If you keep tabs on the Chinese ecommerce industry, you’ll almost certainly be familiar with the “big two” of Chinese ecommerce: Alibaba and JD.com.
Alibaba is one of the largest internet companies in China (and the world), and is the company behind some of China’s biggest ecommerce platforms, including Taobao Marketplace, Tmall and AliExpress. JD.com is its main competitor, and also owns the online grocery business Yihaodian, formerly owned by Walmart.
Between them, the two companies have captured close to 73% of Chinese ecommerce sales and have investments in a number of other retail companies. But although they have a huge amount of combined clout, it’s a mistake to assume that Alibaba and JD.com are the only two players in Chinese ecommerce worth knowing about.
For example, in November, four months after shuttering its domestic marketplace in China, Amazon announced that it would be opening up a temporary pop-up shop during the holiday period – in partnership with social commerce start-up Pinduoduo. While it only launched in 2015, Pinduoduo has rapidly risen to become one of the most important companies in Chinese ecommerce, giving Alibaba and JD.com a run for their money and prompting them both to expand into the rural communities where Pinduoduo has been so popular.
In this article, we’ll round up some of the players in Chinese ecommerce other than Alibaba and JD.com who are worth paying attention to. Some are up-and-comers to keep an eye on, while others are veterans who have been around since the early days of Chinese ecommerce and have evolved with the times. All of them are important names to know for anyone who wants to gain a better understanding of the Chinese ecommerce landscape.
Pinduoduo
Since it was founded in 2015, social commerce app Pinduoduo has succeeded in massively disrupting the Chinese ecommerce market, achieving unprecedented popularity and rising to become the third biggest player in Chinese ecommerce.
Pinduoduo’s overnight success can be attributed to a combination of factors: it offers low-priced goods that appeal particularly to consumers in China’s rural communities, a largely untapped market until Pinduoduo came along, and it rewards users for getting their friends involved, offering further discounts for users who buy as a group. Its presence on WeChat, China’s ubiquitous messaging platform and super-app, has also played a key role in Pinduoduo’s success, giving it a ready-made means with which to promote itself.
What’s behind the success of China’s social commerce app Pinduoduo?
Despite these many advantages, Pinduoduo’s continued growth and success are by no means guaranteed. The company is now trying to shed its association with shoddy goods and deep discounts and gain recognition as a high-quality ecommerce platform, something which the tie-up with Amazon could help it achieve. Pinduoduo has encountered some bumps in the road in its pursuit of a more mature long-term business model: its operating costs have more than doubled as it tries to market itself to a wealthier customer base in China’s major cities, and in Q3 of 2019, it suffered an $11 billion slump in value after posting a wider-than-expected quarterly loss.
However, Pinduoduo CEO Huang Zheng has asserted that the investment will be worthwhile in the long run, and Pinduoduo is still enjoying rapid growth in both users and revenue. While it remains to be seen whether Pinduoduo can win over wealthy consumers or whether it will need to pivot to another strategy, there’s no doubt that Pinduoduo will continue to be an important force in Chinese ecommerce.
Xiaohongshu
Xiaohongshu, also known as ‘Little Red Book’ or ‘RED’ in English, is an ecommerce platform for luxury overseas goods. Founded in 2013, Xiaohongshu originated as an app for Chinese shoppers travelling overseas to publish reviews and recommendations about products they’d bought, and gradually built up a community of savvy shoppers sharing their insights into luxury goods. Xiaohongshu’s founders, Miranda Qu and Charlwin Mao, saw an opportunity to pivot into ecommerce and began to source products to cater to users who wanted to buy directly, as well as allowing qualified brands to open up their own digital shops on the platform for a commission fee of 5% per deal.
User-generated content has been the major draw on Xiaohongshu’s platform, with dedicated members of its community publishing long-form product reviews (known as “notes”), complete with images and videos. The app has historically enjoyed high engagement, as users flocked to Xiaohongshu to learn about the latest trends and hottest products.
However, where once Xiaohongshu was staunchly non-commercial, refusing to run advertising or allow brands to open up official accounts, it has changed its stance over the past year and a half and begun to host ads and court professional influencers, which has alienated some of Xiaohongshu’s dedicated users and damaged engagement.
Like Pinduoduo, Xiaohongshu is currently going through a period of transition as it attempts to broaden its scope and keep the profits coming in. It has diversified its video content to include videos of things like pets and travel, in keeping with the current trend towards short video in China, and in June, it quietly began testing a livestreaming feature – another trend that is currently all the rage among ecommerce platforms. Xiaohongshu has also ramped up its marketing to attract new users, and as a result, has seen the number of daily users on the app quadruple to 30 million, according to The Information.
Xiaohongshu reportedly took in close to 100 million yuan in advertising revenue (US $14.5 million) in 2018, and the company has told investors that it expects to increase that figure to one billion yuan by the end of this year. It may be that Xiaohongshu opts to move further away from ecommerce towards advertising and social content, but for now, it’s keeping one foot in the world of online retail.
Mogu (formerly Mogujie)
Mogu is a social media and ecommerce platform specialising in fashion content, products and services. It was founded in 2011 as a digital magazine for young women, and originally resembled a Pinterest-style pinboard that let users share fashion items with links to third-party ecommerce platforms.
In those early days, Mogu (then known as Mogujie) enjoyed a mutually beneficial relationship with Taobao, Alibaba’s third-party marketplace: Mogujie sent large quantities of referral traffic over to Taobao, and received a hefty referral commission in return. But after Mogujie rejected an investment offer from Alibaba due to a difference in vision, it was banned from linking to Taobao – and so became an ecommerce platform in its own right.
Mogu has since built out both the commerce and social sides of its platforms, soliciting high-quality merchants and giving them tools to connect with users. In 2015, it introduced livestreaming as a way for KOLs (Key Opinion Leaders, the Chinese term for influencers) to show off items for sale – well ahead of the current trend of livestreaming in ecommerce, which Mogu claims to have pioneered. In 2018, livestreaming brought in 11.8% of Mogu’s total sales.
While it hasn’t always been easy for Mogu to compete with titans like Alibaba, it has held its own, combining forces with its biggest rival, Meilishuo, in 2016, to form a combined company worth (at the time) $3 billion. In 2018, Mogu collaborated with JD.com to create a new fashion ecommerce mini-program on WeChat. Later that same year, Mogu went public, filing for a $200 million IPO in the United States. Mogu is placing its hopes in the livestreaming boom to help it turn a profit (the company currently operates at a loss), along with WeChat mini-programs, which have been a key source of growth and revenue.
Suning.com
Suning.com is China’s largest omnichannel retailer and a mainstay of the Chinese retail landscape by anyone’s estimate. First founded in 1990 in Nanjing as an air conditioner store, Suning has since broadened its scope beyond domestic appliances into electronics of all kinds, as well as books, general merchandise, cosmetics, baby care products and more.
Suning’s strengths as a retailer mainly lie in its bricks-and-mortar presence, but in the 2010s, Suning has ramped up investment into its ecommerce business. It opened its doors to third-party sellers on its ecommerce platform in 2013, and has made some strategic acquisitions, acquiring baby products specialist Redbaby in 2012 and group buying website Manzuo.com in 2014. In 2018, Suning announced that its net profit increased by 216% thanks to “soaring online consumption”, and as of June 2019, its online platform had 442 million registered users.
Suning has also joined Alibaba and JD.com in expanding into China’s rural markets, announcing that it will help people in rural areas to take advantage of its ecommerce platform, empowering them to start up businesses. In the bricks-and-mortar space, it is also emerging as a leader in China’s burgeoning New Retail revolution, expanding its network of offline stores and outfitting them with innovative smart technology.
Vipshop
Discount ecommerce platform Vipshop was one of the first flash sales marketplaces in China, offering brand name goods at a discount for a limited period of time. Launched in 2008, Vipshop went public just four years later, listing on the New York Stock Exchange in 2012.
The company has had highs and lows since then, but has consistently been a leading discount ecommerce website, and for a time was the third-largest B2C ecommerce platform in China. In 2017, it was ranked 115th in Fortune Magazine’s China 500 listing, and 40th in BrandZ’s list of the Top 100 Most Valuable Chinese Brands. In late 2017, tech giant Tencent and JD.com both made investments, tethering Vipshop’s marketplace to their own ecosystems; nearly a quarter of Vipshop’s new customers now originate from JD.com and Tencent’s platforms.
Vipshop is considered a small player in Chinese ecommerce these days, but its userbase is still increasing: in Q3, 2019, Vipshop’s active customers grew by 21% to 32 million, while total orders on the platform increased by 33% year-over-year to 127.6 million. Vipshop has also recently pushed into the bricks and mortar space, acquiring retail chain Shan Shan Outlets in June for 2.9 billion yuan (US $422 million).
Dangdang
Dangdang was a pioneer in Chinese ecommerce and one of the earliest entrants into the space. Much like Amazon, it launched as an online bookstore in 1999 – and even received a $150 million takeover bid from Amazon in 2004 (which it rejected). In 2010, it went public on the New York Stock Exchange and became the first Chinese ecommerce site to list in the United States.
In 2012, when the Chinese ecommerce market began to take off, Dangdang was cautious in expanding its product range, keen to put the interests of its investors first rather than risk profitability by expanding rapidly like rivals Alibaba and JD.com. While this conservative strategy allowed Dangdang to turn a profit in the short term, it ultimately struggled to compete with the vastly expanded product ranges its rivals offered, and several tough years followed.
Dangdang became a private company again in 2016, and its profits have since improved. It is now mostly focused on the niche online book market, a sector reportedly worth 45.9 billion yuan in 2017.
Youzan
Unlike the other companies on this list, Youzan is not an ecommerce vendor in its own right, but rather a platform for ecommerce vendors. Widely regarded as the Chinese answer to Shopify, Youzan allows ecommerce companies to start up a business on WeChat.
While it is far from the only platform operating in this space, Youzan is one of the most highly-regarded ecommerce platforms for WeChat, making it an important player to know about. In April, it received a 550 million HKD investment from WeChat parent company Tencent. Search giant Baidu has also entered into partnerships with Youzan to create ecommerce mini-programs on Baidu, and in August, the two companies founded a joint venture called Qima that is aimed at accelerating mini-program development.
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