Alibaba’s budget shopping app Taobao Deals has adjusted its key business metric twice in less than six months, Chinese media outlet LatePost reported on Tuesday. In April, the app elevated gross merchandise value (GMV) as its most important metric and pivoted away from focusing on user growth after reaching 300 million annual buyers. Two months later, it changed again to focus more on the monthly active users (MAU) instead.
Why it matters: Taobao Deals is facing a challenging situation as it competes for growth. The platform reached over 300 million users this year. But with Alibaba Group unlikely to commit the same scale of resources to the growth of the platform as it has in the past, the standalone app will need to find new ways to expand its market share and achieve profitability amid pressure from strong competitors, such as Pinduoduo.
Taobao Deals uses the consumer-to-manufacturer (C2M) business model that connects manufacturers directly with customers to help lower costs, the same business model that fuelled the rise of Pinduoduo. Soft-launched in 2018, Taobao Deals is Alibaba’s effort to reach users in less affluent regions and compete with the growing reach of Pinduoduo.
Details: The significant shift in the key metric means Taobao Deals focuses more on increasing user retention and activity than user growth. LatePost reported that the department responsible for user growth has also been reduced.
Daniel Zhang, CEO of Alibaba, said in the first quarter earnings call that the huge quarterly investment (in the tens of billions of yuan) in Taobao Deals has brought Alibaba about 60 million new users in the past year.
More than 70% of the app’s external budget has been spent on new user growth in the past two years. However, the proportion dropped by around 30% to 40% this year, seriously slowing user growth.
Taobao Deals’ single-quarter new user growth shrunk during the January to March period, from the previous 30 million to 40 million range to just over 20 million. The company has yet to disclose its user figures publicly for the second natural quarter.
Context: In less than two years, Taobao Deals has achieved annual growth of more than 200 million active buyers — an impressive result for a mature company like Alibaba. All of the other Alibaba’s e-commerce sites have been seeing annual active consumer (AAC) growth of less than 20 million every quarter since the first quarter of 2019.
Taobao Deals occupies only a fraction of the market share compared to the dominant incumbent Pinduoduo. Pinduoduo’s annual active buyers reached 900 million in the second quarter this year, nearly three times the growth of Taobao Deals.
There is a 70% to 80% overlap between the user base of Taobao Deals and Pinduoduo, and with Alibaba simultaneously trying to reduce costs and increase efficiency, Taobao Deals can face more difficulties in trying to increase its market share.
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