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Alibaba’s Juhuasuan doles out massive subsidy to take on Pinduoduo

Head-on competition from a deep-pocketed rival could be a headache for the still loss-making startup.

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Alibaba’s group buying platform Juhuasuan, which is available via its Taobao app, has rolled out a RMB 10 billion (USD 1.4 billion) subsidy program for its users, a move which could deal a huge blow to Pinduoduo, 36Kr reported Wednesday.

Juhuasuan’s subsidy comes after Pinduoduo’s RMB 10 billion subsidy program was deemed successful by the company’s management in helping the Shanghai-based startup gain and retain 536.3 million annual active users. Pinduoduo is now only second to Alibaba, whose active buyers on its China retail marketplaces have reached 693 million.

Pinduoduo’s RMB 10 billion subsidy was rolled out in June and will be continued in the foreseeable future, certainly for next year as the company prioritizes user engagement over monetization, Pinduoduo’s vice president David Liu told analysts.

Juhuasuan’s RMB 10 billion subsidy program will first be applied on December 12, Thursday, in the Double 12 promotion for dozens of products including iPhones, Dyson hairdryers, and Nintendo Switch consoles.

For example, the iPhone 11 Pro with 256G storage is priced at RMB 7,099 under the program, much lower than the official price of RMB 9,999, KrASIA found. However, only 315 units of such devices are available and Juhuasuan users need to “grab” them right after sales begin at noon. The same model on Pinduoduo can be bought at RMB 8,699 for every Pinduoduo user under the company’s RMB 10 billion subsidy program.

While it remains to be seen whether Juhuasuan’s RMB 10 billion subsidy program will help the deep-pocketed Alibaba weather the challenge from Pinduoduo, the head-on competition could be a headache for the still loss-making startup.

Pinduoduo booked RMB 2.3 billion (USD 337.1 million) in net loss in the third quarter, widening from a net loss of RMB 1.1 billion (USD 156.4 million) in the same quarter of 2018. Alibaba reported  RMB 70.7 billion (USD 10.5 billion) in net income in the same quarter.

36Kr is KrASIA’s parent company.