Pinduoduo vs. Amazon: Can the Chinese e-commerce giant win in the US?

A Chinese tech company has become an unexpected winner of COVID-19: Pinduoduo. Over the past month, the mobile-only market has become the best performer on the Nasdaq Golden Dragon China Index, with shares up 43% and outpacing bigger e-commerce rivals Alibaba and

With the mainland economy cooling, Pinduoduo is looking overseas for further expansion. On September 1, the Shanghai-based platform launched an online shopping site in the United States called Temu, featuring fashion, jewelry, health, home supplies and other categories. According to a Press release“Temu was created with the aim of empowering consumers by giving them access to a wide range of carefully selected products at ultra-competitive prices.”

Temu describes itself as an “online marketplace offering unique products at prices that are hard to beat”. Photo: Temu

Known for offering discounts on agricultural products, the success of Pinduoduo highlights the growing price sensitivity of Chinese consumers. More than two years of the pandemic have exhausted revenge shopping urges; battered by lockdowns, travel restrictions and high youth unemployment, residents have reduce discretionary spending. Even the luxury resale market is seeing prices for Rolex watches and Hermès bags tumble as cash-strapped business owners unload their wares, underscoring low consumer confidence.

Although Pinduoduo’s Chinese app also offers clothing, beauty and even iPhones, it’s best known for connecting farmers directly to consumers. Can he now find success outside of his farm-to-table business? And will the low prices of the new Temu platform be enough to rise high in the saturated North American market?

The pandemic success of Pinduoduo

In fiscal 2020, Pinduoduo’s revenue jumped 97% year-over-year to reach $9.1 billion (59 billion RMB) and the number of active users increased by 57 million to reach 788 million.

Established in 2015 – much later than other national e-commerce players – Pinduoduo has quickly become one of the largest marketplaces in the country. With JD and Alibaba dominating tier-one cities like Beijing and Shanghai, e-tailer has differentiated itself by catering to underserved shoppers in lower-tier cities. It also made the online shopping experience more interactive by introducing “group buying”, allowing customers to buy products in bulk with their friends and family members to enjoy deep discounts.

These features have helped Pinduoduo show strong results even during lockdowns. In Q2 2022, after setting up a special section in the app to deliver food to trapped Shanghai residents, Pinduoduo was the only Chinese internet company to report an increase in profits (up 36% to 4 $.6 billion or 31.4 billion RMB), tripling its net profit, while Alibaba and posted their slowest quarterly growth on record.

Pinduoduo’s success is also due to its significant investment in agriculture, one of its key priorities. “Agricultural products are excellent for user retention,” said Queenie Yao, marketing and communications manager at Azoya, an e-commerce provider in China. “Fruits and vegetables are a daily necessity for almost all users – this is especially true as many Pinduoduo customers live in rural areas.” Going further, “Throughout the past year, Pinduoduo has launched agriculture-focused shopping festivals with different regions to promote thousands of local delicacies,” she added.

Entry into the American market dominated by Amazon

While Pinduoduo has found its niche in China, the United States is a totally different playing field. Here, the social commerce platform has to compete with the dreaded Amazon for market share, which counts for nearly 40 percent of all retail e-commerce sales in the United States. A household name, Amazon attracts 126 million US mobile visitors to its digital stores every month. Pinduoduo will have a huge way to go in building name recognition and site traffic.

“Chinese brands and platforms have notoriously been bad at branding, so much so that they focus too much on sales volume rather than longer-term benefits,” said Arnold Ma, Founder and CEO of Chinese digital agency Qumin. “Quality should be the number one priority for the marketing team, focus on trust rather than recognition [the latter] will come on its own over time.

When it comes to the quality of goods and services, Amazon currently has the upper hand. In 2020, the platform rolled out a “Luxury Stores” section in the United States, featuring established and emerging high-end names such as Elie Saab, Rodarte and Oscar De La Renta. This summer, it launched an innovative shopping feature called Virtual shoe try-onwhere shoppers can test thousands of sneaker styles on their phone.

In June 2022, Amazon launched a “Virtual Shoe Try On” feature in the United States and Canada. Photo: Amazon

“Amazon is focused on providing brands and designers with innovative resources, including motion graphics and enhanced auto-play images, to further share their stories and connect with a fashion-engaged customer base,” said VP. President of Amazon Seller Services, Xavier Flamand in a Press release on the recent expansion of Luxury Stores in Europe.

On the other hand, Temu lacks those elite name tags, advanced features, and sheer volume of merchandise. However, Ma notes that this might be more appealing to some given the lower barriers to entry: . This stands in stark contrast to the high service fees charged by Amazon, which can account for up to 30% of total sales revenue, which could naturally add to Pinduoduo’s appeal for business users.

Learn from Shein

In that vein, another way Temu competes with Amazon is through price. Scrolling through the website — where there’s currently a 30% off sitewide sale to celebrate its opening — prices are rock-bottom: $2 bucket hats, $0.99 cargo-print boyfriend jeans, shoes racing at $4.22. But betting on “ultra-competitive pricing” also draws comparisons with another e-commerce titan: fellow Chinese Shein.

The fast fashion apparel maker has already conquered the US market; in fact, in May 2022, Shein became the most downloaded app in the United States, overtaking TikTok, Instagram and Amazon.

“Shein disrupted the fast fashion industry with a bottom-up model (driven by insights and data collected from what consumers prefer), versus the traditional top-down model (driven by high fashion and designers) “, says Ma. “They also focused on creator-led social media rather than traditional super-polished and over-produced brand accounts. Two things Temu would do well to take note of.

Temu’s Facebook account currently only has 2,727 followers. Photo: Temu

But Temu is not at a complete disadvantage. Despite being one of the world’s newest online marketplaces, “Temu has access to one of the world’s most sophisticated supply chain networks right from the start,” the platform declared. Like Shein, Temu can leverage Pinduoduo’s global network of vendors and fulfillment partners, which managed to handle 61 billion orders in 2021 alone.

But being able to handle commands is one thing; and attracting them is another. Pinduoduo has made a name for itself in China by providing fresh produce and popularizing group purchasing, providing customers with what it calls the Costco + Disney Experience (i.e. more savings, more fun). Without these distinguishing characteristics, Temu will have to carve out a new niche in North America and learn from its predecessors if it is to be successful in the long term.

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