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With a monthly income of $470, Liu, a retired worker living in the northern city of Huhehaote, finds the selections on Alibaba’s sites a bit expensive. So when she finally shopped online for the first time in 2015, Liu turned to an alternative platform called Pinduoduo, which offered cheap household products such as $1 toilet paper packs and $5 bed sheets.
“It is really cheap and really convenient,” she told Forbes. “I don’t go outside to buy such things anymore.”
And Liu isn’t the only fan of this e-commerce alternative. While the country’s tech giants such as Alibaba and Tencent compete for increasingly wealthy customers in China's major urban centers, Pinduoduo has been capturing another less noticed market: low-income people from lower-tier cities and towns. With a unique business model tailored for its current 100 million-strong budget-shopper base, the Shanghai-based startup has become one of China’s largest e-commerce sites in just two years. And this meteoric rise has Alibaba concerned; as it is finally starting to pay more attention to China's towns and villages, aware of the potential this massive new market offers.
Pinduoduo pinned its attraction on meshing online shopping with social media. Launched in 2015 by ex-Google engineer Huang Zheng, the company operates a bulk-buying business model similar to U.S.-based Groupon. But it comes with a twist: Pinduoduo allows shoppers to share products across Chinese social media platforms, such as Tencent’s popular instant-messaging service WeChat, to qualify for more discounts. For example, if people find what they want on the site and invite enough WeChat friends to form a purchase group, they can enjoy discounts of up to 90 percent. This includes everything from $1 T-shirts to $80 smartphones. To further encourage sharing on social media, Pinduoduo even offers cash back incentives and free products to its most loyal customers.
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