China’s e-commerce players look to smaller cities to help drive consumption, growth

China’s e-commerce giants are sharpening their focus on consumers in the country’s smaller cities to help boost consumption, amid slowing growth and an uncertain economic climate.

Shanghai-based Pinduoduo (PDD), which announced its earnings for the quarter ended December on Wednesday, said a majority of its users already come from lower-tier cities – a classification for small government units in China based on population, gross domestic product and administrative hierarchy – that are “starting to explore a more diverse selection of products, such as small luxuries”, according to Xu Tian, vice-president of finance for the country’s third-largest e-commerce company.

“Such demand may have been unformed or unmatched in the past, but now they are crystallising and being fulfilled on our platform,” Xu said.

That development provides a welcome relief for the country’s e-commerce services providers, following a marked slowdown in business generated from consumers in first-tier cities – including Beijing, Shanghai, Guangzhou and Shenzhen – and those in second-tier cities, such as Xiamen, Zhuhai and Harbin.

Efforts to expand online retail initiatives in lower-tier cities come as Beijing set a lower economic growth target range of 6 to 6.5 per cent this year, after factoring in a variety of headwinds, including the trade war with the United States, a high debt level and financing bottlenecks for private enterprises.