In the last few days, PropCentre made statistics of top 5 most cost-effective e-commerce brands in China, in which Pdd Holdings deeply engaged in the markets in lower-tier cities for many years held on to the top spot, Taobao’s Taogongchang featuring cost-effective white-label factory products from the source factories ranked second, and Tiktok, as a late entrant to e-commerce, took the third place by virtue of the advantage of very cost-effective price in spite of criticism on the quality of its live-streamed goods all the time.
PropCentre is a New Zealand technology company that leverages AI to provide a fresh interactive and user experience for buyers, real estate agents, and mortgage brokers. PropCenter also serves as an information reference provider for audiences from China or those who wish to learn about the latest market trends in China.
Why have the markets in lower-tier cities become a key segment for e-commerce brands to compete for?
Many viewpoints hold that the next round of growth potential in the Chinese market will come from the markets in lower-tier cities. With the rapid economic development, the saturation of the consumer markets in first-tier cities and some second-tier cities, and meanwhile for the lower turning point of consumer demand in the markets in lower-tier cities, it is easier to develop and cultivate new consumption habits.
Furthermore, driven by long-term economic growth, the markets in lower-tier cities have accumulated a large amount of disposable wealth, and some brands have found that consumers in the markets in lower-tier cities are increasingly demanding new and high-quality products. The consumption demands of consumers in lower-tier cities with capital accumulation are surpassing those of the residents in first- and second-tier cities.
The success of Pdd Holdings attributes to take advantage of channel opportunities that a large number of township users and third or fourth line residents recognize the whole world through the Internet, they love discounts and bargains, and have plenty of free time. By accurately grasping the psychology of this group, and pleasing customers in a way that almost hurts merchants, Pdd Holdings attracts audiences through the low-priced goods, and makes a great whoop and holler about [cutting price], enabling the product flow, and then turns flow into cash, and ultimately is rewarded by success.
Different from Pdd Holdings, the M2C model of Taogongchang connects factories with consumers directly, removing unnecessary intermediate links, and Taogongchang uniformly provides six major solutions, including digital selection of products, intelligent pricing, marketing hosting, supply chain optimization, logistics and localized services, to reduce the OPEX of factories and the costs of commodity circulation, so that consumers can buy more cost-effective quality products.
While Tiktok is more like a provider of a flow field for merchants, who can attract a large amount of flow for themselves by making content creation and live streaming on Tiktok, for the purpose of retaining such flow, the merchants must maintain the price advantage in the fierce competition, therefore, they tend to reduce the price proactively to maintain the efficiency of the content conversion, which has nothing to do with the platform, but still creates a cost-effective mindset with the price advantage.
In conclusion, it is not hard to find that, from the viewpoint of income structure, the consumer population of the markets in lower-tier cities is the majority in the Chinese market, in addition to operating consumers, how to retain consumers, increase their hours of use, occupy their leisure time has become a huge challenge that major cost-effective e-commerce brands have to face currently. However, it is undeniable that nowadays the markets in lower-tier cities have become a red sea.
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