SCMP: JD.com Plans $1.5 Billion Subsidy Campaign Against Pinduoduo
As China's e-commerce sector slows, JD.com is preparing a 10 billion yuan (US$1.5 billion) subsidy campaign in early March to compete with rival PDD Holdings, whose budget shopping app Pinduoduo has been rising rapidly, according to a source. The subsidies apply to both directly owned stores on JD.com and those run by third parties using its platform. One of the insiders added that the corporation is still working out the kinks and getting its system ready for the campaign's launch next month.
JD.com's push in the budget category, a Pinduoduo stronghold, is its first significant commercial move since billionaire founder Liu resolved a civil rape lawsuit in the United States in October and returned to Beijing to reestablish control over the e-commerce business he established over a decade ago. In the middle of 2019, Shanghai-based Pinduoduo launched a multibillion-yuan subsidy scheme, which has helped the latecomer cement its position in China's small towns, where consumers tend to be more price-sensitive.
According to Zhuang Shuai, founder and chief analyst of e-commerce consultancy Bailian, while JD.com has a strong base in major cities, its network is not as comprehensive as Pinduoduo's in low-income areas. JD.com's new subsidies may help it cause a stir in the industry.
“JD.com’s future growth will be driven by its performance in lower-tier markets,”? and “the subsidies, at the end of the day, are intended at grabbing more users [in those markets],” said Mo Daiqing, research director at internet consultancy 100ec.cn.
Although low prices tend to entice Chinese consumers, he noted that in an era of slowing development in China's e-commerce industry, this strategy might backfire and cause losses. Significant losses were incurred by Pinduoduo in its early days. In China, at least 89 e-commerce platforms shut down in 2017 due to three years of rigorous pandemic regulations and supply chain delays.
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