Chinese e-commerce giant JD.com has spun off its Pingou group-buying business as a separate division and will cut commission fees in an effort to attract more merchants and expand its presence, local tech media outlet 36Kr reported (in Chinese) yesterday.
Why it matters: The move indicates that JD’s rivalry with social e-commerce giant Pinduoduo—whose business model is based on group buying—is intensifying as the pair compete for market share in lower-tier cities.
- The target consumers for group-buying platforms are mainly based in third to sixth-tier Chinese cities, where purchasing power may not be as high compared with those living in top-tier cities.
- As competition in China’s top-tier cities becomes increasingly fierce, lower-tier cities represent a new opportunity for e-commerce giants like JD.com.
- The rise of Pinduoduo exemplifies the potential of the lower-income market, which, in the past, had been largely ignored.
Details: JD.com has reclassified Pingou as a separate unit focusing on social e-commerce, highlighting its importance. JD Pingou also announced lower commission fees and a large-scale recruitment drive for third-party vendors in August.
- From September, WeChat users can visit JD Pingou directly through the shopping gateway in the app’s Discover section.
- The move places JD Pingou at the front and center for the WeChat user base—a vast market of more than one billion users.
Context: JD Pingou debuted in 2014, and its parent has placed increasing importance on the business following the meteoric rise of group-buying models like that of Pinduoduo.
- Platforms offer discounts for users who buy in a group, and users are encouraged to share their potential buys with friends on social networks.
- Pinduoduo has been scrutinized for offering poor quality and counterfeit goods—a fate which some speculate JD Pingou could also suffer in the future.