Zhang Xiaomeng, who lives in Beijing’s expensive central business district and runs her own design agency, had been putting off downloading Pinduoduo. Despite its popularity, she disliked how it gamified shopping, particularly a feature that prompts users to enlist their friends to click on a link in exchange for a price cut. This year, she finally gave in. “Things there are cheap,” she says.
Pinduoduo shares a parent company with Temu, the blockbuster retail app that has permeated US online shopping in recent years. The success of PDD Holdings, which owns both, has come in spite of economic headwinds and intense competitive pressures in China. But an international crackdown on retail imports could bring it back to earth after a meteoric rise.
The US has outlined plans to curb tax exemptions on packages worth less than $800, in a move that will affect hundreds of millions of packages shipped by companies like Shein and Temu. It will also mean more scrutiny of textile and apparel imports, popular Temu categories. And Republican US presidential candidate Donald Trump has proposed a 60 percent or higher tariff on all goods from China—a potentially huge blow to a company built on bargains.
The success in China of Pinduoduo—and Temu in the US—counters Beijing’s desire to reposition China from a source of cheap goods to a hotbed of advanced manufacturing. Its appeal lies in offering the cheapest option for anything you might need. It works. According to the company, it had 850 million annual active buyers in 2021. PDD Holdings has twice outstripped Alibaba to be China’s most valuable ecommerce company by market share, albeit briefly. And because of Temu’s continued success abroad, domestic media now holds up its business model as an example to follow. (...)
China’s slowing economy has contributed to Pinduoduo’s rise. The downturn in the domestic property market and rising unemployment have made consumers hesitant to spend. At the most recent June shopping festival, where ecommerce platforms organize large-scale promotions and discounts, overall ecommerce sales in China fell 7 percent from the previous year to 742.8 billion yuan ($102.3 billion). When consumers do spend, they want better value for their money, searching for discounts, coupons, and cheaper versions of the same thing. “Consumers are more price conscious amid growing economic uncertainties,” Economist Intelligence Unit research analyst Aishwarya Tendolkar told WIRED.
Last year, ecommerce platforms JD and Alibaba’s Taobao offered users steeper discounts in a bid to compete with Pinduoduo. Neither has dislodged Pinduoduo’s reputation for offering the cheapest option online. In an April interview, when asked about his most serious competitors, Alibaba group chair Joseph Tsai acknowledged that Alibaba had “fallen behind,” because “we forgot about who our real customers are.”
Tsai didn’t mention Pinduoduo by name, but from its beginnings, the shopping platform has never made the merchant its focus like Alibaba did: It has always prioritized getting the user the lowest price online. (...)
Pinduoduo has even instated policies that favor customers to the detriment of merchants. Since 2021, Pinduoduo has allowed consumers to get refunds without returning the item, if what they got didn’t match the seller’s description. The Chinese counterpart to Tiktok, Douyin introduced a similar policy in September 2023, as did Taobao and JD at year end.
The platform is also edging into territory traditionally occupied by its competitors by welcoming dealers for established brands like Apple and Louis Vuitton.
Competitors like JD, which banked on being the destination for quality products and fast logistics, are at risk of their users being stolen. “JD is worried it can’t retain its existing users, and also won’t be able to attract price-sensitive users,” says one former mid-level JD manager, who asked for anonymity because of potential professional repercussions, about Pinduoduo’s rise. On its app homepage, JD has begun aping Pinduoduo by emphasizing discounts.
PDD Holdings has also made international expansion a priority by launching Temu for international markets, a step that many retail Chinese companies haven’t taken. It used to be fine for a Chinese brand to stay within the Chinese market—after all, the consumer base is huge. Rather than make international expansion a side thought, PDD Holdings spent a reported $21 million on ads at the SuperBowl earlier this year; The Wall Street Journal also reported that Temu was Meta’s single biggest advertiser in 2023, racking up $2 billion in spend. That push has paid off; in the first half of this year, Temu spent more days ranked first for downloads on both the iOS App Store and Google Play Store in the US than any other app.
by Lavender Au, Wired | Read more:
Image: CFOTO/Getty
[ed. Love seeing someone take a big bite out of Amazon's ass profits. I've never heard of Pinduoduo, but most Temu users I've talked to have been pleasantly surprised by the quality of the items they've purchased. Resisters always have the same excuse - "You think I'm giving my personal information to China?" When asked how that's worse than giving it to Amazon or any other big American corporation... no response.]
