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New refund policies from Alibaba’s Taobao and JD.com spark fears of customer abuse among merchants

January 4, 2024 - New “refund only” policies introduced by Chinese e-commerce players including Alibaba Group Holding’s Taobao and JD.com have sparked concern among some sellers about potential abuse of the terms, according to merchants and analysts.


Taobao and JD.com in late December introduced new policies that – in certain circumstances – allow shoppers to receive a refund for a product they are unhappy with even though they keep it. This may occur when a consumer complains about the poor quality of a product, or about an inaccurate and misleading description on the platform. Alibaba owns the South China Morning Post.


Alibaba, whose company mission is “to make it easy to do business anywhere”, had a long internal debate over whether to follow rival Pinduoduo, which was the first to offer a policy whereby a shopper can receive a refund for a product they are unhappy with even though they do not return it.


Even though some merchants have raised concerns about potential abuse, Alibaba came down on the side of consumer rights in such a situation as merchants are ultimately dependent on buyer confidence, according to a person briefed on the discussions who asked not to be identified.


However, since the policy went into effect last week there has been an increased number of claims under the “refund but keep the purchase” policy, according to one merchant who runs apparel shops on both Taobao and JD.com, adding that some consumers were looking to exploit the situation.


The 33-year-old online shop owner, who spoke on condition of anonymity for fear of retribution from the platforms, said that the new refund policy could backfire and hit sellers who invest in high-quality products, because they will bear higher costs in the event of more claims.


This refund terms only works for merchants who sell dirt-cheap goods,” she said, adding that the policy clearly favoured consumers.


Meanwhile, some merchants took to social media platforms such as Douyin and Weibo to express anger at the potential for policy abuse.


One user with the handle “PengqiangweiVerna” posted on Weibo that the practice will “foster a group of online freeloaders”. Another Douyin user called “Xinzhouxiaohuolang” posted a dozen videos denouncing such refund requests.


Both Taobao and JD.com have said that any decisions on refund requests on their platforms will be based on multiple indicators, including the track records of both merchants and buyers, along with big data analysis to support their judgments.


A person familiar with the situation at Taobao, who asked not to be identified as they are not authorised to talk to the media, said that the platform has offered merchants an appeal option if they think they have been wronged.


Taobao and JD.com did not immediately respond to requests for comment on Wednesday.


Pinduoduo’s original “refund but keep the product” practice was initially launched in 2021 and is seen as a key factor behind the Shanghai-based budget-shopping platform’s rise to prominence.


Tang Guangyao, a 38-year-old Beijing software developer, said he has shifted from other e-commerce platforms to Pinduoduo as a primary shopping channel owing to its robust consumer protection, even though it focuses on budget prices.


But some analysts say simply following Pinduoduo’s lead may not work for rival platforms.


This [new refund policy] isn’t very practical for platforms such as Taobao, Tmall and JD.com,” said Zhang Yi, founder and chief analyst at Guangzhou-based iiMedia, pointing out that Pinduoduo’s focus on rock-bottom prices means that the costs of the scheme are more bearable than for merchants on rival sites.


By following this [Pinduoduo] refund policy … [rival platforms] will give their merchants a dilemma,” he added.

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