The dark horse of online retail is our key to understanding China's new consumer growth story
In less than two months since its stock began trading on Nasdaq, the share price of Chinese e-commerce upstart Pinduoduo has been steadily rising – gaining a record high last Thursday, with a 60% increase over its IPO price. Shares of its bigger rival, Alibaba, meanwhile lost ground in the same period, shedding nearly 15% on the NYSE.
Pinduoduo is just three years old. It has about 300 million users, compared with Alibaba’s 617 million. Another Chinese e-commerce giant JD.com, founded 10 years ago and for the longest time viewed as the biggest threat to Alibaba, has roughly the same market share as Pinduoduo.
The battle to rule China’s e-commerce market was deemed over a long time ago. Alibaba’s dominance had been unshakable, while runner-up JD.com was also consolidating its power as a logistics giant. No-one seemed to stand a chance of breaking the duopoly; even Amazon failed to make much of an impact. Until now.
Pinduoduo has ricocheted to the No. 3 spot in China e-retail, although it's still in the red. That hasn’t stopped a host of heavyweights from jumping on board, namely China’s most famous artificial intelligence expert Lu Qi, who recently left Baidu and joined Y Combinator; top Tencent executive Lin Haifeng; Sequoia Capital’s China head Neil Shen; and George Yeo, a former Cabinet minister of Singapore. They are all on the Pinduoduo board.
The company is also often named alongside news aggregator app Toutiao and live-streaming app Kuaishou as unicorn-startups that have gotten big by appealing to China’s smaller and poorer cities and the rural population. As Pinduoduo's founder and CEO Colin Huang, who owns 50.7% of the company, a stake valued at about US$10 billion in the IPO, famously said, "Our core competitive advantage is precisely cracking what people in big cities cannot grasp.”
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