HONG KONG -- Chinese online retailer Pinduoduo plans to invest globally in agricultural technologies to improve the productivity of the country's 65 million farmers and the efficiency of the supply chain, a senior executive said in an interview with Nikkei Asia.
The five-year-old e-commerce startup built success by targeting budget-savvy customers in a market carved up by Alibaba Group Holding and JD.com. Now with 700 million users and a valuation close to $200 billion, Pinduoduo sees digitalizing agricultural offerings as its next big chance to outgrow rivals.
Fresh produce has low penetration in online retail compared with consumer categories such as apparel and electronic products. But the segment emerged as the hottest battleground for e-commerce last year as people bought groceries online during the pandemic, and the trend continues even after China managed to control the coronavirus.
By the end of 2020, major e-commerce groups including Alibaba, Meituan, JD.com and even ride-hailing company Didi Chuxing had begun selling farm products. The fresh food ordered by consumers online, usually in bulk, would be sent to designated locations within 24 hours for customer pickup with the help of part-time coordinators.
For the operators, securing a stable supply of quality agricultural products is a high priority to be competitive as China's farming population ages. Pinduoduo sees technology advancement as the best solution.
"On the agricultural and food tech front, we're looking for global partnerships and making global investments," Lim Xin-yi, Pinduoduo's executive director for sustainability and agricultural impact, told Nikkei Asia in an interview Tuesday.
Pinduoduo Executive Director Lim Xin-yi speaks to Nikkei Asia in Singapore on March 16. (Photo by Weixiang Lim)
"We just want to ensure that there's more productivity or just more efficiency in the supply chain. Sometimes you don't need to reinvent the wheel."
Lim said the company is particularly interested in technologies connected with food safety, precision agriculture and logistics management. It plans to bring advances in these fields to China through investments, research collaborations or business partnerships, she said.
Pinduoduo is also open to acquiring agritech startups, Lim said.
"We'll be interested to talk to them to see how the technology could maybe enter China or be applied in our supply chain," she said.
Beyond its technology aspirations, Pinduoduo is training talented individuals to help create and manage rural e-commerce businesses. As of June, Pinduoduo provided courses to more than 100,000 so-called new farmers who had left their rural hometowns to work in cities. Many of them returned to the countryside to start or participate in e-commerce operations.
But the fast expansion by Chinese internet giants into agriculture, often with generous subsidies to shoppers and suppliers, has raised eyebrows among the country's authorities.
China's antitrust watchdog this month fined Pinduoduo, Meituan and three other online sellers between 500,000 yuan and 1.5 million yuan ($77,000 and $231,000) for "improper pricing practices" that undercut small businesses. Scholars also warn of a threat to low-income jobs as these internet companies connect farmers directly to consumers, bypassing intermediaries.
Lim said the situation in the job market is "not necessarily zero sum," noting that Pinduoduo's grocery unit has created more than 10,000 jobs since its launch last year.
"We are making the entire agricultural value chain more efficient. So cutting out the wastage in the system, we're helping more farmers actually access a wider market," she said. "As for the intermediaries, some of them have actually gone to work in the warehouses."
The company is expanding its agricultural support projects in rural areas such as Yunnan province, China. (Courtesy of Pinduoduo)
Pinduoduo also is studying regulations and working closely with authorities to ensure it is compliant, Lim said.
"What we're getting a very clear signal on is that the government would like to encourage fair and open competition, which we are very supportive of," she said.
Despite the regulatory actions, Pinduoduo continues to expand the offerings on its grocery platform. In addition to fresh produce, it now offers more daily staples such as detergent, which also can be delivered to the pickup point within a day.
"We already built out the system," she said. "Then I can just have some of the other commonly ordered items in the warehouse as well, and dispatch them together."
