Pinduoduo doubles down on rural China, with five-year, US$7.1 billion e-commerce campaign
- The investment is projected to help grow the online penetration of agricultural goods to about US$113 billion within five years
- It will also foster development of 1 million rural online shops on Pinduoduo
Social e-commerce giant Pinduoduo is investing at least 50 billion yuan (US$7.1 billion) over the next five years to initiate online retail programmes in China’s rural areas, helping create a “new infrastructure” to boost nationwide demand for agricultural products.
Shanghai-based Pinduoduo, the country’s No 3 e-commerce services provider by gross merchandise volume, plans to help foster the development of 1 million rural online shops on its platform during that period, with each store targeted to generate more than 1 million yuan in annual revenue, according to the company’s announcement on Tuesday.
“PDD is very positive and optimistic about China’s agricultural modernisation and the online penetration of agricultural goods,” Pinduoduo co-founder Sun Qin said in an interview on Wednesday. The company is listed on the Nasdaq Stock Market under the ticker symbol PDD.
Sun indicated that online penetration of agricultural goods in mainland China will reach 800 billion yuan within the next five years. Total online sales from farmers and co-operatives on Pinduoduo, China’s biggest e-commerce platform for agricultural goods, “will exceed 1.5 trillion yuan”, he said, without elaborating on timing and other details.
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E-commerce in China’s rural areas and lower-tier cities has become more competitive over the past few years amid the slowdown in the country’s major cities like Beijing and Shanghai. Pinduoduo’s growth in rural e-commerce has intensified its rivalry with Alibaba Group Holding and JD.com. Alibaba, which runs the online retail platforms Taobao Marketplace and Tmall, is the parent company of the South China Morning Post.
The stakes are high for these companies, as the rural e-commerce market is projected to reach about 1.7 trillion yuan this year, according to data from China’s Qianzhan Industry Research Institute.
Pinduoduo’s latest initiative backs Beijing’s efforts to revitalise economic activity after the government started lifting the lockdown on communities and other coronavirus containment measures across the country from last month.
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That has been bolstered by the growth in China’s rural internet user population, which reached 225 million as of June last year, according to a report by the China International Electronic Commerce Centre.
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Founded in 2015, Pinduoduo has built a business model around helping farmers sell products online. It developed a “team purchase + agricultural goods” initiative to drive direct sales between small-scale farmers and consumers. Team purchase encourages users to share product information and make recommendations on Tencent Holdings-owned Chinese social networks QQ and Weixin, the domestic version of WeChat. Deeper discounts on products are offered on Pinduoduo when users buy in groups, including friends, family and social contacts.
“As of the end of 2019, PDD has achieved the first phase of “team purchase + agricultural goods,” company co-founder Sun said. He added that the company will use its “technological and marketing capabilities, bringing more agricultural sales online and exploring how to modernise the [agriculture] sector”.
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The number of active buyers of agricultural products on Pinduoduo surpassed 240 million last year, according to the company. In the past quarter to March, Pinduoduo helped open more than 270,000 new agriculture-related online shops.
But competition with its larger e-commerce rivals remains fierce. Alibaba has already developed thousands of “Taobao Villages” – clusters of online sellers in rural China – since 2009. JD.com has created rural service centres, providing technologies such as drones to expand its logistics capabilities.
Pinduoduo’s initiatives this year are expected to “strengthen user growth and engagement” across the country, according to a report last month from Jefferies. “It launched live-streaming features to facilitate interactions between users and merchants,” wrote Jefferies equity analyst Thomas Chong, the report’s lead author.
