Pinduoduo’s latest results prove its ecommerce isn’t just for cheapskates, founder says

Pinduoduo, a Chinese ecommerce platform that is seeking to dispel an association with price-sensitive customers, said it gained more customers from the nation’s most developed cities, a feat that would bolster its challenge against more established rivals Alibaba Group Holding and JD.com.

Photo credit: Georgejmclittle

Orders from the most developed cities, such as Beijing, Shanghai, and Hangzhou, accounted for 48% of the total value ordered through Pinduoduo’s ecommerce platform in June, up from 37% in January, according to company founder Colin Huang Zheng in a conference call before the US market opened on Wednesday.

“When we were listed a year ago and unfamiliar to most people, despite our consistent messaging, some competitors tried to frame us as a platform that would only attract price-sensitive users in lower-tier cities, and that our products are cheap because they are low-quality or even knock-offs,” said Huang, who is also chairman and chief executive. “Today, our results have firmly demonstrated otherwise.”

The latest estimates by Pinduoduo may reinforce its efforts to challenge what it described as “forced exclusivity” in the ecommerce market, where merchants and customers are constrained to a certain platform or choice of payment method.

In April, Huang called for a more open competition that would benefit both merchants and consumers. Shanghai-based Pinduoduo has provided alternatives in terms of its logistics waybill systems, cloud computing services, and payment system.

Pinduoduo has accused its larger ecommerce rivals of freezing out upstarts through their dominance in various industries.

The country’s biggest ecommerce services provider, Alibaba, for example, developed and deployed its own logistics network Cainiao and online payment system Alipay, while excluding similar offerings such as WeChat Pay from rival Tencent Holdings. Social media giant Tencent, meanwhile, blocks links to Alibaba’s Taobao marketplace from opening within its flagship messaging and social media app WeChat.

New York-traded Alibaba is the parent company of the South China Morning Post.

Pinduoduo’s shares have gained almost 17% this year before the results announcement, in line with the 15.6% gain in the benchmark Standard and Poor’s 500 Index.

Its users have nearly doubled their annual average spending to 1,467.5 yuan (US$208) in the 12-month period ended June 30, helping to drive a 169% jump in revenue in the second quarter.

Its net loss narrowed to 1 billion yuan (US$141.3 million) in the same period from 6.5 billion yuan (US$918.3 million) the previous year.

Pinduoduo initially found popularity via its group-buying business model, which offered discounts to users who persuade friends on social media platforms to buy an item together with them to get a lower price.

After it went public last year, the company was hit by accusations that some products sold on its platform were inferior or counterfeit items. The firm has since promised to put in place stricter regulations and technology aimed at targeting and taking down such listings.