SHANGHAI, September 26, 2023— The world of e-commerce is gearing up for a discount showdown as platforms worldwide brace for the crucial upcoming holiday shopping season. In China, the largest e-commerce market globally, a “value-for-money battle” has emerged due to economic uncertainty and a slower retail recovery following the easing of COVID-19 restrictions late last year. This battle for bargains is reshaping the global online shopping landscape and placing pressure on incumbent platforms.
China, traditionally a major exporter of consumer products, is now exporting its e-commerce marketplace dynamics, revolutionizing online shopping globally. Low-cost platforms within China and multinational companies shipping goods from China are poised to dominate the year’s final quarter, including the holiday season and China’s Singles’ Day shopping festival.
Sharon Gai, former head of global key accounts at Alibaba and author of E-commerce Reimagined, notes,
“These marketplace dynamics that first emerged from China, or were invented in China, are now dominating the Western world. (Other online retailers) are seeing this insurgence of these cheap Chinese goods that are flooding in… They don’t know if they can compete.”
The trend towards low-cost platforms is driven in part by macroeconomic challenges, such as belt-tightening amid economic uncertainty in China and inflation in the United States and European markets, which is affecting consumer spending.
Emerging discount competitors, including Pinduoduo, Douyin, Temu, and Shein, are pouring billions into subsidies and discounts to capture market share among cost-conscious consumers.
Even industry giant Amazon is set to ramp up discounts during its “Prime Big Deal Days.” The battle for the lowest prices is expected to intensify with the entry of TikTok Shop, which plans to focus on Chinese-made goods, mirroring the success of Shein and Temu.
TikTok Shop is preparing merchants for deep discounts during the U.S. holiday season, waiving merchants’ fees to encourage more sellers to join. However, Indonesia is considering banning e-commerce transactions on social media due to concerns about flooding the market with cheap goods.
The rise of budget-friendly online players globally is filling a gap in the low-cost e-commerce market, previously dominated by platforms selling higher-margin items. Tech analyst Rui Ma states,
“There was a clear vacuum for the discount retailer online experience … There is still so much more room still to grow in the discount arena.”
Executives worldwide are now grappling with price pressures as discount online retailers gain market share. Trudy Dai, CEO of Taobao and Tmall Group, noted,
“The ‘value-for-money battle will continue and will be an area of major investment.”
While giants Alibaba and JD.com experienced faster-than-expected growth in their recent quarters, PDD Holdings outpaced them with a 66% year-on-year revenue rise, driven by its discount e-commerce platform, Pinduoduo, and international shopping site, Temu.
As structural and macroeconomic factors continue to drive this race to the bottom, shifting consumer trends may ultimately alter the focus of e-commerce shoppers and platforms. Humphrey Ho, U.S. managing partner at Hylink Digital, observes,
“If the consumer is having a good economic time, they will always seek to upgrade. That might affect and dampen these (discount-focused) platforms’ growth if you start seeing the economy come back up.”
Market Analysis and Foresight:
The rapid rise of discount-driven e-commerce platforms, driven by cost-conscious consumers and macroeconomic challenges, has set the stage for a transformative period in the world of online shopping.
What began as a “value-for-money battle” in China is now reshaping markets worldwide, challenging incumbents, and forcing a reevaluation of pricing strategies.
While established giants like Alibaba and JD.com are adapting to this new competitive landscape, the remarkable growth of platforms like Pinduoduo, Douyin, Temu, and Shein serves as a testament to the demand for affordable goods. Even industry leader Amazon is adjusting its approach to accommodate this trend.
Yet, as economies fluctuate and consumer confidence shifts, the longevity of this discount-focused era remains uncertain. A return to economic prosperity may see consumers once again seeking to upgrade their purchases, potentially impacting the growth trajectory of these discount platforms.
As we enter this transformative phase in e-commerce, businesses must remain agile and responsive to evolving consumer preferences. The battle for the bottom is on, but the future of online shopping may yet hold surprises for both consumers and industry players alike.
The coming months will provide a critical test for discount-driven e-commerce, and the industry will undoubtedly continue to evolve in response to changing economic conditions and consumer sentiment. In this dynamic environment, adaptation and innovation will be key to thriving in the world of online retail.