One of Chinese e-commerce’s major players, JD.com, has launched a new social e-commerce service dubbed Jingxi, to compete in the fast-growing group-purchase space where young challengers like Pinduoduo are flourishing, with particular strength in lower-tier cities.
Beijing-based JD.com (otherwise known as Jingdong) will launch its new app through WeChat’s Discover tab at the beginning of October, according to Kr-Asia. It is widely believed that the Tencent-owned microblogging service WeChat, contributed to Pinduoduo’s success.
Pinduoduo’s success is based on group buying – offering big discounts to users who buy in groups, encouraging customers to share potential purchases with their friends through social channels. It is thought to have particular appeal to customers with lower incomes that e-commerce players have largely ignored.
Pinduoduo’s history has been quick, explosive, and murky. Founded in September 2015, Pinduoduo has largely popularised the idea of the “team purchase” that JD now chases. It debuted on the NASDAQ stock market in 2018, raising $1.6 billion, making it one of the largest IPOs of last year.
Unlike Taobao (by Alibaba) or JD.com, which are search-based, Pinduoduo’s interface is more like a news feed, with the options to share to platforms like WeChat and QQ – the social element, along with some cash, coupon, and freebie incentives has helped the platform keep its customer acquisition costs very low.
The discounts it offers are staggering: according to Technode – in an illuminating primer on the company – Pinduoduo’s typical discount on products goes up to 90%. Selling socially creates scale for vendors, which allows them to cut prices more aggressively.
It operates a C2B model, in which manufacturers ship directly to a group of buyers, eliminating distribution costs. Almost two thirds of PDD’s shoppers are based in third- and lower-tier cities; 70% of users are women. However, the company has also been mired by accusations of extensive counterfeiting on the platform, which it denies.
A relatively professional image opens up an opportunity for JD, whose increased focus on the space is interesting for a number of reasons. First, JD is hungry for new opportunities and has alighted on the fast-growing social e-commerce space, which is popular in China’s lower-tier cities and rural areas: the new growth opportunity as higher tier cities’ e-commerce markets are beginning to saturate.
Second, it’s not JD’s first social-e-commerce rodeo, having launched JD Pingou in 2014, before spinning it out as a separate business division earlier this year.
It said at the time that by September it would be directly available through the WeChat gateway – a fact the Jingxi news both confirms and extends.
Sourced from Kr-Asia, Technode; additional content by WARC staff