms has also been upgraded.

What Alibaba Taotian Group puts the most emphasis on is content-based.On May 10, at the 2023 618 merchant conference hosted by Taotian Group, comprehensive content-based content was repeatedly mentioned. Taotian Group CEO Dai Shan proposed that “future e-commerce platforms are the best content platforms.”

Based on specific actions, Mu Shan, general manager of the marketing department of Taotian Group, drew out three major priorities: good goods, good prices, Taobao good price festival, short videos and live broadcasts of good shopping.

According to the Future Consumer Report, during the 618 period this year, Taobao Tmall will have more than 50,000 new anchors broadcasting for the first time, and during the 618 period, it will launch four major topics: New Encyclopedia of Life, New Interests, New Cultures, Unique New Scenes, and New Lifestyles. At the same time, for high-quality talent content, the platform will also provide traffic support for information flow within the site, shopping, the venue, and outside the site.

In fact, this follows the five major strategies that Ali set for Taobao at the beginning of the year — price power, live streaming, private domain, content-based, and local retail. Although these are not new words for Ali, after being promoted to a strategic level, Taotian Group will undoubtedly increase its horsepower, especially at major promotion points such as 618 and Double 11.

On the other side, at the JD 618 conference, JD Retail CEO Xin Li spent a huge amount of time talking about low prices to determine the main tone of the current JD 618.

Regarding this investment in 618, JD called it “the strongest in the entire industry.” For example, on the basis of a direct price reduction for the entire site, each user can receive up to three “over 200 minus 20” subsidy vouchers every day.

Furthermore, like Taotian's idea, as platforms such as Douyin, Kuaishou, and Xiaohongshu use content methods such as live streaming and video to increase the conversion rate of content and get a share of the cake from e-commerce platforms, content-based content has become the consensus of traditional e-commerce platforms.

At the JD 618 conference, JD announced that on the evening of May 31, a mysterious agency will enter JD and bring a major guest. This guest is Luo Yonghao, the former son of Douyin who brought goods. As early as May 20, Luo Yonghao made a friend at his company and completed JD's live broadcast debut.

At the same time, Pinduoduo officially reached a product-level cooperation with Kuaishou during the 618 period of this year. Through short videos recommending good products on Kuaishou, Pinduoduo focused on matching cost-effective products to new consumers in the sinking market.

If the focus of traditional e-commerce platforms is the traffic brought by content-based content, then the focus of the content platforms newly added to 618 is the e-commerce conversion rate.

When it comes to e-commerce conversion rates, nothing is more urgent than Xiaohongshu. Following the promotion of live streaming to the first level, setting up live broadcast rooms for leading anchors such as Dong Jie, and vigorously developing the live streaming delivery business, Xiaohongshu E-commerce fully launched the “Note Delivery” function on the eve of 618, with the aim of using cooperative notes from bloggers and merchants to open up the e-commerce closed loop within the Xiaohongshu website.

Intensive e-commerce layout actions show that this year's 618 is a rare training ground for Xiaohongshu, who is no longer wavering in commercialization strategy.

On the other side, Douyin and Kuaishou, which participated in the 618 promotion for the third year, and even video accounts, while stabilizing their own content platforms, became more and more similar to e-commerce platforms such as Taobao and Jingdong.

Looking at the overall gameplay, styles of play that Taobao and JD were once familiar with, such as full cuts across stores, pre-sale of deposits, discounts on final payments, and big name subsidies, can all be seen on Jikuai.

Specifically, Douyin mainly launched the “Good Things Live Stream”, “Selected Alliance Category Day”, and the “Douker Ten Thousand Order Plan”; Kuaishou named this big promotion the “618 Shopping Festival” for the first time, and launched two core gameplay, such as category days, anchor rankings, interest-free installments, and national quests.

On the WeChat side, the video account of the 6.18 Good Things Festival became an entry point for WeChat to participate in the 618 promotion. Specifically, video channel anchors can post short videos with products and include the topic “618 Good Things Are Video Numbers”, which means they have the opportunity to get boosted by short video traffic, increase content exposure, and help bring goods.

With the arrival of the 618 promotion points, the e-commerce industry is also competing in the second half.E-commerce platforms increase content gameplay, content platforms integrate e-commerce gameplay, and integrate the two major models. How to maximize the chemical reaction between content and e-commerce to attract consumers is testing the long-term strategic adjustments of platforms.

2. The price war must be fought, but it is more difficult

Regardless of the model, in the big promotion point, low prices must be one of the labels.By 618 this year, the low price ideas of major platforms at the beginning of the year will naturally continue.

JD made harsh remarks, saying that the 618 billion yuan subsidy “double the claim for buying the price”; Taobao said that the 618 billion subsidy launched a “break through the bottom price” campaign, and the main products opened the “Buy Expense Claim” application channel; Pinduoduo shouted the slogan “Every day is 618”, opening the market with super supplements for home appliances and re-betting on 3C Digital; new player Xiaohongshu also said “the price was the lowest on the whole network during the event”...

Every time there is a big promotion in the industry, the price is a competition that players cannot bypass. In the eyes of consumers who are extremely price-sensitive, lower prices will always be a “nifty trick.”In other words, boosting transaction volume through means such as discounts and full reductions is the value of a big promotion.

On the consumer side, at 618 this year, there was no absence of a “full reduction across stores” of routine operations that had been greatly promoted in the past. Taobao introduced over 200 yuan minus 30 yuan, 300 yuan reduced 50 yuan; Douyin launched over 150 yuan minus 25 yuan; Xiaohongshu launched over 300 yuan minus 50 yuan; and the “over 200 minus 20” subsidy vouchers issued by JD to users every day “on the basis of a direct drop in overall prices” is equivalent to another 10% discount after a direct drop in prices.

In addition to the full reduction across stores, all companies have invariably prioritized the “10 billion subsidy”.

At the JD 618 conference, JD revealed that the number of products participating in JD's 10 billion subsidy had also increased tenfold compared to March. Before the 618 pre-sale began, Taobao also used the “10 billion subsidy” section to warm up on May 22; Douyin also introduced hundreds of millions of platform subsidies and policies such as “window operation rebates” for merchants; Kuaishou provided platform subsidies of up to 15% for some big-name products.

In addition to this, various platforms have written more articles about the price war.

For example, for the first time, Taotian launched the Gathering Cost-effective Direct Landing. The shortlisted products must be 20% off the lowest price after the coupon within 30 days; in addition, the “Taobao Good Price Festival” will also be launched, offering nearly one million items of 1 yuan per day. This is the first time that Taobao Tmall has launched an exclusive 618 marketing channel for small to medium businesses.

Xiaohongshu launched the Ace Lightning Sale and Single Product Direct Drop campaign. In terms of platform subsidies, Xiaohongshu is not too strong. The platform will use red envelope expansion gameplay to attract users with purchasing intentions in “planting grass” scenarios such as searches and notes to “pull grass” scenes such as live broadcasts and business cards, and penetrate various fields such as searches and notes.

However, for most consumers, the big promotion rules mean that the trouble of math problems has not been reduced.A consumer told Online Insight, “The 618 discount is not too strong every year, but too complicated rules will dissuade me.”

In addition to this, the rules of many platforms invisibly require users to be immersed in a certain scenario of the app, which is equivalent to increasing the user's usage time. In JD, the flash sale day on June 1 can be combined with full discount coupons for all categories of its own businesses. After that, there are also big name day, magic coupon day, full reduction day, and red envelope rain; on Douyin, higher discounts are inseparable from live streaming rooms, red envelopes, and shopping mall red envelopes.

Seen from this point of view, for e-commerce platforms, what the 618 promotion is pursuing this year is no longer a simple breakthrough in data such as the scale of GMV; the key is to compete for users.

Whether it's price power, content-based, or improving content conversion, it's all a means for e-commerce platforms to acquire users.

However, one major premise is that now low prices are not exclusive to big promotions. As e-commerce traffic peaks and users approach the ceiling, low platform prices and subsidies have become more and more normal for the sake of turnover and user size.A consumer told Connect Insight, “My current desire to shop for 618 and Double 11 is not as strong as it used to be. I used to rely on these two big promotions to stock up, but now there is a full reduction campaign on all platforms almost every month, or even once every half month.”

Changes in consumer attitudes have made it harder and harder to fight price battles on e-commerce platforms. In an environment where low prices have become the norm, consumers are no longer as excited about big promotions. If you want to rely on price to leverage users, the platform will need to spend more money.

In other words, consumer expectations for 618 are higher than ever. In addition to the lower price, simpler gameplay, higher cost performance, and better service are all what consumers are looking forward to.

What is foreseeable is that various companies will inevitably have to experience some competition over the middle of the year, when awareness is gradually being established, and the intensity of the price war can also be called the “biggest year in a year” in history.

After all, low prices are the platform's most effective weapon to reach consumers. The price war of 618 will not be absent this year, and it will continue. However, in the context where price wars have become the norm, users' demands for 618 are no longer as simple as low prices. If they want to attract customers to place orders, the difficulty for e-commerce platforms has only increased unabated.

3. How to grab users and increase profits? Pressure transmission to merchants

As the first 618 after the Black Swan incident, it was also a test for businesses. Whether it's big brands or small to medium businesses, the purpose of participating in 618 is to survive better in the second half of the year.

When the major platforms have already set up the 618 stage, it is extremely important for merchants to find the best option to sing.This is a test of the integration of human, material and other resources for merchants.

Specifically, under the premise that each platform has different gameplay, if the same merchant wants to participate in 618 on multiple platforms, they need to study the game rules of different platforms to formulate different price systems. More importantly, when merchants come face to face with consumers to “shop around” for prices, the pressure also increases invisibly.

A beer brand manager who is responsible for two e-commerce platforms 618 at the same time has been in continuous rotation for almost a month.He told LianInsight, “From the perspective of our merchants, the goods and pricing rights of some DTC platforms are on our own, and prices are generally not much lower than usual; some proprietary platform goods rights are on the platform itself, and our merchants must cut the price even lower in order to grab more users.”

If big brands have the energy and resources to participate in full-platform activities such as Taotian and Shakui, or even “lose money and make money,” then for small and medium-sized businesses, choosing the most suitable platform with limited resources is a better choice.

Big promotion events such as 618 and Double 11 seem like a carnival for the entire e-commerce industry, but under the 28th effect, small and medium-sized businesses often became “companion runners.” In particular, the appeal of big promotions to users has declined year by year in recent years, and small and medium-sized businesses cannot escape problems such as being caught up in rules and being kidnapped by low prices.

More importantly, the disappearance of user growth dividends and the marketing model of burning money for growth is not working is a fact that the entire consumer industry must acknowledge in the past two years. For the e-commerce industry, this is also a stock market, and grabbing users, traffic, and bills of lading is not an easy task.

Under this trend, merchants are beginning to change their scale thinking and GMV thinking and shift to profit thinking.

In the past, merchants hoped to establish word of mouth and gain traffic with big promotions such as 618, and did not hesitate to trade sales for sales. At present, the era of burning money in exchange for growth is over, and the marketing formula of “new brand = 5,000 notes+2,000 Q&A+live streaming” is no longer applicable. Merchants are considering protecting profits more so that brands and enterprises can develop healthily.

The good news is that outside of the e-commerce stock market, the potential of the sinking market is valued by major platforms. Small and medium-sized businesses are also being taken seriously by various platforms as important suppliers that can provide low-priced products. On 618 this year, platforms such as Taotian, JD, and Kuaishou all specifically mentioned small and medium-sized businesses at the conference and issued a number of support policies.

At the end of the day, for merchants, the traffic subsidies granted by the platform are short-term and unstable. If they want to continue to attract users and increase sales, merchants also need to continue to refine their products, provide quality services, and establish deep connections with target users.

It is undeniable that after the tenth year of the 618 promotion, merchants gradually lost the myth that they generated sales at the big promotion point, and protecting profits and making money became a priority. However, platforms have bid farewell to rapid growth, and users, services, and supply chains have replaced GMV as keywords.

The rules of the game are constantly changing, and players on the field can only see the changes and respond quickly to avoid being eliminated.The day of this year's 618 mid-year college entrance examination results is getting closer and closer. Under the wave of consumer recovery, there will soon be answers as to which platforms will come out on top and which businesses will stand out.

Editor/jayden