Pinduoduo is to ramp up competition with Chinese e-commerce competitors Alibaba Group Holding and JD.com by doubling down on rural e-commerce, after the Shanghai-based company said it saw the sector as a strategic focus over the next five years.
The social commerce player aims to become China’s No. 1 online agriculture platform by investing in related technologies and operations, with gross merchandise volume (GMV) for agricultural products expected to exceed RMB 1 trillion in five years, Pinduoduo said after announcing second-quarter results on Friday.
“Agriculture is a sector that touches the largest number of people and yet had the least amount of digitization in the past decades,” said Chen Lei, Pinduoduo’s newly-appointed CEO during the earnings call on Friday. “Any technology that can improve productivity and efficiency along the agriculture value chain would have a huge impact.”
David Liu, vice-president of strategy of Pinduoduo, indicated during the earnings call that the company plans to sharpen its focus on agriculture through further investments in, and development of, its agricultural analytics system and logistics service to help farmers with decision-making and delivery. It is also planning more investments in technology for precision farming, warehouse control, and food safety.
While Pinduoduo has developed a reputation for serving China’s agriculture sector, especially through the COVID-19 pandemic, this is the first time the company has detailed its long-term ambition, which will see it compete more closely with Alibaba and JD.com.
Bringing farmers online
China’s vast agriculture sector has lagged other industries when it comes to digitalization. While every one in four Chinese workers works in agriculture-related sectors, the industry as a whole makes up less than 10% of China’s total GDP. The COVID-19 pandemic dealt a severe blow to many of China’s poorest farmers, prompting Beijing to implement a variety of support measures.
E-commerce giants Alibaba, Pinduoduo, and JD.com have all launched their own programs to support farmers during the pandemic, helping them sell their products through their online platforms, offering logistics support and sales promotions to attract more consumers.
During China’s 618 midyear shopping festival, Pinduoduo saw orders for agricultural products grow 136% to RMB 380 million (USD 55 million) with nearly three quarters of the orders coming from China’s urban users.
Its Duo Duo University program, launched in 2018, also aims to solve China’s rural talent shortage by offering week-long training sessions to equip merchants with crucial skills required for online retail. The company also announced in April that it was investing at least RMB 50 billion over five years to help foster the development of more than 1 million rural online shops on its platform.
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“Due to current global economic pressure, consumers will keep tightening their belts. We expect to see more consumer activity happening in lower-end markets with lower-priced products,” said Xu Yinghao, an analyst at Hangzhou-based research firm China E-commerce Research Center. “Meanwhile, rural e-commerce has ushered in a new period—agriculture will be where e-commerce platforms see the strongest user growth [going forward].”
The total market in 2019 for business-to-consumer agricultural goods sales in China was RMB 8.1 trillion, with less than 7% of these sales taking place online, according to statistics from the Ministry of Commerce.
On Friday, Pinduoduo reported a 67% increase in revenue to RMB 12.19 billion in the second quarter of 2020. Its net loss was RMB 899.3 million for the quarter ended in June, down from a loss of RMB 1 billion previously.
This article was first published on by the South China Morning Post.