Pinduoduo’s Impact on Small Malaysian Businesses: The Squeeze Explained

How Pinduoduo’s Factory-Direct Model Disrupts Malaysian Retail

The entry of Chinese e-commerce giant Pinduoduo into Malaysia in late 2025 has sharply altered the retail landscape for local merchants. Operating under the same parent company, PDD Holdings, as global marketplace Temu, Pinduoduo utilizes a high-volume, direct-from-factory strategy. Adopting Temu’s high-volume, direct-from-factory approach, Pinduoduo ships items from China to Malaysian buyers completely free of charge, even for purchases below RM2 (60 Singapore cents) for a single piece.

This direct shipping method contrasts with established regional platforms like Shopee and Lazada, which require a minimum purchase to qualify for free shipping. An industry insider noted to The Straits Times that state subsidies from Beijing help these Chinese platforms maintain ultra-low prices, making cross-border logistics cost management a top priority for their management teams.

Impact on Local MSMEs and Traditional Sundry Shops

Malaysia’s micro, small and medium-sized enterprises, which employ nearly half the nation’s workforce and contribute nearly 40 per cent of the country’s gross domestic product, are facing intense pressure. Hong Chee Meng, national president of the Federation of Sundry Goods Merchants Associations of Malaysia, stated that anecdotal feedback from members in Johor and Kuala Lumpur shows sales dropping by up to 30 per cent since the platform’s launch. Previously, seasonal sales drops would drop by 10 per cent at most before rebounding.

In Ipoh, supermarket owner Wong Yeong Jin, 50, explained that price-controlled essentials such as cooking oil, flour and sugar generate only single-digit profit margins. Consequently, he relies on higher-margin products, such as towels and other household items, to sustain his business. Wong told The Straits Times on Aug 8 that platforms like Pinduoduo hurt profits when consumers can buy a nail clipper for RM1 with free shipping.

Case Study: The Chinese Prayer Materials Sector During the Hungry Ghost Festival

Traditional seasonal sectors have felt the immediate effects of overseas competition. Lee Chuan Wei, 47, who owns a Chinese prayer materials business in Penang, reported that sales of offerings and other ceremonial items in the week leading up to the Hungry Ghost Festival were just 60 per cent of those in the same period last year. Taking place during the seventh month on the lunar calendar, this year’s festival commenced on Aug 13 and traditionally serves as a vital sales window for these merchandise items.

“At least there were some inquiries close to the eve last year. Now, there isn’t even a single query. It saddens me,” Lee told The Straits Times on Aug 6. He blamed the decline on Pinduoduo’s entry into Malaysia in late 2025, which retails some items, such as joss sticks, for half of what Lee pays his wholesale suppliers.

Regulatory Responses and Calls for Government Action

The swift disruption has galvanized local business groups and politicians to demand stricter oversight. Eugene Sing, president of the Association of Praying Material Traders Malaysia, cautioned that the absence of government rules could push numerous independent shops out of business, ultimately jeopardizing employment and government tax collections over time. Sing cited Indonesia’s regulatory framework, where all online shops must be registered, with local hires and warehouses required, as a model to protect domestic businesses.

Member of Parliament Tan Kar Hing called for Pinduoduo to be suspended from app stores, pointing out that unlike established players such as Shopee, Lazada and TikTok Shop, Pinduoduo has no physical footprint in Malaysia. Meanwhile, Domestic Trade and Cost of Living Minister Armizan Mohd Ali announced that a new law is being drafted to regulate e-commerce platforms and better protect local MSMEs. In addition, Deputy Finance Minister Liew Chin Tong held discussions with prominent e-commerce operators on Aug 6 regarding the establishment of a fair competitive environment.

Cost Reductions for Local Manufacturers and Shifting Consumer Habits

While retail businesses face headwinds, some local manufacturers report cost savings. Daniel Lee, a 40-year-old Kuala Lumpur-based Chinese paper offerings manufacturer, stated he reduced raw material costs by more than 20 per cent by purchasing through the platform instead of traditional middlemen.

Frequently Asked Questions

When did Pinduoduo enter the Malaysian market?

Pinduoduo entered the Malaysian market in late 2025, offering ultra-low prices and direct factory-to-consumer shipping.

How has the platform affected local businesses?

According to the Federation of Sundry Goods Merchants Associations of Malaysia, members in regions like Johor and Kuala Lumpur have experienced sales drops of up to 30 per cent due to direct competition from ultra-cheap imported goods.

What regulatory measures are Malaysian authorities considering?

Domestic Trade and Cost of Living Minister Armizan Mohd Ali stated that a new law is being drafted to regulate e-commerce platforms and better protect local MSMEs.