October 10th was the third anniversary of Pinduoduo, however the celebrations were clouded by an attack from Alibaba.
Tmall, the main B2C platform of Alibaba, allegedly required a lot of brands to choose either Pinduoduo or Tmall – i.e. if they want to stay open on Pinduoduo, they need to close the shop on Tmall.
This is brutal, especially considering that the most important ecommerce shopping festival, Double 11 (November 11th), is just around the corner.
Many of the sellers and brands, though hating this bully, chose to side with Alibaba, as they could not afford to lose the traffic and volume of Tmall.
Usual tactic
Readers in Southeast Asia might remember, Alibaba did something to local Daigou platform Ezbuy during last year’s Double 11. By closing its thousands of accounts owned by Ezbuy, Alibaba made it impossible for the Daigou company to operate during the festival.
Ezbuy’s CEO then sent an open letter full of emotional appeal, only to be ridiculed – “so what?”.
In fact, what happened to Pinduoduo is a tactic that Alibaba has been using many times – leveraging Taobao and Tmall’s dominance in internet traffic.
Around this time last year, they forced many fashion brands to delist from JD.com, prompting JD’s founder Richard Liu (yes the one who was charged with sexual assault in the US recently) to also protest in public:
This Weibo (microblog) message from Richard Liu said: “Forcing partners to choose one from two is never a sign of how great a company is – instead, it is a showcase of incompetence. Any such dirty tricks will not win in the end.”
Again, who cares…
Anti-competition? Too young too simple
Alibaba does this not only to alleviate the threat that Pinduoduo presents, but also to help it hit its own sales target for Double 11.
Think about that – there are overlaps (of both sellers and consumers) between the two platforms, cutting one off will redirect a lot of traffic to the remaining one.
Of course, this is anti-competitive. In fact, China’s new Ecommerce Act, which will come in force next January, strictly prohibits any player from using its dominance to force exclusivity.
In reality, it is pretty hard to define what exactly constitutes a violation of this clause. From the dominant player’s point of view, whacking an upcoming competitor hard is much more beneficial than being strictly compliant.
Unless the financial and strategic consequences are prohibitive – which are unlikely. Have you not seen how toothless Singapore’s competition watchdog is facing the Grab-Uber merger?
What’s next for Pinduoduo
If Pinduoduo can withstand this pressure and find a way around it, it will continue its path towards greatness.
We think Pinduoduo will overcome this – though there are many challenges along its path, success means overcoming most if not all of them.
By the way, some Rocket company in Southeast Asia tried to force exclusivity on its partners, only to fail spectacularly.
The reason is simple – if you only own 30% of the market, who cares…