Some China merchants are collateral damage in the war between e-commerce rivals Alibaba and Pinduoduo, as a growing number claim to be victims of ‘forced exclusivity’.

Group-buying platform Pinduoduo has overtaken in terms of customer numbers and its annual customer base of 536 million is closing in on Alibaba’s figure of 693 million.

Many merchants sell on both platforms, but now, the Financial Times reports, Alibaba is alleged to be demanding they make a choice of one or the other; sellers who don’t close their Pinduoduo operations face having shopper traffic directed away from their Tmall store.

“If a brand’s product offering is relevant, and their price is competitive on our marketplace, it will organically show up,” said an Alibaba spokesperson. “It’s not about other platforms.”

But not all observers agree. “Forced exclusivity is an open secret in China’s e-commerce industry,” according to Li Chengdong, chief executive of the Haitun think-tank.

Pinduoduo made reference to the practice in an analysts’ call last November, in which it said more than 10,000 sellers had seen their business affected. The platform is also reported to be part of an ongoing lawsuit against Alibaba, initiated by back in 2017, for abusing its market position in this way.

The rapid growth of Pinduoduo over the past two years – it had fewer than 100 million customers in 2017 and passed’s 300 million in 2018 – is reshaping the market. Earlier this month, Alibaba launched Taoxiaopu, as part of its response to the rise of social commerce as exemplified by Pinduoduo.

This is a platform available in its Taobao app that encourages users to become “dropshippers”. Users tap online social contacts to boost transactions, acting as middlemen selling goods for other merchants without having to stock any physical inventory; they take a commission, Alibaba takes care of payment and shipping.

Last year Alibaba and also both launched discount and flash sales platforms – Juhuasuan and Jingxi respectively – as part of a push into lower tier cities where Pinduoduo is strong; at the same time Pinduoduo is pushing into higher-tier cities.

The battle continues later this month as Alibaba’s Taobao will send out a reported RMB 2 billion in cash in red packets during the Spring Festival holiday, with half of this being handed out during the Spring Festival Gala televised by state broadcaster China Central Television (CCTV).

The partnership with CCTV will help Alibaba to promote a RMB 10 billion subsidy program offered through Juhuasuan, which was launched at the end of last year as a response to Pinduoduo’s own RMB 10 billion subsidy program.

Sourced from Financial Times, Tech in Asia, TechNode; additional content by WARC staff