Alibaba challenger Pinduoduo is bringing imported goods to rural homes

Pinduoduo, the latest challenger to China’s ecommerce dominators Alibaba and JD.com, wants to bring affordable, imported items to shoppers in China’s smaller cities and rural areas.

The three-year-old Tencent-backed ecommerce upstart is recruiting importers to set up shop on its marketplace, shows a message on its website. The business is known for offering cheap, sometimes counterfeit goods that initially appealed to users from the less prosperous parts of China but have gradually garnered more price-sensitive urbanites. Its rise is closely linked to Tencent’s popular WeChat messenger, which lets it toy with viral marketing schemes like group deals, a level of access that’s unavailable to, say, Tencent rival Alibaba. Furthermore, the app’s focus on direct sales between manufacturers and consumers helps to keep costs down.

Pinduoduo’s social group-buying model works so well that it’s rapidly closing in on its larger rivals. It claimed 232 million monthly active users by the end of September. That represents only a fraction of Alibaba’s 700 million user base but the newcomer is growing at over 200 percent year-over-year. Pinduoduo already eclipsed JD.com in terms of market penetration according to data analytics company Jiguang. Over the past year, Pinduoduo was installed on 27.4 percent of all mobile devices in China, placing it ahead of JD.com which stood at 23.9 percent and behind Alibaba’s Taobao at 52.5 percent.

And now Pinduoduo becomes attuned to China’s booming cross-border business. People’s cravings for imported, higher-quality goods are surging along with their increasing disposable income. That new demand gives rise to a bountiful supply of “daigou”, or purchasing agents who send overseas goods to Chinese shoppers, and inspires ecommerce operators like Alibaba and JD.com to start their own cross-border businesses. The lucrative sector, estimated by market researcher iiMedia to have generated 9 trillion yuan ($1.34 trillion) in transactions last year, has even drawn unexpected players like NetEase. The Hangzhou-based firm is best known as one of China’s top game publisher but it’s made a dent in cross-border shopping in recent years with its Kaola service, which is reportedly buying Amazon China’s import unit.

TechCrunch has reached out to Pinduoduo for more information on its overseas shopping scheme and will update the story if we hear back. What we know for sure is that the ecommerce site plans to take on 500,000 small and medium-sized merchants for its overseas channel within the next three years, the company’s vice president Li Yuan announced at a November event. Pinduoduo was already delivering imported goods to customers, a business that it said had seen surging transactions last year. Consumers in the countryside have never been more ready to shop online, as Beijing is making a big push to grow digital payments in these regions.

Pinduoduo has yet to make a profit, and the cost of battling Alibaba and JD.com became more evident after it recently announced to raise more than $1 billion just six months after a $1.63 billion initial public offering in the U.S. Time will tell whether cross-border ecommerce — where it plans to replicate its direct sales model — will help it gain an upper hand over the industry giants.