Author | Liu Baodan, Zhou Zhiyu
Editor | Zhang Xiaoling
As the killer feature for the rise of Pinduoduo, &#34;refund only&#34; was once regarded as synonymous with protecting user rights and was adopted by major e-commerce platforms. However, due to its harm to merchants' rights, it has been continuously revised or even canceled.
Following Taobao and Tmall, 1688 has also joined this trend, which means that the Alibaba ecosystem is beginning to completely downplay &#34;refund only.&#34;
Recently, 1688 announced at the &#34;Good Business Conference&#34; that it will fully cancel the &#34;refund only&#34; policy starting from late March. When handling transaction disputes related to product quality issues, the platform will determine based on the account's creditworthiness, subsidizing the affected party to accelerate dispute resolution and improve business efficiency.
1688 primarily engages in B2B business, and the cessation of &#34;refund only&#34; reflects its intention to build a favorable business environment. This is also attributed to the development of AI technology, which is becoming the core driving force of the company.
In recent years, competition in e-commerce has become increasingly fierce, and Alibaba has entered a period of strategic adjustment, focusing on its two main businesses: e-commerce and cloud computing. In this adjustment, the long-standing supply chain advantages of 1688 have been recognized, and it has been selected by the Alibaba Group as one of the first strategic innovative businesses to receive investment.
After more than 20 years of dormancy, 1688 is now embarking on a journey towards the stars and the sea of the AI era.
<h2>Cessation of &#34;Refund Only&#34;</h2>
The &#34;refund only&#34; policy, which once represented the intense competition in e-commerce, has ultimately faded from the stage of 1688.
Unlike other platforms' revisions or corrections, 1688 has directly announced the complete cancellation of the &#34;refund only&#34; policy. Previously, when buyers found quality issues with products after receiving them and initiated a refund-only request, the platform would actively intervene in the handling without requiring the merchant's consent for a refund.
Merchants were in a passive position. If merchants disagreed with the platform's handling results, they could protect their rights through an appeal process. If the appeal was successful, the platform would compensate the merchant accordingly.
Now, 1688 will cancel the platform's active intervention in &#34;refund only for quality issues after receiving the goods.&#34; The determination will be made based on the platform's buyer credit system, and those who meet the requirements will be subsidized by the platform, with merchants not bearing any related costs. After the subsidy is completed, the product does not need to be returned.
The cancellation of &#34;refund only&#34; by 1688 indicates that competition in the e-commerce industry is beginning to move towards a de-involution phase, which is both a result of policy advocacy and a necessary requirement for the platform to create a healthy ecosystem.
On March 5, Luo Wen, director of the State Administration for Market Regulation, stated that in terms of platform rules, the principle of openness and fairness will be upheld to promote mutual benefit and win-win situations among all parties on the platform. In response to the prominent issue of platforms abusing the &#34;refund only&#34; rule, resulting in merchants losing both goods and payments, the platform will be urged to clarify the applicable scope and specific circumstances of the rules to protect merchants' legitimate rights and interests.
For 1688, canceling &#34;refund only&#34; is just part of building a favorable business environment. At the conference, 1688 announced that it will increase investment in three areas: platform rules, operational efficiency, and market competition. For example, in terms of operational efficiency, 1688 will leverage AI's understanding of the industry to help merchants publish products using natural language and images
Commercial investment is also part of operational efficiency. Liu Kang, head of customer experience at 1688, stated: &#34;From the perspective of the business environment, we believe that a qualified marketing tool should have an ROI of 5:1, meaning that an investment of 1 yuan should generate 5 yuan in GMV. An ROI below 5:1 is unreasonable, indicating low operational efficiency.&#34;
In terms of market competition, 1688 emphasizes that competition should be healthy and orderly, with one measure being support for new products. Regardless of whether they are new or old merchants, as long as there are new products, support will be provided. &#34;We guarantee that today, at least 20% of all traffic on 1688 will be allocated to these new products.&#34;
1688 will also incorporate the business environment into the company's systematic governance procedures. At the meeting, 1688 announced the establishment of a Business Environment Governance Committee, which will include core indicators such as platform rule optimization, market competition order maintenance, and operational efficiency improvement into the annual assessment system for relevant department heads, with a weight of no less than 30%.
At the same time, 1688 will fully launch supply upgrades, eliminating merchants with no inventory, poor service fulfillment capabilities, and high refund rates, allowing quality suppliers with competitive products, prices, and services to enjoy more certain business results.
To this end, 1688 will focus on supporting two types of quality supply: one is high-quality factories represented by &#34;specialized, refined, distinctive, and innovative&#34; and brand OEM factories; the other is suppliers with direct sources in core production areas.
The cancellation of &#34;refund only&#34; serves as a barometer, representing 1688's re-evaluation of the merchant ecosystem, enhancing competitiveness by stimulating the supply side, which is undoubtedly the right direction, although it still requires time and market validation.
<h2>Enhancing Service Capability</h2>
Whether for brand alternatives or factory goods, users are rapidly flocking to the 1688 platform, which is a remarkable phenomenon in the context of a plateau in internet user growth.
According to data released by 1688, in 2024, the number of active buyers on the 1688 platform is expected to grow by 55% year-on-year. Among them, the number of active buyers in the drop shipping distribution model, which does not require worrying about inventory risks, is expected to grow by 75% year-on-year.
Wall Street Journal learned that by February 2025, the annual active buyer count (AAC) on the 1688 platform will exceed 100 million, setting a new historical high, with B-class buyers contributing about 90% of the platform's transaction volume.
To a large extent, the popularity of 1688 is closely related to the rise of live e-commerce platforms such as Douyin, Kuaishou, and Xiaohongshu.
According to Lu Tao, head of user operations at 1688, in addition to the retail e-commerce seller group, the new buyers who have flocked to 1688 in recent years mainly come from Xiaohongshu bloggers, Douyin hosts, Kuaishou influencers, community group buying &#34;group leaders,&#34; as well as mothers, college students, and emerging white-collar workers trying side jobs and light entrepreneurship, along with flexible workers such as delivery riders and ride-hailing drivers.
Lu Tao further explained that these buyers have high-frequency demands on 1688, including sourcing quality goods, finding brand alternatives, and seeking factory customization, with high-frequency small purchases being their notable characteristic
In order to attract buyers, 1688 is also trying to continuously enhance its service capabilities and has launched a new business called &#34;Yuanxuan,&#34; collaborating with factories to build brands and supply chains, thereby reducing buyers' decision-making costs.
In the past year, 1688 has focused on addressing procurement experience issues that received significant feedback from buyers. As of February 2025, the on-time delivery rate for merchants reached 98.6%, and automatic compensation implemented due to merchant performance violations has covered 85% of orders.
Additionally, 1688 has focused on rectifying issues frequently reported by buyers, such as negative responses from merchants, refusal to accept returns, forcing buyers to bear return shipping costs, and failure to fulfill refund commitments. Currently, approximately 96% of on-site orders have achieved a &#34;return shipping cost covered&#34; service.
According to Wall Street News, starting in March 2025, 1688 will fully upgrade its APP, focusing on five major directions to comprehensively improve the buyer experience and enhance procurement efficiency using AI. This includes making it easier for buyers to find new products and quality supplies, achieving efficient procurement processes and precise decision support, simplifying inventory management for buyers, and continuously improving the buyer experience.
&#34;Yuanxuan&#34; is also an important attempt by 1688, primarily doing two things: first, providing products of the same quality as major brands but at only one-third of the price, catering to household procurement and stockpiling needs, while innovating and improving the products.
Second, relying on 1688's offline selection centers and super factories, it aims to lock in factories with design, research and development, and rapid response capabilities, promoting the digital transformation of the supplier chain, allowing factories to engage in private label business. Insiders reveal that this business aims to serve buyers across the board and has similarities with the &#34;MM&#34; brand products of Sam's Club and the private label products of Costco.
At the meeting, 1688 announced that Yuanxuan will launch the &#34;Brand Supply Chain&#34; plan, which will initially focus on three core consumption scenarios: health, travel, and home, planning to create 100 super products in collaboration with factories using new AI technologies.
It is worth mentioning that in 2025, 1688's Wow Customization will undergo a comprehensive upgrade, significantly enhancing the application of AI in the customization field. It is reported that &#34;Wow Customization&#34; is a service launched by 1688 to meet the market's demand for small-batch, personalized customization.
<h2>Seize the Opportunity Period</h2>
As Alibaba's oldest business, the importance of 1688 within Alibaba has significantly increased.
In November 2023, 1688 was identified by Alibaba Group as one of the first strategic innovative businesses, adopting a more independent strategy to face the broadest market.
In the view of Alibaba Group CEO Eddie Wu, 1688 has a solid foundation and enormous potential for a second entrepreneurial venture in the new era. Starting with the most competitive Chinese manufacturing products, it is expected to extend from B2B business to procurement for small and medium-sized enterprises and consumers, while also possessing the service capability to support cross-border transactions.
After more than a year of development, 1688 has already achieved significant results, with the number of buyers exceeding 100 million and the factory ecosystem improving. Wall Street News has learned from internal sources that 1688 not only strictly controls its commercialization rate but also clearly defines the operational principle of &#34;buyer experience first, seller business growth prioritized over platform revenue.&#34;
1688's confidence comes from being backed by the big tree of Alibaba. According to the plan, Alibaba Group will continue to invest in 1688 over a period of 3-5 years, which means that 1688 does not face financial pressure in the short term.
However, this does not mean that 1688 can rest easy; the challenges it faces should not be underestimated. As a business that has been established for more than twenty years, 1688 needs to completely break away from past inertia, find and establish its unique advantages in the market, and translate this capability into performance growth.
At least for now, 1688's strategy has not yet reflected in its performance. As of the quarter ending December 31, 2024, the wholesale business in China where 1688 operates achieved revenue of 6.575 billion yuan, a year-on-year increase of 24%, which is basically flat compared to last year.
The era of AI is accelerating, and 1688 is also betting on a new future, which will be a thorny path to gold mining. If 1688 wants to win this battle, it must demonstrate real strength.
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Alibaba's 1688 platform announced that it will fully cancel the "refund only" policy, aiming to create a favorable business environment and improve transaction efficiency. This move marks Alibaba's shift away from internal competition in the e-commerce sector. Leveraging the development of AI technology, 1688 will focus on its core businesses of e-commerce and cloud computing, advancing into the AI era

- 1688 has announced the complete cancellation of its "refund only" policy, aiming to create a better business environment and enhance operational efficiency.  
- This decision reflects a shift in the e-commerce landscape, as 1688 seeks to leverage AI technology and improve the quality of its supply chain while addressing merchant rights.  
- The platform's active buyer count has surged, indicating a growing demand for competitive products, as it adapts to the evolving market dynamics and consumer needs.

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