Pinduoduo Says Slower User Growth Inevitable and Inroads by Short-video Platforms Show Market Dynamism

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Pinduoduo, the e-commerce upstart that has ascended at meteoric speed to challenge the market incumbents, may be starting to feel the effects of gravity.

In Pinduoduo’s results announcement for the quarter ended June, the company reported annual active buyers rose to 850 million, marking the smallest number of new users since 2019.

Alibaba has accumulated over 900mn users, right on track towards its 1 billion user target. JD.com adds record-high 32 million new users in the second quarter.

Besides competition from incumbents Alibaba and JD.com, both of which posted stellar quarterly results as they expanded into smaller cities to win over price-sensitive consumers, Pinduoduo has also found itself under pressure from the rising popularity of short-video platforms like Douyin and Kuaishou.

“The rise of short video-ecommerce is not surprising given their huge user base, high usage frequency, and user time spent. In many aspects, they are doing a better job than us,” said Chen Lei, Chairman and CEO of Pinduoduo, in the quarterly earning call. “We are seeing more platforms entering the e-commerce space, so competition is increasing, and will continue to increase, and it’s not only the short-video players like Douyin or Kuaishou.”

Chen mentioned that short-video players like Douyin or Kuaishou provided users “with a very different shopping experience.” Given that consumer demands are “multi-dimensional and constantly evolving,” Pinduoduo is “constantly reviewing whether its business model is still the most innovative one that best meets consumer needs.”

“The Chinese market is extremely dynamic and vibrant,” Chen added. “Can we sustainably maintain our current growth rate into the long-term? Certainly not, and we do not have such delusions. Can we always prevent others from overtaking us? That is also impossible. But we will strive to constantly improve the ability of our platform to serve our users, and to keep giving back to society.”

In addition, the State Administration for Market Regulation, China’s antitrust watchdog, released draft rules this month that prohibit behaviors such as blocking traffic to competitors and external sites.

Tencent and Alibaba, China’s two largest internet platform companies, are reportedly considering opening up their services to each other. Previously, Tencent’s social-messaging app WeChat generally would not allow links to Alibaba’s platforms, and vice versa.

SEE ALSO: Pinduoduo Pulls Ahead with 824 Million Users, Vows to Use Scale for Good

A large part of Pinduoduo’s early success came from the fact that its deals could be shared among friends via Tencent-backed social media platform WeChat.