It has been a year since Jack Ma proposed to “go back to Taobao, go back to users, and go back to the internet” at an internal Alibaba meeting. Following this, Taobao and Tmall began deploying a user-first strategy, and this year, both platforms have significantly increased their investment in consumer experience, showcased during the recent 618 shopping event.
Market feedback on Taobao and Tmall’s year-long focus on user experience has been positive. According to Alibaba’s financial report for the quarter ending March 2024, Taobao Tmall Commerce Group (also known as Taotian Group) achieved double-digit growth in gross merchandise value (GMV) year-on-year. An Analysys report also shows that during the first phase of this year’s 618 festival, both platforms held close to half of the market share among the five major domestic e-commerce platforms, maintaining a 14.6% growth rate.
From the start of Tmall’s 618 sales to 9 p.m. on May 31, 185 brands exceeded RMB 1 billion in sales, and as of May 28, more than 37,000 brands saw their sales double. Taobao’s RMB 100 billion subsidy, offering a bundle of deals, saw GMV increase by 445% compared to last year’s 618 promotion. According to Qingyan Qingbao, in May 2024 alone, Taobao’s beauty and skincare sales increased by 69.2% year-on-year. Moojing Market Intelligence data also shows that home appliance sales grew by 74.2%, and 3C digital sales increased by 90.1%.
This year’s 618 event also saw Taobao Live attracting hundreds of celebrities and CEOs to start live streaming on the platform, with their first broadcasts outperforming typical newcomers. Many used the new full management option launched by Taobao Live this year, which provides a one-stop “nanny” service to help new content creators provide better user service.
However, “user-first” should arguably be evaluated by users themselves, most of whom are indifferent to abstract data like GMV, growth rates, or market capitalization rankings. Consumers have simple desires. According to 36Kr, an Alibaba employee communicated on the company’s internal network: “Return to the essence of e-commerce service: simple purchases, simple returns, fewer tricks, and more benefits.”
There is no upper limit to public demand for good consumer experiences, and the platform’s role is like walking a tightrope, where even a slight misstep could make merchants scapegoats for problems, destabilizing the supply side. In maintaining this delicate balance, Taobao and Tmall are not yet perfect, but this year’s 618, which canceled pre-sales and prioritized user experience, appears to be a step forward.
Online shopping should be simpler
One significant change in this year’s 618 is that people have finally started praising Taobao for becoming simpler online. Gone are the numerous pre-sales, deposits, and final payments. Taobao has finally joined forces with Tmall for unified discounts, with its RMB 100 billion (USD 13.7 billion) subsidy giving rise to “the lowest prices on the internet.” Even details like the green label highlighting shipping insurance drew praise.
Until a few years ago, the decade-long festival of e-commerce promotions had almost become synonymous with complexity. Despite the promotions—especially for popular branded products—being cheaper than usual, the huge traffic often exposed significant issues, including app crashes, long delays in pre-sale shipments, and difficulty finding where to pay the balance.
Major promotional periods often triggered the “big company syndrome,” where a large team with numerous project groups had to meet various performance metrics, leading to discount schemes designed based on interest points, which were not easy for users to understand. In some years, there were over ten different discounts for buying a single item on Tmall during Singles’ Day, making the rules too complex for ordinary people to comprehend.
Some marketing accounts even unapologetically launched playbook charts documenting Singles’ Day promotions, prompting consumers to set alarms and collect various “red envelopes” and coupons. When promotions became this complicated, it was hard to say that user experience was a priority at all. Taobao and Tmall had reached a point where they had to heed advice.
This year’s 618 event saw Taobao cancel pre-sales, eliminating issues related to deposits and final payments. For items like women’s clothing that are prone to long pre-sale periods, the pre-sale period was limited to 15 days.
Before the 618 sales began, Taobao reaffirmed its user-first focus from the first half of the year, continuously enhancing the promotion experience. First, the app latency issue needed resolution. Taobao optimized its app for smoothness, significantly speeding up its load time. A programmer told 36Kr that the e-commerce app, equipped with many features, has shrunk to just 50 megabytes (MB) in size.
Alongside slimming down the app, Taobao also updated the app’s homepage, greatly simplifying the previously overwhelming interface. The homepage now supports personal customization, displaying frequently used channels while folding away less-used modules.
Another issue thoroughly addressed was the infamous “math problem” faced by Taobao users. This was largely attributed to the complexity of promotion terms and conditions. For example, Taobao’s RMB 200-30 discount was inconsistent with Tmall’s RMB 300-50 offer, leading to longstanding confusion among users. This was finally resolved this year during the 618 festival, when both discounts were unified to RMB 300-50 on both platforms.
Moreover, due to these discounts, many merchants liked to write the “final price” after discounts on the cover image of listings, using three or four different prices to attract traffic. Prior to this year’s 618 promotion, Taobao and Tmall regulated these tactics, prohibiting misleading prices in images. Correspondingly, Taobao added a section on each product page to present discount details, enabling buyers to see all discounts at a glance.
For Taobao’s 35 million 88VIP members, recent upgrades to membership rights were equally tangible. Since last year, 88VIP has undergone several upgrades, adding new benefits such as Mango TV membership, daily red envelopes, and more. Starting April 22, 88VIP launched unlimited return shipping coverage, subsidizing up to RMB 25 (USD 3.4) per return. This service quickly made an impact on frequent online shoppers, especially those who enjoy buying clothes.
With these benefits, Taobao and Tmall have developed some hidden plays. For example, the “value purchase” feature in Tmall Supermarket drops prices of items from hundreds to tens of RMB, with various popular snacks costing only a few RMB, and adding the RMB 2 (USD 0.28) red envelope from 88VIP, making it feasible to purchase items at near-zero cost. Real benefits led to real user growth. In May this year, 88VIP signup rates tripled compared to last year, and the number of Gen Z members increased by 533%.
After canceling pre-sales, membership benefits effectively boosted the promotion’s momentum. For this year’s 618 on Tmall, 88VIP’s major discount coupons were released in advance, with each member receiving RMB 5,000-400 and RMB 1,200-100 coupons. On May 20, the first day of sales, the number of 88VIP members placing orders increased by over 50% compared to last year, with average purchase amounts rising by over 30%.
Returning to the essence of e-commerce service
Marketing expert Philip Kotler once proposed that acquiring a new customer costs five times more than retaining an old one, and retaining 5% of customers could bring 100% profit to a company. According to a report by the China Internet Network Information Center (CNNIC), as of December 2023, the number of internet users in China reached 1.092 billion. Huachuang Securities’ research report shows that, in March 2024, Taobao’s monthly active users (MAU) reached 910 million.
When over 80% of Chinese internet users use Taobao at least once a month, acquiring new users becomes incredibly challenging. For Taobao and Tmall, the core strategy is to shift toward preventing merchants or consumers from leaving. So, how can users be retained? The intuitive answer seems to be low prices.
More, faster, better, and cheaper—of course, saving money is important. In this era where minimalism is a trend, almost all e-commerce platforms emphasize low prices, shortening supply chains, and competing for manufacturers, giving more traffic to low-priced products. Taobao is no exception, launching the five-star price power index last year, while the RMB 100 billion subsidy took center stage on the app’s homepage.
The “banana green” trend that unfolded during the 618 period also introduced young people to Tao Factory, which sells three items at a promotional price of RMB 3 (USD 0.41). 36Kr noted a user writing a “poem” for Tao Factory, praising its effectiveness in curing shopaholism by spending RMB 9 (USD 1.2) on nine items just to enjoy the fun of unboxing. Taobao’s strong and diverse supply chain allows it to excel in low prices.
Indeed, Taobao’s RMB 100 billion subsidy drew top brands like Apple and Dyson, subsidized by the platform to the lowest prices on the internet at a 20% discount. These items sold out within seconds of being listed, with other e-commerce platforms launching similar activities in response.
But with 900 million users spanning cities and rural areas and from all walks of life, low prices are not the only solution. It has at times been said that the end of price competition is price convergence. Merchants typically respond to low prices with two main approaches: shortening the supply chain through white label goods or acquiring agent and distribution rights with brands. When these two tactics are played to the extreme, the only differentiator for consumers comes down to other factors.
Prior to this year’s 618 festival, the “Youlishu” channel of The Beijing News surveyed over 3,000 consumers, showing that, besides the top-ranking price discounts, the second to fifth factors consumers valued were all related to experience and service: genuine products, comprehensive shopping experience, simple promotions, and substantial price protection services. Among them, 50% of consumers focused on low prices, while 44% valued genuine products, and 34% cared about the comprehensive shopping experience comprising product, price, and service. In consumers’ minds, what is almost as important as price is a simple, straightforward, and trustworthy experience.
Taobao charts a new path
Last year, Eddie Wu, CEO of Taotian Group, proposed internally that every penny spent on user experience should yield a higher ROI than acquiring new users. As the first-generation e-commerce platform, Taobao’s growth environment was vastly different from today. Initially, its forte lay in neither product nor content, but recruiting merchants. For many years, Alibaba’s notion of being customer-first referred more to merchants. However, in reality, merchants and consumers are part of the same flywheel. Taobao must grab one end to keep the whole cycle moving, but now the focus has shifted to consumers.
Recently, there were reports that Taobao is fully implementing a new rating system that combines a “shop experience score” and a product experience index (PXI), replacing the previous dynamic store rating (DSR). Under the new rating system, in a nutshell, the higher the merchants’ average positive feedback rate, the faster their delivery and customer service response, the fewer complaints, and the more timely and appropriate the handling of refunds and appeals, the more traffic they will receive across scenarios like search, product recommendations, ad placements, and event signups.
According to 36Kr, some merchants have already benefited simply by improving their experience without increasing ad spending. A top grocery brand’s flagship store on Tmall improved a high-selling product’s PXI from 61 to 93 by enhancing shipping and refund experiences, resulting in a 20.5% increase in product-related traffic. A leading Taobao factory store launched a dishcloth and improved its PXI from 67 to 90 by addressing delayed shipments and stockouts, leading to a 39.3% increase in product-related traffic.
Traffic distribution guided by service rather than low prices and high GMV indicates that Taobao and Tmall are trying a new path where operational efficiency is rewarded with traffic bonuses. Over two decades ago, China’s first e-commerce platform rating system, the DSR, was introduced and continuously iterated, eventually becoming an industry standard, providing a foundation for platform-based search recommendations. Now, Taotian is attempting to overhaul the entire system.
Taobao is an “all-encompassing” platform, and the needs of 900 million consumers are diverse. Compared to other e-commerce platforms, Taobao and Tmall’s unique advantage lies in their comprehensiveness. By optimizing design and leveraging a vast and diverse supply, they ensure different groups can find satisfying consumer experiences, no matter how small the demand.
During the earnings call on May 14, Wu reaffirmed Taotian’s plan to persist with a user-first strategy, expressing the company’s intent to create new mechanisms that will help brands, merchants, and factories to provide good products, prices, and services to meet the multifarious needs of domestic consumers.
One recent example of this is Taotian’s upgrade of Taobao’s website. While only 10 million users log in to Taobao via the web version daily, in early May, just before Taobao’s anniversary, it underwent an overhaul, resolving login issues and further supporting live streaming on the web version. The revision is believed to have increased daily user visits to Taobao web live streams fivefold.
Another instance is the provision of free shipping to Xinjiang. Until last year, Alibaba considered logistics development in Xinjiang a pure investment. Coupled with 618 promotions, on May 20, Xinjiang consumers purchased over 60,000 tees and shirts, over 20,000 orders of facial masks, and nearly 10,000 orders of sunscreen from Taobao and Tmall.
Xinjiang’s population is only equivalent to Shanghai, but free shipping to Xinjiang can benefit more than just Xinjiang residents. In the news comments section, a Henan netizen shared his story: he is from Henan, and his girlfriend is from Xinjiang. In their long-distance relationship spanning 3,000 kilometers, her gifts arrived quickly, while his orders faced logistical and shipping cost barriers. Now, with Taobao’s designation of Xinjiang as a free shipping zone, he can finally show more care for her.
As Taobao and Tmall recalibrate their focus toward user experience, individuals like this young man from Henan are choosing to return to the two platforms. According to Analysys research, during the first phase of the 618 promotion, Taobao’s daily active users (DAU) increased by 22.9% year-on-year.
A more attentive Taotian now stands at an inflection point, and how far this new path can go will depend on the company’s determination and capability.
This article was written by Xiao Xi in Chinese and was originally published by 36Kr.
