"Price wars have become a very common operational tactic for e-commerce merchants," said an insider from an e-commerce company. From a certain perspective, low prices have become deeply integrated into China's e-commerce ecosystem. In recent years, price wars seem to be gradually fading from the internet competition discourse, but in reality, they have transformed from a byword for "vicious competition" into a "daily operational tactic" for e-commerce merchants. On the surface, there are overt or covert price wars between platforms, such as JD.com's recent 10-billion-yuan subsidy campaign against Pinduoduo, which is not much different from the price wars between JD.com, Suning, and Gome over a decade ago. At a deeper level, merchants use low prices as a tactic in their daily operations. "Price war" is not a positive term; platforms rarely initiate price wars proactively now, but the industry's low-price competition is far more intense than a decade ago. E-commerce platforms are indirectly driving price wars among merchants through traffic dominance. Photon Planet's conversations with multiple e-commerce merchants reveal that in the current era of e-commerce going down-market, pure low-price competition is becoming increasingly prominent. Merchants are forced, either passively or actively, to elevate low-price strategies to an operational priority, even if it devolves into vicious competition.
Low Prices: Malicious Competition Among Merchants
Zhang Li, an insider at an e-commerce company specializing in household daily necessities, recently revealed to Photon Planet that their Tmall store, which had been operating for eight years, was shut down by the platform. The reason, he said, was that "an employee used a crawler to scrape product images from other stores on Taobao for our own listings, and accidentally used images from a major brand, leading to a complaint from that brand and the store being closed." "The store's daily revenue was around 70,000 to 80,000 yuan, and now it's all lost," Zhang Li lamented. As for the "incident," he said the employee's main mistake was that "the other party was a major brand," not the act of using others' images. "Using competitors' images or product links is just a tactic to siphon traffic; it's common in the industry. For ordinary or non-branded products, platforms usually don't intervene, but when major brands complain, they take it seriously," Zhang Li said. The typical approach for this traffic-siphoning tactic is for merchants to target best-selling products in their category, steal their images or create similar keywords and product descriptions, then use paid traffic to position their own product's search or recommendation placement near the competitor's, and price it lower. This creates the illusion for consumers that "at first glance, the products are identical, but ours is cheaper," and choosing the lower-priced product is naturally the first choice for most consumers. This "image theft" is not limited to a single platform; cross-platform theft is also common. For example, Pinduoduo merchants steal from Taobao, and Douyin merchants steal from Pinduoduo. "This has become an unspoken common competitive tactic," Zhang Li said. This phenomenon is more prevalent on platforms like Pinduoduo, Taote, Douyin, and Kuaishou, which is closely related to product categories, target consumer groups, and platform regulation. For most non-standard products, intellectual property is difficult to define, and platforms face significant regulatory challenges. As a result, many merchants resort to these seemingly "reasonable" loopholes, and the cost of this malicious competition is the loss of orders and traffic for original merchants, along with the risk of consumers buying inferior products. Beyond exploiting loopholes, some in the industry use outright non-compliant methods to put many merchants out of business. Deng Hui, a Douyin merchant, started his Douyin store as an individual seller in mid-last year, selling low-priced daily necessities like socks, gloves, and towels—non-standard products. He chose Douyin because, as a novice, he heard it was less competitive than other comprehensive e-commerce platforms, but he found the opposite to be true. He was caught off guard by attacks from peers, and his first Douyin store failed within six months. Deng Hui said that shortly after opening, to boost sales, he selected a well-received pair of contrast-color socks for a promotion at "19.9 yuan for 6 pairs." Within days, sales of these socks quickly exceeded 100,000, but malicious attacks from peers followed as sales climbed. "Once sales went up, the socks' placement on the search page moved up. But it didn't last long; as the placement improved, returns and negative reviews surged because peers were placing fake orders. Normally, products with such low unit prices have very low return rates, and since these socks were promotional items, the quality was definitely up to par," Deng Hui said. "At that time, hundreds of fake orders were placed daily, and the store's rating quickly dropped from 4.6 to 4.0, which was a fatal blow for a new store." As an individual merchant, without advantages in capital and supply chain, it's hard to counter price wars from other players. And since these "contrast-color socks" were promotional items, already discounted, and from a new store, perhaps Deng Hui inadvertently disrupted the industry's price levels and took orders from other merchants, leading to this outcome. For any new e-commerce store, without an initial user base, it's crucial to maximize the store's rating, as it's a prerequisite for platform traffic recommendations and buyer choices. Whether it's copying images, text, or using keywords to steal traffic, or maliciously placing fake orders and defaming competitors with negative reviews, or directly engaging in price wars to suppress competitors, such malicious competitive tactics are widespread among e-commerce merchants.
Platforms' "Low-Price-Only" Approach Indirectly Fuels Price Wars
"Low price" is a tried-and-true competitive tactic in the retail industry; consumers always prefer products that are more cost-effective and cheaper. Therefore, low-price competition will always exist in industry development. For merchants, initiating a price war can boost sales in the short term, strike at competitors while consolidating their own market position, and is an extremely simple and crude competitive method. As the aforementioned insider noted, price wars are not a sophisticated operational tactic; many merchants who are keen on price wars lack other operational thinking. But conversely, this is why many people like to provoke price wars—they are simple, direct, and yield quick results, leaving merchants with weak financial strength defenseless. "Merchants who truly pursue long-term operations rarely initiate price wars, but the current competitive environment is gradually forcing merchants to participate in them," the insider said helplessly. With platforms' "low-price-only" traffic recommendation logic and increasingly fierce competition in the lower-tier market, more and more merchants can no longer stay out of price wars. Jiang Lu, a Pinduoduo merchant, is increasingly frustrated with her business on the platform. "The platform's traffic allocation is somewhat unreasonable," she said with emotion when mentioning Pinduoduo's traffic recommendations. She gave a simple example: a customer orders a 10-yuan comb from her store, and right after payment, the platform recommends an identical comb for 7 yuan. Many customers then refund and reorder the cheaper one. Jiang Lu complained that aside from losing orders, Pinduoduo charges a 0.6% transaction fee on every order, even if the user refunds, resulting in significant losses just in fees. Additionally, too many refunds and returns affect the store's weight and lower its rating. She also mentioned that Pinduoduo has a semi-mandatory promotion system. "When we sign up for an activity, sales are good during the activity period, but once it ends, we sell only one or two units a day." This phenomenon is common when platforms dominate traffic. "Taote is even harsher; if the price is too high, the platform rejects the listing, and it can't go up at all," Jiang Lu said. For consumers, platforms like Pinduoduo and Taote give the first impression of overall lower prices and better value. But for merchants, platforms achieve low prices by "restraining" them through various rules or traffic recommendation logic, forcing store operations to become slaves to price. "It's hard to sell high-priced products on Pinduoduo, partly because of the platform's low-price recommendations and partly because many down-market users don't buy high-priced items. This makes it difficult for us to invest in product quality." It's evident that platforms' excessive encouragement of low prices indirectly leads to a decline in overall product quality. According to Photon Planet, Tmall's traffic allocation places more emphasis on weighted calculations, including factors like images, price, shipping time, customer reviews, conversion rate, and click-through rate. This is closely related to the platform's user ecosystem and consumption tier positioning. Therefore, for merchants with strong financial and supply chain capabilities, when expanding scale or upgrading products, they typically don't rely on a single platform like Pinduoduo or Taote; instead, they choose cross-platform operations on Tmall, JD.com, etc., based on platform positioning differences. Platforms' traffic recommendation logic has indirectly fueled malicious price comparison among merchants. To establish a foothold on platforms like Pinduoduo and Taote, merchants must face endless price competition. Jiang Lu said that in this platform atmosphere, merchants have tacitly agreed to low-price competition. Phenomena like the aforementioned image and text copying with low-price traffic siphoning are commonplace on Pinduoduo. Jiang Lu believes that merchants generally have two ways to respond. One is to improve product quality, but that's slow and takes time. The most direct and effective solution is to counter with even lower prices, and if resources allow, "eliminate the opponent" outright, which inevitably escalates the price war. This also intensifies the head effect in certain industries or categories, and many small and medium-sized merchants perish in this vortex. With platforms dominating traffic, they no longer need to directly subsidize and initiate price wars as they did in their early days; their proactive role is weakened. The more common phenomenon now is platforms using traffic to mobilize merchant behavior, leading to internal competition among merchants, indirectly achieving low prices, and thereby gaining a competitive advantage in the industry.
Down-Market E-commerce: Nowhere Left to Compete
In 2023, platforms continue to intensify their focus on the lower-tier market. "Low-price competition" is a price revolution that has swept China's consumer market since Pinduoduo's inception, and it's still ongoing. The down-market segment has pushed this "pure price competition" to its extreme. Across e-commerce platforms, non-branded products, non-standard items, and white-label goods dominate user demand in the lower-tier market. For these product categories, where brand power is not highly required, price becomes the most critical competitive factor. This is why malicious low-price competition among merchants is more common on down-market e-commerce platforms. Zhang Li, the industry insider mentioned earlier, said that initially his company only had a store on Tmall, but now with new platforms like Pinduoduo, Taote, Douyin, and Kuaishou, their household daily necessities are well-suited for these new platforms. "On the surface, we have more opportunities, but the harsh reality is that this industry has no moat, and it's palpable that competitors are increasing." "Once we start selling well, a competitor undercuts us by two yuan and steals the traffic." Household daily necessities and other non-standard products have very low dependence on brand and service, and in today's increasingly scarce traffic, merchants' pricing power has long been controlled by platforms. When the down-market segment is squeezed to the limit, e-commerce operations seem to require no complex operational thinking; low price is the only lethal weapon. "In the end, it's all about winning over the public," Zhang Li sighed helplessly. There are more platforms and more merchants, but the number of consumers is fixed. Platforms and merchants must constantly "please" users to be chosen. Coupled with the high price sensitivity of down-market users, "low price" is undoubtedly the ultimate competitive law in e-commerce's down-market expansion. Note: All interviewees in this article are pseudonyms.