We’ve just passed Double 11, the largest e-commerce extravaganza in the world. Given the occasion, we’d be remiss if we didn’t discuss e-commerce. Before we get to our annual summary of top trends, we thought we’d clarify a few things about Chinese budget e-commerce platforms.
China’s e-commerce landscape is rich and diverse. Currently sitting at a quarter of China’s retail sales, China’s e-commerce platforms includes online retailers, marketplaces and affiliate platforms. Within that range, there’s a number of different platforms catering to specific spending habits.
Indeed, one of the key themes over the last two years has been thrift – consumers are looking for the best deals they can find, whether online or offline.
Previously, we’ve talked about Pinduoduo. Pinduoduo, as you may recall, used group-buying as a way to blower prices of items on its platform. There’s also livestream e-commerce, which we’ve covered extensively. One of the reasons livestream has been a breakout hit is because livestream hosts negotiate with brands to guarantee the “lowest price on the internet” for their fans.
Image: Pinduoduo APP
Below, we’ve categorized China’s budget e-commerce platforms and functions, listing whether they’re suitable or not for brands looking to enter China.
Summary of Chinese Budget E-Commerce Platforms
683 million active buyers
Pinduoduo is China’s second-largest e-commerce platform in China.
|To encourage its users to spend more and buy a wider range of goods on their platform, Pinduoduo has decided to enter cross-border e-commerce. Pinduoduo’s cross-border e-commerce offer is called Duoduo International.||Large international brands with multiple distributors must take care to ensure: |
(1) no counterfeits
(2) distributors sell on Pinduoduo using an agreed price architecture
|We believe Pinduoduo’s cross-border e-commerce platform, Duoduo International, is a net positive for brands looking for exposure to consumers in China’s lower-tier cities.|
|Juhuasuan (inside Alibaba)|
|Juhuasuan is a marketing platform for flash sales and group-buying deals inside Alibaba. It uses data analytics to offer flash sales to certain sub-segments, such as price-conscious consumers.||Juhuasuan is available to most brands who have a Tmall Flagship Store.||Using a steady stream of flash sales and group-buying deals to unlock new consumer segments can be seductive, but it doesn’t replace a clear in-market strategy.||We believe Juhuasuan should be part of a brand’s mix of e-commerce tactics in China. It’s best used when the brand has a track record of operating on Alibaba’s e-commerce platforms.|
33 million active buyers
|VIP is arguably China’s largest online discount retailer. It’s an e-commerce platform that specializes in time-sensitive discounts, called flash sales. VIP typically stocks out-of-season inventory from leading brands.||VIP is well known for offering flash sales for branded fashion, home goods, apparel and accessories.||Given all other e-commerce platforms have flash sales, the distinctiveness of VIP’s model has diminished over time.||We believe VIP is an effective way for fashion and accessory brands to clear excess inventory.|
70 million monthly active users
|A standalone e-commerce app from Alibaba that sells items under RMB 50.|
It is reported Taobao Deals was released to combat Pinduoduo’s stranglehold of consumers in China’s lower-tier cities.
|There is limited upside for most foreign brands to place their goods on this platform, unless they specialize in daily essentials, such as toiletries.||There is limited possibility for items to exceed RMB 50, in the short-term.||We believe Taobao Deals is ill-suited for foreign brands to use.|
We trust you found that summary useful. If you’re looking at entry into China via e-commerce, talk with our research and e-commerce teams to work out the best approach for you to gain traction with online shoppers.