Chinese social commerce firms are riding growth on discounted product offerings in 2023

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The e-commerce sector experienced a significant downturn in the Chinese market in 2022. Many of the leading firms, in the e-commerce and social commerce space, shut operations due to inflation, declining consumer spending, and regulatory crackdown. To revive the sector growth and drive consumer spending, e-commerce platforms are offering huge discounts to shoppers in China.

• Alibaba, for instance, kicked off the 6.18 mid-year shopping festival by offering 60 million products at discounted prices. As part of its strategy to attract more shoppers and accelerate revenue growth, the firm offered a discount of RMB 50 every time a consumer shopped for RMB 300 on the Tmall platform.
• On the other hand, shoppers received a discount of RMB 30 on every RMB 200 spent on Taobao. Alongside the offers provided by merchants, Alibaba revealed that Taobao is subsidizing consumer spending to the tune of RMB 10 billion during the mid-year shopping festival. 

In addition to driving user growth on the platform, the discounted strategy will also enable Alibaba to further strengthen its position in the Chinese social commerce industry, which is projected to grow at a compound annual growth rate (CAGR) of 9.6% from 2022 to 2028. During the period, the industry is projected to increase from US$429.7 billion in 2023 to reach US$743.3 billion by 2028.

Apart from discounted product offerings, Alibaba is also seeking to leverage live streaming capabilities to reach new customers and for creating an immersive shopping experience in China. Notably, in the run-up to the 6.18 mid-year shopping festival, several brands have shown interest in live streaming capabilities. This also includes electronics giants like Apple, which showcased various products during the inaugural livestream session on Taobao Live in May 2023. The session was an instant hit, as more than 1.3 million joined the live stream during the first hour of the program. 

To leverage the reach of live streaming shopping, even small and medium-sized businesses have shown interest in conducting such programs on Taobao Live, which is embedded in both Tmall and Taobao platforms. Consequently, Taobao Live also enabled such businesses to reach more shoppers.

• During the 6.18 mid-year shopping festival, Taobao Live in collaboration with the local government hosted 11,000 livestreaming sessions across 11 cities in China. To drive engagement among shoppers, Alibaba Group also partnered with Lionel Messi to conduct a session on Taobao Live. The stream, conducted in June 2023, attracted more than 2.5 million viewers. During the session, consumer queries like Messi-related goods such as shoes and jerseys topped the search list; however, no products were sold during the stream.

Going forward, Alibaba Group is expected to place further emphasis on live streaming capabilities to engage with shoppers and drive digital sales and revenue growth in China. As per the discounted product offering, the strategy has worked well for other players like Pinduoduo.

PDD Holdings, which owns the social commerce platform Pinduoduo, was able to beat revenue estimates on the back of discounted product offerings. The firm posted a revenue of US$5.45 billion or RMB 37.64 billion compared to estimates of RMB 31.98 billion. This represents a growth of 58.17% compared to the same quarter a year before. The first quarter revenue growth, revealed in May 2023, comes on the back of price-conscious consumers that turned to the social commerce platform Pinduoduo.

• During the Double Five Shopping Festival in Shanghai, Pinduoduo invested more than RMB 4 billion in coupons and discounts. The firm also partnered with China Central Television and Oriental TV for livestreaming sales sessions. These strategies have also aided the revenue growth for Pinduoduo in 2023.

The e-commerce platforms that have been offering discounted products, including Pinduoduo and Douyin, have outperformed others in Q1 2023. As a result, PayNXT360 expects the discounted product offering strategy adopted by Alibaba during the 6.18 mid-year shopping festival to also aid revenue growth for the firm.

As for PDD Holdings, the firm has been aggressively expanding the presence of its discounted e-commerce shopping platform Temu worldwide. The firm initially launched Temu in the United States in September 2022, soon after which it became the most downloaded shopping app in the country. PDD Holdings then launched Temu in Canada and Australia, and the platform surged through the rankings in these markets as well.

The popularity of Temu in the global market has been largely driven by the strategy of discounted product offerings. The growth in the United States, Canada, and Australian market have also aided the revenue growth for PDD Holdings. The firm, in July 2023, also launched the shopping app for consumers in Japan. Going forward, PDD Holdings is expected to launch the platform in more global markets, as cost-conscious consumers are looking for bargain deals worldwide. The growing presence in the global market will, therefore, keep driving the revenue growth for PDD Holdings from the short to medium-term perspective.

To know more and gain a deeper understanding of the Chinese social commerce market, click here.