Chinese e-commerce firms JD.com and Alibaba’s Taobao roll out ‘refund only’ policy to shoppers, heating up rivalry with budget retailer Pinduoduo

Chinese e-commerce firms JD.com and Alibaba’s Taobao roll out ‘refund only’ policy to shoppers, heating up rivalry with budget retailer Pinduoduo

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Cutthroat competition in China’s vast e-commerce sector is poised to escalate, as leading shopping platforms JD.com and Alibaba Group Holding’s Taobao offer a “refund only” policy so consumers can keep the goods they had bought but complained about – matching an option that budget online retailer Pinduoduo has had in place since 2021.

JD.com on Wednesday updated its platform rules to include the new refund policy covering goods shoppers have received, but they believe do not match up with the product description on the site. The new rules will take effect on December 29.

The Beijing-based company, which also promised sales staff a raise in the new year, can intervene in such disputes based on the complaint lodged by a consumer and the track record of the third-party merchants on the platform, according to its policy page.

That initiative comes days after Taobao added on Monday a similar policy to its platform rules, which also covers misleading product information and fraudulent goods. Alibaba owns the South China Morning Post.

Pinduoduo employees are seen at their desks at the company’s offices in Shanghai on July 25, 2018. The budget online retailer started providing a “refund only” option to consumers in 2021. Photo: Reuters
The new refund policies of JD.com and Taobao take a leaf out of the playbook of rival Pinduoduo – operated by Nasdaq-listed PDD Holdings, which also runs international discount shopping platform Temu – which has seen its business grow rapidly, despite weak domestic consumer spending owing to the mainland’s gloomy economic outlook.

Pinduoduo can intervene and offer refunds to consumers without the approval of merchants on its platform. It can automatically grant a refund when a merchant fails to deal with such a request within 48 hours.

The firm’s “refund only” policy has been considered controversial, which previously prompted merchants to protest and even sue Pinduoduo because that option made them vulnerable to exploitation by shoppers, who get freebies even as the sellers bear the cost of their complaints.

The policy, however, has played an essential role in improving the shopping experience on Pinduoduo and enabled the platform to attract loyal users, which made it tougher for JD.com and Taobao to vie for those shoppers’ business, according to Zhuang Shuai, founder and chief analyst at market consultancy Bailian.

Jack Ma praises rival PDD in rare memo calling on Alibaba staff to change

“PDD’s financial data show that its revenue growth and profitability are much higher than the industry average over the past two years, which proves that Pinduoduo has been very effective with its user services including the refund policy,” Zhuang said.

That development prompted Alibaba founder Jack Ma, who remains the tech giant’s spiritual leader, to acknowledge PDD’s rapid rise in an internal memo last month that praised the rival e-commerce platform’s accomplishment, while also encouraging the Hangzhou-based firm’s employees to embrace change.

“I have to congratulate PDD for their decisions, execution and efforts in the past few years,” Ma wrote. “Everyone can be successful at some point, but only those who can change for the future and are willing to pay any price [to reach that goal] can be respected.”

JD.com founder warns staff not to ‘lie flat’, as rival PDD shines

Earlier this month, JD.com founder and chairman Richard Liu Qiangdong urged the company’s employees to take more proactive actions to fend off competition and fix management problems, or else there would be “no way out” for the e-commerce giant.
Liu blamed himself for “mismanagement” and admitted that JD.com faces challenges in a thread on the firm’s internal discussion board. He urged staff not to “lie flat”, or tang ping – a Chinese term that means refusing to work too hard.
On Wednesday, JD.com announced that it will nearly double the salary for frontline employees, including those in procurement and sales from January 1. Staff at its retail unit will receive an average raise of 20 per cent or more by early next year.

That was followed by a notice on Thursday that called on former JD.com procurement and sales staff to rejoin the company, with a promise of a pay rise for returnees.

“That showed how JD.com is feeling the pressure to fend off the competition, especially those employing a low-price strategy and live-streaming e-commerce model,” said Chen Hudong, analyst at market consultancy 100ec.cn.

“The [company’s] procurement and sales team achieved good traffic with their live streams during this year’s Singles’ Day campaign,” Chen said. “This could be the reason behind the pay rise offer.”

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