China’s Quiet Ecommerce Giant Thrives on Fresh Produce

Pinduoduo, which recently passed Alibaba as the shopping site with the most customers, connects 12 million farmers to more than 800 million users.

As China locked down amid the Covid-19 pandemic early last year, Huang Honglin—who sells passion fruit grown by his parents and neighboring farmers in Jiangxi province—worried about getting their crops to traditional markets. Then he applied for an unusual “Help the Farmers” initiative from ecommerce company Pinduoduo. Staff from the company visited the area, offering tips on how to sell on the platform, package produce efficiently, and livestream on the app to promote wares. Huang liked the results enough that he continued to sell largely through Pinduoduo even after the restrictions were lifted. “The livestreaming helped us sell 15 tons of passion fruit,” Huang says.

Huang’s tale helps explain why Pinduoduo recently surpassed Alibaba as China’s top shopping site, as measured by the number of customers. Unusual for an ecommerce company, Pinduoduo has emphasized sales of fresh food since its founding in 2015, aggressively courting small farmers among other things. Now the company says it connects 12 million farmers to approximately 800 million consumers. Sales of agricultural products doubled last year, compared with 2019. Produce accounted for around one-sixth of Pinduoduo’s 2020 transactions, according to information in the company’s financial results.

“Pinduoduo was the first in the agri business. Now everyone wants in,” says Ashley Dudarenok, coauthor of New Retail: Born in China Going Global. She says the company’s efforts coincided with a government push to reduce poverty in rural areas, and benefit from Chinese consumers who visit local markets once or twice a day to pick produce. “When you buy from a farmer directly, the product is considered super fresh, so they prefer it,” she says.

Pinduoduo is available only as a smartphone app and favors browsing more than search. It grew by offering discounts based on group buys that prod users to recruit friends. From the beginning, “agriculture stood out as an industry that was lagging in terms of getting plugged into the digital economy, and we saw many inefficiencies that could be improved with technology,” CEO and cofounder Chen Lei says in a written statement.

The app’s emphasis on food is a good fit for China’s vastly dispersed agricultural sector. Ninety-eight percent of China’s farmers hoe plots smaller than a baseball field, according to the UN Food and Agriculture Organization (FAO). By contrast, only 11 percent of US farms are smaller than 10 acres.

Also unlike the US, China does not have a well-developed supply chain of processors, wholesalers, and retailers to bring produce to market, says Holly Wang, a professor of agricultural economics at Purdue University. In a January report, analysts at Oppenheimer said 20 to 30 percent of vegetables and fruits grown in China go to waste because of poor logistics and refrigeration. Pinduoduo was forced to “innovate around these constraints,” says Xin Yi Lim, the company’s executive director of sustainability and agriculture impact.

One such innovation: Pinduoduo’s New Farmers program, designed to encourage farmers to use digital tools. The program offers lessons on how to operate on the platform, the basics of sales and marketing, and a livestreaming how-to. The company says the program has reached more than 100,000 farmers, and it recently set a goal to train 100,000 more.

He Shuang center in blue hat livestreams videos to promote sales of her pomegranates on Pinduoduo.

He Shuang, center in blue hat, livestreams videos to promote sales of her pomegranates on Pinduoduo.

Photograph: Mu Gong; Courtesy of Pinduoduo

He Shuang, who grows pomegranates in southern Sichuan province, is a Pinduoduo New Farmer. The former flight attendant returned to her remote mountain hometown from the city of Kunming in 2017. She initially sent fruit by truck to wholesalers around China, who then resold the fruit to consumers. After switching to Pinduoduo, He could reach consumers directly; she says that created “strong and predictable demand for our produce, which in turn keeps our cash flow healthy.”

In a recent video, she plucked a pomegranate from a bush in her orchard and, because she “has no nails,” bit down on the peel to reveal its juicy seeds. Though she was stiff at first, He now shows an on-camera flair. “Livestreaming is just like chatting with customers to develop trust,” she says. Her spiking sales prompted Pinduoduo to recruit her for video and text marketing. He’s warehouse staff is now 150 strong, and her annual revenue for 2019 was 40 million yuan ($5.7 million).

Sofya Bakhta, an analyst at Daxue Consulting, says Pinduoduo’s group-purchase model helped aggregate dispersed consumer demand and connected those buyers with farmers, “effectively creating a scaled-up national market.” That lowered farmers’ costs and gave them some of the benefits of large-scale farming. In the past, says Gerard Sylvester, an investment officer with the UN FAO, farmers often suffered from uncertain demand and volatile prices. “We have seen several instances of a farmer driving his produce to the market, only to find that the price of the product has plummeted, much lower than his cost of production, and he dumps the entire harvest outside the market to avoid paying additional cost to the transporter to bring it back to his village,” he says.

Sylvester says Pinduoduo benefited from its own strong logistics network and the ease of mobile payments via dominant Chinese messaging system WeChat. He says Pinduoduo has lifted farmers’ incomes and made it easier for them to plan, helping to create new jobs in rural areas. In August 2020, Pinduoduo introduced Duo Duo Grocery, a next-day pickup service, to help farmers sell directly to local consumers.

Not all farmers are happy with Pinduoduo. Yang Lin sold 30 tons of apples per month on the platform in 2019, but says he “made no money” on Pinduoduo, especially after factoring in the ads he bought on the site to attract consumers. He thinks he could have made a profit on Pinduoduo if he sold more apples, but he quit because that tipping point seemed too elusive. The ads are not required. Asked about Yang’s situation, a company spokesperson says Pinduoduo “champions” farmers and works “to widen the market access for farmers so that they can sell better.”

Other critics have said Pinduoduo and its competitors are disrupting traditional sales chains to the detriment of some farmers, because those conventional networks are more balanced and inclusive than ecommerce algorithms that unfairly favor bestselling crops.

Dudarenok says technology “is not the only answer to elevating farmers out of poverty, or structurally improving their lives and businesses.” But she says Pinduoduo has provided a stable consumer base, sales channel, and logistics to sellers. “Both farmers and consumers win by cutting the middle man,” she says. Still, she says farmers “need to also ‘work for it’ with livestreams and buying ads. You need to be good to catch eyeballs.”

Bakhta says apps such as Pinduoduo are not likely to replace physical markets, because China is big enough to accommodate both. Her four years in China have convinced her that local markets are “more than a place to buy groceries. This is a kind of club where you can come, chat, practice your bargain skills and at the same time buy something fresh and tasty,” she says. “Offline stores, especially those with farm products, are part of the Chinese culture.”

More Great WIRED Stories

Products You May Like

Articles You May Like

The Hidden Ties Between Google and Amazon’s Project Nimbus and Israel’s Military
The Metaverse Was Supposed to Be Your New Office. You’re Still on Zoom
Apple to Allow Rivals to Access ‘Tap and Go’ Technology
The EU Is Coming for X’s Paid Blue Checks
Amazon Ramps Up Security to Head Off Project Nimbus Protests

Leave a Reply