In-Depth: E-commerce Platforms Squeeze Supply Chains to Achieve Ultra-Low Prices(AI Translation)

【周刊提前读】深度：为了极至低价 电商平台把供应链挤压到极至

In mid to late May, Alibaba and JD.com launched the mid-year shopping festival, "618". JD.com, the festival's originator, faced protests from eight major Chinese publishing groups and over 40 publishers. The publishers resisted JD.com's low-pricing strategies, which they said undermined production costs, leading some to withdraw their inventory from the platform [para. 1]. Despite the protests, JD.com offered steep discounts, sometimes up to 70% off, to maintain traffic during the sales event [para. 2].

Richard Liu Qiangdong, JD.com’s founder, issued new directives from Dubai, changing the promotional slogan from "good and affordable" to "affordable and good," highlighting the company’s emphasis on low prices [para. 3]. JD.com’s strategy shift was driven by post-pandemic pressures on China's supply chain, inventory surplus, and slowed macroeconomic growth, alongside competition from Pinduoduo’s low-price model [para. 4]. Both JD.com and Alibaba have reoriented their strategies towards cost-effectiveness and direct manufacturer supply to compete with Pinduoduo [para. 5].

Pinduoduo has adopted stringent governance measures on its platform, Temu, including high penalties, refund rates, and strong pricing control, prompting multiple merchant protests [para. 6-7]. The platform's low-price model has led to pervasive price competition, forcing platforms and merchants into a low-price war, sometimes resulting in pirated and counterfeit goods entering the market [para. 8].

Temu's aggressive pricing means some merchants incur significant losses, with protests leading to occasional wins, such as the cancellation of Temu’s automated price reduction function [para. 9]. Heavy fines have been levied on merchants for unspecified after-sales issues, leading to large-scale protests [para. 10-11]. Veteran sellers have struggled with the stringent after-sales penalties, with gross profit margins proving insufficient to sustain business [para. 12-13].

Pinduoduo, known for squeezing the supply chain, faces declining investor confidence over regulatory risks and the sustainability of its business practices [para. 14]. Since launching Temu, Pinduoduo has expanded aggressively overseas, yet its punitive policies towards merchants remain stringent [para. 15-16]. The company's governance logic has drawn criticism for being overly exploitative and unsustainable [para. 17-18].

Domestic e-commerce platforms like Douyin have also begun cracking down on counterfeit goods, with significant penalties impacting merchants. Some merchants have sought legal recourse [para. 19-20]. E-commerce platforms are caught in a paradox of needing to offer low prices to drive traffic while struggling to manage counterfeit goods and maintain merchant trust [para. 21-22].

The protracted weak domestic demand has pressured platforms to shift their strategies. Alibaba and JD.com have scaled back their sub-applications focused on low prices, integrating low-cost supply chains directly into their main platforms instead [para. 23-24]. JD.com’s considerable discounts during "618" aimed to provide "both cheap and good" products [para. 25-26].

While sales of branded goods have shown resilience, platforms continue to adjust strategies to compete on low prices without compromising quality [para. 27]. Douyin, caught between brand and price dynamics, has prioritized low prices but also faces increasing pressures from counterfeit goods [para. 28-29].

E-commerce operations are under intense pressure to maintain low prices without compromising quality, leading to a situation where platforms enforcing stringent policies can often drive out legitimate businesses [para. 30-31]. Some sellers, reacting to challenges from aggressive platform governance and competition, are reconsidering their strategies or facing exit barriers due to high penalties [para. 32-33].

Overall, the e-commerce landscape in China is strongly driven by intense low-price competition, which poses significant challenges for both merchants and platforms in maintaining sustainability and consumer trust [para. 34].