Taobao takes on Pinduoduo with roll out of Taobao Tejia

Shortly after the launch of family account feature to go after the senior citizens’ market, Alibaba’s online marketplace Taobao recently launched a dedicated app named Taobao Tejia (淘宝特价meaning Taobao Discounts) to target China’s lower-end users who are more price-sensitive, local media is reporting.

The app covers a variety of popular categories that include clothes, baby and maternal care, cosmetics, and home appliances. Most of the items are priced between RMB 5 to RMB 30. On top of that, users can collect extra coupons by click on the red envelope button in the app.

With more emphasis on social features and rock-bottom prices, Taobao’s recent moves are widely translated as a measure to fend off the intensifying competition from Pinduoduo, China’s upstart social e-commerce company.

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Alibaba dismissed the speculations.”The diversification of customer demands leads to the diversification of products. We launched Taobao Tejia because there’s a huge user demand for cost-effective products,” said an Alibaba spokesperson to local media.

With the economic growth, China’s e-commerce market is dominated by the concept of consumption upgrading, where people would like to pay more for quality products. Sometimes, the lower-end market, for which price is still a top concern, is ignored.

Pinduoduo (PDD) has filled in the gap and has recorded exponential growth over the past few years. As of Feb 21, 2018, PDD ranks #3 overall in the Chinese iTunes app store ranking for free apps, after popular apps like Tik Tok (aka Douyin) and WeChat, and ahead of other shopping apps like Taobao. PDD went from 100 million yuan ($16 million) GMV a month in early 2016 to 4 billion yuan ($630 million) GMV a month by 2017, putting it in fourth place behind Alibaba, JD, and Vipshop.

Although Alibaba dismissed the speculations, the two services do share a similar demographics in users from third-to fourth-tier cities and the elderly.