When consumption returns to rationality, “replacement” products are moving from the edge to the mainstream. From big-name replacement to reverse replacement, this change in consumption choices not only reflects the improvement of price sensitivity, but also hides people’s new balance between cost performance and quality of life.
After the latest e-commerce earnings season, SoftBank almost “liquidated” its holdings in Alibaba, and the fund managed by Duan Yongping also sold Alibaba and took a heavy position in Pinduoduo.
This is diametrically opposite to the current situation of the two companies.
In the past year, Alibaba’s net profit growth curve has been “pulling green onions in dry land”, and Pinduoduo has turned its head straight, and the gap between the two has widened step by step, and eight Pinduoduo can earn an Alibaba.
The capital market has also staged a similar “scissors difference”: a year ago, Alibaba watched Pinduoduo take away the position of “e-commerce brother”; Now, it is Pinduoduo’s turn to look up to Alibaba, which has almost twice its market capitalization.
One is that the basic market of e-commerce has stabilized and is attacking the “big consumption + AI” platform, and the other is that the myth of high growth is coming to an end as e-commerce is no longer “low price theory”.
One advance and one retreat, obvious.
But business development is a long-term and dynamic process, just like last year today, those who lamented that “Ali stepped down from the altar” will earn nearly 50% of the income so far with tickets, and Pinduoduo, which is not optimistic now, may also be able to make fine wine in time.
On the contrary, Alibaba, who has achieved a phased victory at this moment, also has a probability of turning low-key in the future, just like Pinduoduo, who was once proud of the spring breeze.
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In the e-commerce world, the state of “entering” and “retreating” of enterprises has changed, so that the main theme of the industry has always been “talented people come out of the country, each leading the way for hundreds of years”.
So, is there a rule to follow between advance and retreat? Will this affect the long-term value of the enterprise?
Different “advance and retreat philosophies” are written in the company’s genes
Also going to sea, Alibaba International brought Alipay, Cainiao, Alibaba Cloud and other brother businesses out together, taking the “big and complete” route; Temu “travels lightly”, does not build logistics, does not make payments, does not engage in content, and focuses on selling goods.
Behind the different paths, Alibaba and Pinduoduo have their own “philosophy of progress”: the former is the “correlation expansion” from e-commerce to the outside, and the latter is the “concentric circle expansion” focusing on e-commerce.
To put it simply, Alibaba not only wants to earn money from e-commerce business, but also has to get a share of the entire transaction chain from user orders, payments to express delivery, and traffic between sectors is mutually guided and capabilities are shared.
Whether it is the previous tens of billions of subsidies, or the current agricultural research projects and e-commerce westward expansion, Pinduoduo has always worked hard around “making e-commerce bigger and stronger”.
The differentiation of paths has also led to very different styles of work between the two companies.
Alibaba fights often with “three axes” – setting the tone of strategy, planting flags with small goals, and pressing the formation with a top-down OKR system, and swinging its fists first.
Taking AI as an example, after Wu Yongming announced the “user first, AI-driven” strategy, Cai Chongxin turned around and set up a military order to “inject AI into all businesses within three to five years”, and there was an additional AI mandatory question on the BG assessment form.
Pinduoduo is different, everything speaks with data and implements “ROI first”.
For example, in 2024Q2, Temu, which is conquering overseas, suddenly cut its monthly advertising budget in half in the United States, resulting in a 14% decline in its traffic share during Amazon Prime Day and a 27% month-on-month drop in sales in some categories.
Even he “slashed” himself because of the exponential growth of overseas advertising costs, and seeing the return fall below the break-even line, Temu immediately stopped the “wide casting” of the delivery and reconstructed the traffic funnel to throttle.
In just one quarter, its ad spend efficiency (GPM/thousand impressions sales) rebounded from $34 to $51, almost comparable to SHEIN, the “FMCG iteration pioneer”.
The contrast between the two paths reflects the different values of the two companies.
Putting Alibaba and Pinduoduo in a similar situation, such as conquering a strategic high ground, facing the next choice:
In the heyday of e-commerce, Alibaba judged that AI would trigger a far-reaching industrial change and reinvested in cloud computing and AI platforms. Today, Alibaba Cloud’s revenue has continued to grow, and AI products have soared at a triple-digit growth rate for seven consecutive quarters;
In the new traffic entrance of the Internet and the sinking blue ocean of local fresh food, Duoduo grocery shopping has fought hand-to-hand with a number of large and small factories, and has become the number one player with absolutely low prices and “light investment”.
As a result, Alibaba went to the left and Pinduoduo went to the right:
Alibaba will continue to “gamble on AI” and invest more than 380 billion yuan in the next three years, exceeding the sum of the past ten years;
Pinduoduo immediately shifted from “grabbing share” to “controlling losses”, such as adjusting categories, raising prices, reducing subsidies, etc., in exchange for profits.
This differentiation has a certain relationship with the characteristics of the track itself, but it also intuitively reflects the trade-off between the two companies.
Alibaba does not hesitate to sacrifice short-term profits and use existing advantages to build a new growth curve and seek “momentum”; Pinduoduo, on the other hand, is “capital efficiency first”, neither pursuing an ecological closed loop, nor blindly expanding boundaries, immersing itself in making money, and talking about “capital”.
It can be seen that Pinduoduo’s net profit margin has always been higher than Alibaba’s in recent years.
The strategy of “advancing” is different, and the wisdom of “retreating” is also different.
Alibaba’s retreat is not a simple withdrawal, but an ecosystem that “pulls the whole body”. Taking community group buying as an example, when Taocaicai contracted, it adopted a “three-stage” moderate contraction of first cutting off redundant warehouse networks, then eliminating regional inefficient outlets, and finally restructuring the business.
At the same time, the internal is also accompanied by in-depth organizational restructuring – strategic tone-setting, team adjustment, and a group of people are replaced, presenting typical systematic thinking as a whole, which lasted nearly one year.
In contrast, Duoduo’s local life business took less than a month from the start of investment promotion to the announcement of withdrawal.
At that time, the competition in the local life field was already fierce, and the latecomers were almost unsolvable. What’s more, Pinduoduo is easy to be criticized by catering merchants for “low-price involution”, and the sinking market is also in the education stage, so it is not a cost-effective deal.
Contrary to the original intention of profit, it chose not to do a war of attrition, and retreated quickly and accurately, with an obvious “liquidator” style.
Not only is the posture of “retreating” different, but the two families also have their own ruler in deciding when to contract. Alibaba, which “makes the world not have a difficult business”, will listen to the opinions of many parties when making decisions, hoping to find a balance between the platform, merchants and users. For example, Taobao listens to the feedback of merchants, not only distributes traffic at low prices, but also “refunds only” and does not turn to consumers one-sidedly, leaving a complaint channel for merchants.
In the face of merchants’ complaints about “refunds only”, Pinduoduo maintained a concerned attitude, and did not give merchants a satisfactory response until the store was bombed. This approach of “exhausting and not turning” is essentially in line with the concept of “ultimate ROI”.
In contrast, Alibaba is “strategic first” and has the taste of travel, while Pinduoduo is the ultimate “efficiency management”, always focusing on being yourself.
Such a background also makes the two companies in different cycles.
The internal and external environment is changeable, and the same direction is “advanced”, and the back direction is “retreated”
An interesting phenomenon is that the steep curve of Alibaba’s stock price is almost synchronized with Tongyi Qianwen’s climb in the large model rankings.
Behind this, after ChatGPT promoted the implementation and popularization of AI, cloud vendors and AI companies ushered in a moment of value revaluation.
The imagination of AI is so great that Vipshop, who fights for speed, and Vipshop, who fights for low prices, are competing to be “AI concept stocks”, and even Nike is clamoring to develop its own large model, as a leading Internet technology company, Pinduoduo, but it hardly mentions AI at the performance meeting.
Such a maverick, even if Pinduoduo still has a leading standard product recommendation algorithm, it cannot keep up with the times in the eyes of the market.
Not only the technical cycle, but also the ups and downs of Alibaba and Pinduoduo, which confirms that the “advance and retreat” of enterprises is a product of the times.
As shown in the figure below, under the consumption trend of constantly changing the king flag, the two companies take turns to be “darlings”: drinking must drink Moutai, the monthly salary can be “cherry free” years, Tmall is synonymous with consumption upgrading; When the wave of cost-effectiveness was set off, Pinduoduo was like a fish in water.
In the era of emotional economy, consumers have changed their tastes, no longer satisfied with simple low prices, but also pursue “happy buying”, and the balance has begun to tilt towards Taobao again.
After all, Pinduoduo’s low-price distribution of traffic, refund-only, etc., although the price has been lowered, it has also shrunk the service and quality.
When low prices were supreme, the gimmick of “9 yuan 9” attracted a large number of uninformed and downgraded consumption, but as users became smarter and stricter, this logic gradually failed.
It can be seen that after the national supplement sent 3C and home appliances with both affordability and quality, those self-proclaimed “iron roosters” lined up to upgrade their refrigerators and air conditioners at home.
Contrary to Pinduoduo’s situation, Taobao, which once “copied the wrong homework”, became clear at this time.
In order to cope with the impact, Taobao has offered a “five-star price power” weapon, but the deeper the low-price strategy is promoted, the more difficult it is – problems such as commodity homogenization and misalignment of goods breed, causing users to return goods frantically and vote with their feet.
In 2024Q2, a quarter with 618 promotions, the strong Taotian Group, as a basic market, experienced negative growth. To this end, it has pulled “user priority” back to the C position: in terms of traffic distribution, priority is given to products with excellent service and low return rate; In terms of membership services, upgrade rights.
The platform ecology is gradually repaired, and when the east wind of national subsidies blows, Taobao can “feast”. According to Tmall news, a large number of 618 high-net-worth users poured into the national subsidy zone this year, driving the total turnover to increase by 116%.
It can be seen that the “advance” and “retreat” of the enterprise should be dynamically viewed, and sometimes the “retreat” in operation is to gather fists and accumulate strength, waiting for the opportunity to “go in both directions” with the external environment.
For example, Alibaba sold assets such as Yintai Department Store, and investors shouted that “there is more than one cockroach in the kitchen”, but after scraping bones and healing wounds, the company’s investment was concentrated in AI and other fields, and a number of star large model companies were behind it.
The “1+6+N” structure proposed by Daniel Zhang’s era loosened in the era of Cai Chongxin and Wu Yongming, and Alibaba was criticized for “strategic swing”, but without “One Alibaba” to quickly mobilize organizational resources, Taobao flash sales would not have been so ferocious.
On the contrary, the “progress” of certain stages of the enterprise may also lay a crisis for the future “retreat”.
In the past, Pinduoduo relied on radical growth and rushed into the head camp of e-commerce with sparks all the way, but “it is inexhaustible”, with the peak of Internet traffic, extreme micro-operations are unsustainable, and the merchant ecology has lit a red light.
In order to make up for the shortcomings, Pinduoduo first directly made profits: the technical service fee was cut in half from 1% to 0.6%, and the store deposit was reduced from 1,000 yuan to 500 yuan…… Subsequently, the “three-year 100 billion” business benefit plan was released, and at the same time, the traffic of high-quality products was tilted to avoid low-price involution.
The support of real money is reflected in the financial report, which is that the advertising monetization rate has been cut in half, the growth rate of transaction service revenue has plummeted by more than 300%, and marketing expenses have soared by 43% year-on-year.
This is the price to pay for ignoring “long-term healthy development”, and of course, from another perspective, this is also the pain that must be experienced by reshaping the platform ecology.
Only when merchants can share the “profits” and users step on less pitfalls and benefit more, can the platform promote the “flywheel” to a positive cycle and continue to sit firmly on Diaoyutai.
From this dimension, Pinduoduo is now “withdrawing”, which does not mean “always withdrawing”. If you look at Alibaba for a long time, you will not “keep going in”.
The sea of stars of AI is basically certain, whether it is for self-use or commercialization, there is room for imagination, but there is a question mark over whether the consumption environment, especially the national subsidy, can be sustained, once the policy stimulus ends, the demand will decrease rapidly.
According to the rough calculation of the subsidy in the first month, it will burn 380 million yuan a day and 138.7 billion yuan a year, which is equivalent to Alibaba’s net profit in fiscal year 2025.
Not to mention that it is difficult to continue burning money in this way, and retention is also a tricky problem.
According to May data, tea accounts for about 25% of flash sale daily orders, which is significantly higher than the industry’s level of 10%-15%. Tea is a non-essential consumption, which often attracts wool parties who have no loyalty.
Looking back at the story of Taocaicai and Taote’s “building collapsing”, every time a large amount of subsidies were given to attract users in the early stage, and the discounts were reduced in the later stage, and users quickly slipped away with the disappearing low prices. Taobao flash sales do not learn lessons, and may repeat the mistake of “cake turning into bubbles”.
This is also a side effect of “strategy first” versus “ROI first” – it is easy to breed false prosperity.
summary
“Long-termism” and “efficiencyism” are not either/or choices, but two sides of business evolution.
Taobao, which started from the PC era, completed the “overall relocation” to the mobile terminal, and encountered the sniper of interest e-commerce, and learned to plan ahead and go through the cycle in the danger of being subverted again and again; Pinduoduo grew out of the gap between Taobao and JD.com, and efficiency priority and dancing on the top of the wave are its innate skills.
The differentiation between the two is just due to the way of the future, and what the future holds remains to be seen. After all, history always proves in cycles: there is no eternal pattern, only eternal change.
