Amazon closed its marketplace in China in July after realizing it could not compete with rivals like Alibaba’s Tmall marketplace and JD.com.
Although Alibaba and JD.com usually lead China’s eCommerce market, the four-year-old Pinduoduo is “popular with China’s lower-tier city residents.” It attracts customers with offers of discounts and deals.
After posting a wider-than-expected quarterly loss, Pinduoduo suffered an $11 billion slump in value last week. The company pointed to the difficulty of competing against rivals with big subsidies.
The deal grants Amazon access to Pinduoduo’s 429.6 million monthly active users, TechNode reported. Pinduoduo, in turn, gets the opportunity to build a relationship with overseas retailers and branch out with more product categories.
“Pinduoduo’s users from first-tier cities spend well over RMB 5,000 ($710) per year, based on annualized figures for the third quarter of 2019,” company founder and CEO Colin Huang has said.
Amazon China held less than 1 percent of China’s total eCommerce market as of June 2018, according to market research institute eMarketer (in Chinese).
When Amazon announced in April it was leaving China, Ker Zheng, marketing specialist at Shenzhen-based eCommerce consultancy Azoya, said Amazon had no real competitive advantage in that country. Domestic rivals like Alibaba‘s Tmall marketplace and JD.com controlled 81.9 percent of the country’s market last year.
Zheng explained that unless a customer wanted a specific imported good that can’t be bought anywhere else, “there’s no reason for a consumer to pick Amazon because they’re not going to be able to ship things as fast as Tmall or JD.”
Amazon isn’t the only Western retailer that has made changes to its plans for China’s eCommerce market. Walmart sold its Chinese online shopping platform to JD.com in 2016 in return for a stake in the platform. In addition, major U.S. tech companies — such as Netflix, Facebook and Google — have slowed down their expansion plans in the country.