Pinduoduo faced similar long odds when it rose to prominence in China despite its short history and entrenched competition from Alibaba and JD.com. One of its biggest edges is its vast network of Chinese manufacturing partners built up over the years. It continues to work diligently with that group, announcing last month it would invest billions of dollars to “cultivate 100 export-oriented brands.”
Apart from cutting out middlemen, Pindouduo has also taken other cost-cutting steps to boost its chances for Temu’s success in the U.S. and other overseas markets.
Its initial cooperation policy stipulates the company doesn’t need to pay merchants until an overseas customer places an order and confirms receipt of the merchandise. The company can also return unsold inventory to merchants after a period of time, meaning it shoulders relatively low inventory risk.
That said, Pinduoduo will still need to invest heavily in overseas user acquisition and retention, which could be its biggest challenge. While its group-buying gimmick has proved highly effective for attracting users in smaller, underserved Chinese markets, the model is less familiar to U.S. consumers.
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