Tech giants like Alibaba, JD.com, Pinduoduo and Vipshop have already shown their interest in small Chinese cities to continue to expand.
The time when China can say it has a saturated market is still a long way off. And the Chinese e-commerce giants know this well and are now focusing on consumers in the country’s smaller cities to increase consumption.
For example, Xu Tian, vice president of finance at Pinduoduo (PDD) based in Shanghai, said that the majority of the company’s users are already from lower-level cities (cities are classified by Chinese government units based on population, the gross domestic product and the administrative hierarchy).
About five percent of consumers in the 400 emerging Chinese cities have the same income as an average American consumer
According to Xu, users are “starting to explore a more diverse selection of products, like little luxuries. This request may have been informed or unmatched in the past, but now they are crystallizing and coming true on our platform”.
Obviously, these new revenues are a relief for the country’s e-commerce service providers, following a sharp slowdown in consumer-generated activities in first-tier cities – including Beijing, Shanghai, Guangzhou and Shenzhen – and those in the second-tier cities, such as Xiamen, Zhuhai and Harbin. Moreover, the still uncertain world economic situation cannot be forgotten.
Colin Huang Zheng said that PDD has actively brought other major brands to lower-tier cities
JD.com, on the other hand, the second Chinese provider of e-commerce services, has launched its Pingo group purchase initiative modeled on the PDD business model. Xu Lei, chief marketing officer of JD.com, said Pingo “proved to be very inductive to help reach lower-level cities and markets.” “As a mainstream e-commerce player, we have not taken advantage of our competitive edge in those lower end markets. With Pingo, we are now positioned to do so,” Xu said.
Not only these two giants, but also Tmall and Taobao Marketplace from Alibaba Group Holding, in addition to the Tencent Holdings-sponsored Vipshop, have recognized separately that most of the user growth comes from lower-tier cities.
Vipshop CEO Eric Shen said the “strongest growth” came from second and third tier cities
Alibaba, the largest Chinese e-commerce company, said that in the last few quarters of the annual earnings over 70% of the increase in annual active users comes from lower-tier cities.
As for sales of large items such as appliances and smartphones, however, Alibaba claimed that they slowed down in online shopping platforms. While basic necessities such as clothing, home furnishings and beauty equipment have shown resilient growth.
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