Is Pinduoduo Ready To Compete With China’s Biggest Players?

What Happened: During the first two days of the Chinese Lunar Year, Pinduoduo’s daily active users (DAU) surpassed Taobao’s for the first time in the company’s six-year history. Over February 12 and 13, Pinduoduo had 259 million DAUs, dwarfing Taobao’s 237 million. This landmark was even more notable given that the former did not cooperate with CCTV’s Spring Festival Program this year.

US-listed Pinduoduo is the third-largest e-commerce player behind Alibaba Group and Pinduoduo’s market value now stands at over $190 billion, and its founder, Huang Zheng, is now worth $30.6 billion, ranking him seventh on the China Forbes list of the country’s richest citizens.

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The Jing Take: It took Alibaba 14 years and 19 years to exceed $150 billion GMV, but Pinduoduo reached this ambitious milestone in only four-and-a-half years. And now, it has also surpassed Taobao in daily active users. However, the company still faces many hurdles to the way to besting either of its competitors. This milestone may have been a victory, but, looking closer, it is reflective of the company’s investment in promotional activities. Since February of 2020, Pinduoduo has invested $463 million in red envelope activities (digital monetary gifts given away during holidays) aimed at the Spring Festival. But due to the high cost of these promotions, the shopping platform has yet to make a profit.

Pinduoduo also faces increasing competition from China’s other sophisticated e-commerce platforms. Alibaba’s Tmall and the Luxury Pavilion, as well as, have successfully tapped into the luxury market. Wanlimu is also a rising star in the app world, using Pinduoduo’s subsidies strategy to sell products from brands like Celine. But in the meantime, Pinduoduo has stuck to offering its goods to lower-tier cities, particularly rural areas, where prices are the main attraction for users as the platform relies heavily on bottomless discounts and subsidies. And before it can even think of moving into luxury, Pinduoduo must first address its counterfeiting issue (called “Pinjiajia” or fake-fake among some users). But for now, that seems far into the future.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.


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