In this era, platforms can cede price space and sacrifice partial interests, but as stated at the beginning of this article, the only thing that cannot be lost is the "user". Better yet, the scale growth and youthfulness of users can advance simultaneously, with the former being the only guarantee to maintain market position and the latter implying greater incremental space.

—Written by the Author

01

A Non-Controversial 618

An old friend from Alibaba told me a detail, saying, "My most prominent feeling about this year's 618 is that Alibaba didn't receive any criticism... In previous 618s, before the official day, criticisms online had already flooded the internet, condemning pre-sales, criticizing discount calculation formulas, and some even accused us of raising prices before discounts... But these voices seem to have disappeared this year."

On the surface, the main reason why Tmall's 618 did not receive any criticism is that it adopted a series of practical strategies that benefited users, including canceling pre-sales, integrating Taobao and Tmall's full reduction discounts, making discount activities simpler and more direct, and upgrading 88VIP members' rights to offer unlimited freight insurance, completely solving the issues of paying the balance and discount calculations.

But this is merely the superficial appearance, and its essence lies in Taobao and Tmall fully implementing the "user-first" strategy, fulfilling their commitment to driving brand transaction growth.

The question is, have these issues only existed today? Did the current leaders of Taobao and Tmall suddenly become more insightful and discover unprecedented details? Didn't Alibaba realize the existence of these issues before?

Obviously not, so what brought about these changes was not Taobao and Tmall being more sensitive, but rather a firmer determination to change. Only a firmer determination can bring about radical changes.

Complex discount calculation formulas, intricate pre-sale systems... The long-standing existence of these issues is not entirely without justification.

From the perspective of "dignity," the reservoir mechanism of the pre-sale system can obviously bring higher total transaction amounts on 6.18 from a data perspective, which looks good and is a key point for Alibaba to compete with its main rivals.

From the perspective of "value," not just one merchant from Taobao and Tmall has spoken to me about how, purely from a business operation perspective, the pre-sale system is obviously more beneficial to sellers as it represents more planned and predictable sales volumes, as well as lower inventory, which means more controllable business for merchants.

These inherent reasons determine that the issues or "characteristics" of 618 have always existed but have never been easy to cure.

And this year, these seemingly difficult-to-overturn mechanisms disappeared overnight.

Some people even joked that without these characteristics, it felt like the sense of ceremony of 6.18 was gone.

But behind it is this generation of decision-makers having a stronger and firmer determination to truly implement the "return to users."

Before this result came out, there was a prevalent view in the industry that the ultimate competition among all e-commerce platforms was price competition, and the evolutionary path of all e-commerce was ultimately extreme low-pricing.

In fact, if this were truly the outcome, it would be a tragedy for the e-commerce industry.

But fortunately, it is not.

Whether JD.com or Taobao and Tmall, they have indeed taken decisive actions on prices, such as hundred billion subsidies, introducing cheaper supply chain capacity, and more white-label products.

But if you regard these strategies as "all e-commerce companies' ultimate destination is Pinduoduo," then you are greatly mistaken.

Hundred billion subsidies, 9.9 yuan shipping for one item, only refund... Although these strategies are similar and are all quality strategies, looking at the different ecosystems of each company, their superficial strategies are similar, but we cannot say that their underlying logic is the same.

In other words, these are just strategies adopted by both Taobao and Tmall and JD.com. Their purpose is to protect the lower limit—that is, to prevent their users from leaving due to lack of competitiveness in the low-price segment.

An inertial thinking in e-commerce is to divide people based on urban and rural areas and income, but now users on different platforms actually have a high degree of overlap. We see that each user's consumption needs are comprehensive, saving where possible and spending where needed. People who buy La Mer products may also buy a hundred-yuan T-shirt and a three-yuan trash bag at the same time and hope all three are cheap.

Comprehensive e-commerce platforms like Taobao cannot have a price weakness.

As the saying goes, "If you retain people but lose land, you retain both people and land; if you retain land but lose people, you lose both people and land."

For Alibaba, the most important thing now is to maintain the non-outflow of the overall user base. As long as people are there, opportunities will follow.

This is also the unprecedented determination, decision-making power, and organizational strength that Alibaba, which urgently needs change, requires. And we are pleased to see that they have achieved it.

And the result exceeded expectations—as of 24:00 on June 18, the number of new 88VIP members increased by 65% year-on-year, setting a new record for membership scale; the number of new brand members also exceeded 90 million!

This shows that not only was the 618 strategy effective, but also that "returning to users" did not become an empty slogan.

This also makes Alibaba still have a lot of potential.

02

Technology Cost Reduction

Many people confuse technology cost reduction with algorithm cost reduction.

Algorithm cost reduction is a technical aspect, and to some extent, it is an asymmetric advantage—neither merchants nor consumers have algorithmic capabilities. In other words, merchants and consumers cannot outwit the platform and can only relatively passively accept what the platform considers "optimal." Although the platform will claim that this "optimal" is based on balancing the interests of multiple parties, merchants and consumers may not necessarily agree.

Simply put, "algorithm cost reduction" is the result of technically magnifying the saying "the buyer is never as shrewd as the seller" indefinitely, except that the seller here may refer not only to merchants but also to the platform.

But what can truly bring about sustainable victory is technology cost reduction, especially with the revolutionary advent of AI technology, which allows many links in the traditional e-commerce full-chain to have optimization space. At this point, "cost reduction" is only a starting point, and what it can truly bring is a change in the entire business logic.

And for Alibaba, there is another particularly obvious advantage, which is that Alibaba itself is one of the largest players in large domestic models. Alibaba's 110 billion parameter model Qwen1.5-110B, which was open-sourced at the end of April, has surpassed Meta's Llama-3-70B in multiple benchmark evaluations, and the soon-to-be-released Tongyi Qianwen 2.5 version scored equal to GPT-4 Turbo on the authoritative benchmark OpenCompass, which is a significant advantage.

For example, this year's 618, Alibaba Cloud introduced a 500 million computing power subsidy for the first time, providing more inclusive cost support for enterprises. Just the concept of "computing power subsidy" demonstrates Alibaba's integration of AI capabilities and marketing, as well as its enthusiasm for deploying this capability.

As mentioned earlier, it is almost common sense that merchants cannot outwit the platform. But Alibaba's approach is not to continue strengthening the platform's side but rather to empower merchants to accept new AI capabilities in a low-cost, high-efficiency manner through computing power deployment and tool empowerment.

Ali Mama's "Marketing Delegation" is such a tool that changes the traditional stereotype of "digital marketing is all about making as much money as possible from merchants," allowing merchants to enjoy technological equality and improving collaboration between merchants and the platform to some extent, while also reducing some gamesmanship.

For example, as we mentioned earlier, the reason merchants like the pre-sale system is that it can help merchants better manage supply chain management, provide a more accurate assessment of possible sales volumes, and avoid understocking or overstocking.

This year, Alibaba canceled the pre-sale system, but it did not ignore merchants' demands for better supply chain management expectations—Alibaba's Ali Mama introduced a concept called "Marketing Delegation."

In the AI era, we increasingly hear about supply chain predictions based on data, user focus insights, and marketing effect predictions, but this capability has been difficult to deploy to merchants in the past.

And the main upgrade of "Marketing Delegation" is the addition of two capabilities: traffic promotion and effectiveness estimation, while allowing merchants to use this capability in an extremely simple manner.

In short, for products participating in Marketing Delegation, the platform can analyze sales and accurately estimate periodic transactions based on big data models for registered products, making transactions more deterministic.

Moreover, this product has integrated paid and organic traffic fields, not only making product matching more precise but also simultaneously promoting products across the entire domain.

More importantly, if merchants want to participate in this plan, the setup process is also one-click, requiring only filling in information such as the marketing cycle and rate and submitting it, with the large model automatically running across the entire network.

Just this one product alone has attracted over 400,000 merchants and nearly 10 million products to sign up for participation.

Breaking out of the circle and creating hit products are two words that single-track players, especially niche merchants, care most about. But in fact, with the continuous increase in SKUs, breaking out of the circle has become increasingly difficult.

In an era of oversupply, not to mention breaking out of the circle, even ordinary transactions are not easy. According to third-party data, it takes 15-20 touches between users and brands to potentially facilitate a transaction.

In the traditional e-commerce era, merchants could only increase touches by purchasing premium resource positions and increasing advertising, which improved results but also increased costs.

Especially for niche brands, one of the pain points they have to face is a relatively homogeneous customer base. For example, 70% of users of a maternal and child brand are young mothers born in the 1990s, and this group is already nearly "numb" from being influenced. Therefore, for a brand to achieve new business breakthroughs, it must broaden its promotion scenarios to reach more potential customers.

And this year, relying on Alibaba's LMA large model technology,达摩盘 (Damopan, a data management platform) newly launched the "TA Crowd Solution" and 15 "618 Most Series Crowds" during 618. Although these names may sound strange, the concept is simple—through AI data mining, it finds the deep-seated relationships between people, people and brands hidden beneath the surface data, serving as a "radar" to help merchants detect more opportunities, crowds, and markets, ultimately manifesting as more precise reach to the most relevant and convertible consumers during promotional periods.

While many enterprises are still looking for applications and landing points for large model capabilities, relying on Alibaba's powerful, complex, and multi-faceted e-commerce chain, Alibaba's large model capabilities have achieved a certain degree of penetration and specialization.

And the result is that business has become easier to do.

From a more macro perspective, as of 24:00 on June 18, 365 brands achieved over 100 million yuan in transactions during Tmall's 618, and over 36,000 brands doubled their transactions. Among them, new force merchants experienced a phenomenal outbreak this year, with 576 new brands established within three years taking the first place in trend categories.

Behind this impressive turnaround is a determination to transform and technological empowerment that brought death to life.

03

People Have Changed Too

Most people would hardly expect that under increasingly severe pressure, Alibaba could so quickly bring GMV back to double-digit growth. This change is attributed to the change in Alibaba's management team's philosophy.

To some extent, Alibaba's requirements for managers have shifted from being "native to the mobile internet era" to being "native to the AI era," with the latter having a better intuition for the intelligent era.

In a letter to all employees, Wu Yongming specifically wrote, "We will resolutely implement team youthfulness, refresh the business management team with young key managers, and create a cultural environment and mechanism that allows more young Alibaba people to become the core force of Alibaba."

Now it seems that this change has not only been achieved but also, from the perspective of results, Alibaba's Q4 fiscal 2024 financial report shows that among Alibaba's six major business segments, except for the Entertainment Group, the revenue of the other five business groups is showing growth trends. From this perspective, the post-80s generation and even some post-90s have found their sense of belonging in their positions.

Moreover, not only Taobao and Tmall's GMV but also order volume and 88VIP have achieved double-digit year-on-year growth, coupled with Alibaba Cloud's public cloud, model-as-a-service, and other AI-related revenues, which are currently unmatched in China, all injecting new vitality into revenue growth.

More importantly, not long ago, to be precise, in March of this year, Taobao + Tmall's GMV increased by 14% year-on-year, surpassing Pinduoduo's 13%, and Taobao's MAU also increased by 10%, regaining the industry's top spot.

Today, China's e-commerce business has entered a new era of competition among the top five players. In this era, although Alibaba still has a large number of stock advantages and technological advantages, overall, each platform has developed its unique competitiveness and ecological advantages, and absolute dominance will no longer emerge, making misaligned competition even more important.

Product economy is mainly about selling products, but this is prone to becoming a red ocean and内卷 (intense competition); therefore, service economy has emerged, emphasizing that the upgrade of services brought by products is more important, which has entered a blue ocean. But the blue ocean is not the ultimate, so someone has proposed the black sea strategy.

What is the core idea of the black sea strategy? It is to go deeper and penetrate further from the blue ocean, to take root further down. The surface of the sea is blue, but doesn't it turn black when you go deeper?

Therefore, the decisive battle in the future will definitely be to deepen users and refine the market, including continuously building small ecosystems around users' specific scenarios and developing differentiated advantages to the extreme.

And in this mode of competition, the continuous self-driven pursuit of young management teams is the most crucial factor for victory. It has to be said that Alibaba is increasingly finding its way in this journey.

Author | Hu Zhe