Beijing: As consumers become more frugal during the economic downturn, China's online consumer market is shifting from the former dominance of Alibaba Group Holding to a more diverse warring state.
While Alibaba, which owns the South China Morning Post, remains the country's biggest e-commerce player with its Tmall and Taobao platforms, competition is heating up as consumers seek the best deals.
Shanghai-based Pinduoduo, which is known for its value for money, reported a 66% increase in third-quarter revenue to 35.5 billion yuan (US$5 billion).
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The company's strong sales growth, which uses consumer social media networks to promote deals, contrasted with Alibaba's 3% revenue growth over the same time period -- despite Alibaba's sales of 207.2 billion yuan being nearly six times larger. .
Tam Tsz Wang, an analyst at Hong Kong-based DBS Bank, said Pinduoduo is benefiting from its focus on lower-tier cities and daily supplies, which are essential even in tough times.
Ruby Ye, a resident of Shanghai, said she now uses Pinduoduo instead of Taobao to buy things such as slippers and screws for less than 10 yuan, and the quality is satisfactory. "I bought a wristband for my Apple Watch for 6 yuan, and the quality is good," he told the Post.
As the total pie stops growing, competition in China's online market has become increasingly brutal - one e-commerce platform's gain means another platform's loss, and low prices are increasingly the major difference. Total retail sales fell 0.5% in October, slowing from a 2.5% increase in September.
In a leaked speech by JD.com founder Richard Liu Qiangdong, Liu told senior JD.com executives that they needed to go back to basics in order to offer consumers the best prices. According to the speech, JD.com's third quarter revenue rose 11.4 percent to 243.5 billion yuan.
In the earnings call, Sandy Xu Ran, JD.com's chief financial officer, said consumers are "becoming more conservative or rational under the current macro environment." As a result, "daily necessity products outperformed discretionary products."
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Alibaba CEO Daniel Zhang Yong also said that consumer order volume decreased due to weak consumer demand as well as disrupted deliveries. Alibaba and JD.com did not release total sales figures for this year's Singles Day shopping festival.
Facing the economic slowdown, all three major e-commerce players have adopted cost-cutting strategies. There is also a shift away from the static urban market towards opportunities in rural areas.
JD.com and Pinduoduo have both increased their investments in China's agricultural e-commerce sector. According to Xu, JD.com is "committed to consumption upgrading ... to promote the virtuous cycle of rural revitalization."
China's rural e-commerce market is set to grow nearly 18% year over year to 3.7 trillion yuan in 2021, according to e-commerce data analytics service EDT, while the number of rural online shoppers grew 21% to 360 million.
Meanwhile, new players have emerged in China's e-commerce market, such as ByteDance's Douyin, the Chinese version of TikTok. Short video service providers are looking to turn their large user base into a growing source of shopping revenue.
Live-streaming e-commerce gross merchandise value, or total sales, jumped 146% year over year to 181.4 billion yuan, or one-tenth of total sales, for online carnivals during the 2022 Double 11 shopping, according to big data analytics service Sinton Competition.
Pinduoduo faces competition from content e-commerce platforms such as Douyin and Kuaishou. They are investing more in e-commerce, and [Tencent's] video account has also had an impact on Pinduoduo," said Zhuang Shuai, a researcher at 100ec.com's e-commerce research center and founder of Bailion Consulting.
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According to Chen Tao, a senior consultant in retail at Analysys, these new e-commerce business models, such as live streaming and Meituan's instant purchase, present challenges as well as potential new growth opportunities. For example, Alibaba has aggressively pursued live-streaming e-commerce.
However, Chen said that he "does not expect [live streaming and instant shopping] to replace the traditional e-commerce model and become mainstream in the next year or two."