Alibaba Taoxiaopu To Grow Dropshipper Base – Alibaba initially tested Taoxiaopu last April among a small group of users, and it was expanded to nearly a million users at the time of its official launch in early January. About half of those users reside in China’s lower-tier cities.
In theory, Taoxiaopu represents a promising way to counter the discount marketplace Pinduoduo (NASDAQ:PDD), which thrives on bulk sales of cheap products, across lower-tier cities.
Why Alibaba believes in dropshipping
Alibaba’s Tmall and Taobao platforms are the largest online marketplaces in China. However, Pinduoduo gained a firm foothold in lower-income cities over the past four years by encouraging shoppers to team up on bulk purchases via social networks like Tencent’s (OTC:TCEHY) WeChat.
By encouraging users to share product links with their friends, family members, and co-workers, Pinduoduo drove down the prices per unit for bulk orders. Pinduoduo also convinces big brands to sell their products at a loss on its platform, then subsidizes the difference out of its own pocket.
Those aggressive strategies enabled Pinduoduo to surpass JD.com (NASDAQ:JD) as the second largest e-commerce retailer in terms of active shoppers (but not revenue) last year. Its total number of active buyers rose 85% annually to 429.6 million last quarter, compared to JD’s 334.4 million annual active buyers.
Alibaba and JD both generate slower growth in top-tier cities like Beijing and Shanghai, so they’re expanding more aggressively into lower-tier cities to offset that slowdown. Alibaba launched a discount and flash sale platform called Juhuasuan last August, and JD launched a similar platform called Jingxi last September.
Taoxiaopu is clearly an extension of that push against Pinduoduo. If Alibaba converts more of its users in lower-tier cities into dropshippers, its marketplaces could sell more products via social networks and steal shoppers away from Pinduoduo