The Algorithm Eats the Search Bar - AI Is Rewriting Chinese E-Commerce

AI is reshaping how consumers find products — and China’s e-commerce giants won’t all feel the impact the same way.

The Brutal Reality of Competition in China

Forget the Communist Party — it’s the capitalists you should fear!

One of the biggest misunderstandings among foreign investors is believing that China’s political system is the main reason its stock market keeps underperforming the U.S. It isn’t. Among many other factors, the real challenge, the one that quietly destroys profit margins and wears down investor patience, is the brutal, endless competition

Competition in China doesn’t stop when it stops making sense. It keeps going long after logic and balance sheets have given up. And it’s not only about price wars. The moment a business model starts working, it gets copied, cloned, and overextended until the entire market is flooded. Success invites replication, not consolidation. Everyone rushes in, everyone overspends, and the cycle repeats.

You can see it today in instant retail, before that in ride-hailing, group buying, livestreaming — and tomorrow it’ll be something else. The defining feature of China’s economy isn’t its political structure. It’s the reflex to compete past reason.

And this isn’t just about billion-dollar tech platforms. Walk down any street in any Chinese city and you’ll see the same dynamic on a smaller scale. Your local beef noodle shop has three competitors within 100 meters, all racing to the bottom on price while stacking loyalty programs and mini-apps.

This constant knife fight means that, unlike most markets where one or two players eventually dominate, China rarely settles. It doesn’t consolidate. It multiplies.

A Market with Too Many Winners

Take e-commerce.

Anywhere else, you’d end up with one or two major survivors. In China, we have at least seven.

China’s e-commerce battlefield now includes the three traditional players, Alibaba, JD, and Pinduoduo; the live-streaming platforms born from the social short-video universe — ByteDance, Tencent, and Kuaishou; and the instant-retail entrant, Meituan. And then I haven’t even mentioned Xiaohongshu, or RedNote as it’s known in English, along with many others. Xiaohongshu is now also aggressively expanding into e-commerce.

Why Xiaohongshu (RedNote) Became China’s Default Search Engine for Daily Life

AI Won’t Flatten the Playing Field — It’ll Tilt It

Investors, used to a single dominant platform at home, often fail to grasp the diversity of China’s e-commerce landscape. They lump everything together — Pinduoduo as a “cheap Taobao,” JD as “Taobao with warehouses.” That kind of shorthand might feel convenient, but it’s a fundamental mistake.

These companies aren’t small variations of the same model. They’re structurally different businesses with different incentives, strengths, and strategic logic. The nuances matter.

And with AI entering the picture, those differences matter even more.

I’m a true believer that AI will transform everything — probably faster and more deeply than most expect. But that’s exactly why investors need to get the foundations right. AI won’t reshape all these companies the same way. Their models will absorb, resist, or amplify it differently.

Lumping them together is dangerous lazy thinking.