Original link: https://www.latepost.com/news/dj_detail?id=1311
“LatePost” exclusively learned that after entering the new fiscal year in April this year, Taote, whose annual number of buyers has reached 300 million, adjusted the first indicator of its business, from focusing on the growth of users to focusing on GMV (transaction value), a short period of time. Two months later, the first indicator was adjusted to MAC (monthly active users).
With the adjustment of the first indicator, Taote’s main strategy and organizational structure have also changed.
In the strategic direction, user retention and repurchase are more important, and budget costs, algorithm recommendations, and supply structure are all tilted accordingly; in terms of organizational structure, the number of game departments responsible for user activity has expanded, while the original user growth department has increased. Narrowed down, the product and search recommendation divisions were consolidated.
Taote originally referred to the Taobao special edition, which was first launched in March 2018 and was managed part-time by the “Daily Specials” team of the Taobao business group at that time. During this period, Tao Te was not in the public eye. At the end of 2019, with Juhuasuan’s failure to block Pinduoduo, Taote, which focuses on factory goods, was re-discovered. Organizationally, Ali further integrated the daily special sale and the supply center of 1688, and established the C2M division. The front-end corresponding product is the Taobao special edition, which is in charge of Wang Hai, the former general manager of 1688 and vice president of Ali.
In March 2020, Taobao’s special edition was re-launched, and the number of staff increased rapidly from a dozen to nearly a thousand in the next year or so. This summer, the team moved out of Xixi Park and became an independent operation of Ali’s “special zone” entrepreneurial project. In May 2021, the C2M Division was renamed Taote Division, and the Taobao Special Edition was renamed “Taote” to further differentiate itself from Taobao.
After Taote operates independently, users have grown rapidly. At the end of 2020, the number of annual active buyers was less than 100 million. A year later, the number had reached 280 million, and at the end of March this year, it exceeded 300 million, which is equivalent to an average increase of more than 30 million users per quarter over the past two years. This growth rate is a shot in the arm for Ali, whose annual growth in active buyers has been below 20 million in a single quarter since the first quarter of 2019. Tao Te also achieved the best performance of Alibaba Group of 3.75 in fiscal year 2021 (the year ending March 2021), and the head Wang Hai was promoted to be a partner of Alibaba.
Alibaba Group divides the growth stages of emerging incubation businesses into three stages: Seed (seed), Traction (traction), and Profitability (profitability). In the Traction stage, it is mainly to improve user activity and retention, to optimize the scale and quality, and to maintain healthy growth; in the Profitability stage, it is mainly to realize the independent operation of the business and find a suitable business monetization method to achieve profitability.
The scale of 300 million users is a dividing point for Taote. Taote entered the Traction stage from the Seed stage. How to make users stay longer and buy more things is a new proposition it faces.
After 300 million buyers, Taote pays more attention to user retention and repurchase
In April this year, at the beginning of Ali’s new fiscal year, Taote set the first indicator as GMV and began to introduce products with higher unit prices. After two months of operation, the team found that although the total turnover has increased, the purchase conversion rate has become lower, and users’ purchasing habits need to be continuously cultivated.
Two months later, Taote adjusted the first business indicator from GMV to MAC, and paid more attention to how many people spend on Taote each month. A Taote employee believes that the MAC indicator focuses on the frequency of use of users and is a transitional indicator. The final first indicator of Taote is still the total turnover.
Since then, Taote’s core strategy has revolved around user retention and repurchase, and the market fees originally used to attract new ones have been transferred to user retention and stimulating repurchase. In the past two years, more than 70% of Taote’s external budget investment has been spent on user acquisition. This year, the ratio dropped to 30-40%, and these savings began to be transferred to retention and conversion.
In terms of specific operations, for example, the red envelopes subsidized by Taote in the past will be distributed at one time. Now, in order to allow users to open Taote shopping and shopping more, these rights and interests will be distributed in two to three days.
In terms of algorithmic logic, some products with high repurchase will get more exposure and traffic, and Taote will also introduce more high-repurchase products. At the beginning of September, Taote’s first search pit (the first product pit displayed after searching) also canceled the bidding, and rented good products with price advantages without advertising.
In-app mini-games have also become an important tool for improving user retention. In the past, the team had less than 10 employees, and many games were solved by outsourcing companies. At present, the team size is about 20 people.
In the shelf e-commerce platform, application portals, search and recommendation algorithms are all important sources of traffic. In order to make traffic conversion more efficient, after April this year, Taote merged product and search recommendation groups.
In order to achieve a longer-term turnover target, Taote is still exploring products with higher prices in terms of supply.
In March this year, Taote launched the official direct-sale stores of “Taote 10 Yuan Store” and “Taote 100”. The latter mainly focuses on the concept of “replacement of big brands”. The products come from the products jointly developed by Taote and the factory. higher. But two months later, the higher-priced “Tao Te 100” became less important because of the immature purchasing habits of users.
Although the scope and scope have been reduced, an operator in the beauty industry said that Taote is still exploring. Currently, Taote’s beauty industry will introduce products with a price that is about 10% – 20% higher, such as “used to sell 9 Block 9 for two eyebrow pencils, now will try to sell two eyebrow pencils for 12.9 yuan or 15.9 yuan.”
Tao Te’s value confusion
After reaching 300 million users, Taote’s value to Ali also became blurred. Prior to this, Zhang Yong, chairman and CEO of Ali, made it clear at the earnings conference call that Taote “undertook the role of continuously acquiring new users for the Chinese retail market.”
In the year before March 2022, Ali lost more than 40 billion in profits due to its investment in Taote and Taocaicai. According to Orient Securities’ calculation of the comprehensive single-quarter loss of Ali’s core business, it is estimated that Ali’s average investment in Taote and Taocaicai per quarter is about 10 billion yuan.
Zhang Yong said at the 2022 second natural quarter earnings conference call that 20% of Taote’s 300 million annual buyers are users who have never spent money on Taobao and Tmall, which means a huge investment in Taote every quarter. In the past year, it has brought about 60 million new users to Ali.
It is unlikely that Ali will continue to invest resources of the same scale. At the end of last year, Zhang Yong mentioned that Taote and Taocaicai have begun to take shape, and they have reached a stage where more emphasis is placed on growth quality and shrinking losses.
This year, at a time when all major companies are emphasizing cost reduction and efficiency enhancement, it is difficult for the Group to continue investing in new businesses with the same intensity. In the first natural quarter of this year, the growth rate of Taote’s new users in a single season has slowed down, from 30 to 40 million new users to more than 20 million. The second natural quarter did not disclose user data.
Hastily using GMV as the first indicator can see Tao Te’s sense of crisis for the future. Many Taote employees feel nervous and confused. On the one hand, they are worried about the future. Under the background of the cold environment and Ali’s implementation of the operating responsibility system and requiring the business to bear the profit and loss, the continuous blood transfusion of the group is no longer realistic. Special must prove that he can make money and have the ability to commercialize.
On the other hand, what unique value can they create to retain users when they already have a strong opponent? Taote used to be a challenger to the competition. Whether it is marketing or public relations, it does not shy away from comparing the two. As part of Ali’s retail business matrix, it has played a certain blocking role.
At present, 70% to 80% of Taote’s users are combined with Pinduoduo, and some of the latter’s users and consumption are also brought over. According to an observation by a Taote employee, in good months, Taote’s daily turnover was once a quarter of Pinduoduo’s. But it remains to be seen whether this leveraging will work in the long term. What they see is that users in the sinking market are extremely sensitive to rights and have no loyalty. “As long as they don’t spend money, DAU will fall.”
Before February 2021, Pinduoduo also closely followed Taote for a quarter. However, “LatePost” learned that after this, many employees of Pinduoduo have an attitude towards Taote, “I won’t pay attention, and the size is too small.”
On the user side, Taote’s product managers envy Pinduoduo’s product innovations such as “Ten Billion Subsidies” and “Duoduo Orchard”, but they have not left a deep impression on users. In addition, Pinduoduo and WeChat are a venue that can recall lost users at any time, and they do not have these advantages.
On the supply side, Taote once emphasized C2M (Consumer Direct to Factory), but this expression was not accurate, and then changed it to M2C (Factory Direct Supply). Taote attaches great importance to the factory and the place of origin, and has set up a special team to station in the place of origin to operate directly-operated factory goods. The supply of factories that work closely with 1688 is one of the few unique business values that distinguish Taote from Pinduoduo. Zhang Yong also mentioned that the commercial value of new users brought by Taote can be realized in various ways, “especially after the direct connection between the origin and consumers, the efficiency of supply chain integration has been improved.”
An employee of the direct-sale business of Taote told “LatePost” that their department is the highest performance in the whole Taote. The team is mainly stationed in the production area, digs out high-quality factories, and finds suitable products to sell on Taote.
Products under the M2C model are managed and sold in Taote’s official factory store, and Taote charges a management fee of about 10%. In the latest quarter, the only content about Taote’s progress in Ali’s financial report was about M2C – the payment GMV generated by M2C products on Taobao and Taote increased by more than 40% year-on-year.
“LatePost” learned that among the sales proportion of the factory’s official direct-operated stores, more traffic and transactions came from Taobao stores, and the ratio to Taote was between 7:3 and 6:4.
At present, directly-operated stores account for about 30% of Taote’s overall turnover. Taote likes to emphasize “good products at low prices”, but in addition to a limited proportion of directly-operated store products, it has no obvious differences and outstanding advantages from Pinduoduo in a wider supply.
The operators feel the pain, and the drawbacks brought about by too fast are emerging. Users are accustomed to promotions and red envelopes, and the less the subsidy, the less willingness to buy.
In the latest quarter, Pinduoduo’s annual active buyers have reached 900 million. Now Pinduoduo not only sells cheap things, but also sells iPhones and Hailan Mystery, and is developing cross-border business. In the Alibaba e-commerce ecosystem, Taote, which is positioned in the “sinking market”, is not regarded as a completely independent business. Its ceiling is lower than imagined, and it is more difficult to conduct business.
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