Amazon's latest challenger is China's online dollar store Pinduoduo

·3-min read

The race to bring China-made goods to Western consumers via online stores is heating up. Pinduoduo, the Chinese e-commerce giant known for offering hard-to-believe deals, has quickly gained momentum for its first international endeavor in the U.S.

The company's overseas shopping app, called Temu, briefly claimed the top spot of Android shopping apps in the U.S. in mid-September before dipping to No. 15 this week, according to app analytics platform Data.ai. The rankings indicate new downloads, so it's hard to gauge the app's user retention and activeness.

At a glance, Temu doesn't look much different from other e-commerce platforms exporting affordable goods from China, whether it's Amazon, Alibaba's AliExpress, or Wish. Its landing page features a dazzling collection of competitively priced products, from a $2.77 blouse to a $1.39 soap holder.

Pinduoduo is relatively late to the cross-border e-commerce scene. In nearly every major market outside China, one can find an online retailer importing goods directly from Chinese vendors or manufacturers. Alibaba-owned Lazada and Tencent-backed Shopee enjoy a strong foothold in Southeast Asia. AliExpress is a popular option in Russia. Shein, the fast fashion e-commerce site with an expanding product category, is now the go-to shopping app for youngsters across Europe and the U.S.

Temu's edge over its rivals could be its extensive connections with factories in China. Founded in 2015, Pinduoduo quickly grew to challenge the dominance of Alibaba, which started out more than a decade before it. The company's meteoric rise has been credited to a clever strategy of connecting manufacturers directly to consumers, which allows it to trim middlemen costs and eventually price products a lot more competitively than others relying on layers of distributors.

It seems that Pinduoduo will continue to play to its supply chain strength as it goes abroad. Just this week, the firm announced that it will invest "tens of billions of RMB" ($1 = RMB 7) in "cultivating 100 export-oriented brands." In doing so, the initiative aims to help 10,000 domestic manufacturers sell globally.

Pinduoduo isn't particularly known for brand building as its success is rooted in selling white-label goods at slashed prices. It remains to see whether the initiative can help elevate factory products' image beyond "cheap Chinese goods."

Temu has a headstart in sourcing products thanks to Pinduoduo's supply chain resources, but it might struggle to replicate the success of the user acquisition strategy that had driven Pinduoduo's rapid growth back home. In its early years, Pinduoduo depended heavily on its investor Tencent's WeChat app where users invited their contacts to join group purchases and get deals.

The setup worked nicely in China because WeChat has morphed well beyond being a messenger app. The platform has a built-in mini app ecosystem that integrates seamlessly with its social features, a user scenario that's missing in Western counterparts like WhatsApp. In the West, Temu might want to learn a few things from Shein's use of TikTok/Instagram influencer marketing.

Temu could also face the same set of challenges that is troubling Shein. The fast fashion upstart has been repeatedly slammed for its opaque supply chain practices and accused of infringing on intellectual property. In 2019, the U.S. added Pinduoduo to its notorious blacklist over suspected counterfeits, though the company has pledged to crack down on counterfeits.