Last week, the Chinese e-commerce firm Pindoudou went public, making its founder Colin Huang the 13th wealthiest billionaire in China. Along with the company raising $1.6 billion through a U.S. IPO it achieved other milestones, which warrant a closer look.

Founded in 2015, Pindoudou has managed to rise to the top of China’s highly competitive e-commerce market, and now has over 200 million monthly users. It offers online deals, which become increasingly less expensive as more people make purchases. The platform is fueled by people sharing the deals via social networks, such as WeChat and QQ. Described as a “team purchase” model, the company offers a breadth of everyday functional products from groceries to appliances.

Along with the excitement of watching the price drop on common items, users are further incentivized via cash, coupons, lottery, and free products. With their customers basically doing their advertising,

Discounts can be as high as 90%, such as bed sheets ($1.50 each), toothbrushes ($0.16 each), PCs ($150 each), coconuts ($1.32 each) and umbrellas ($1.51 each). While most of their products are run-of-the-mill quality, their average daily growth is 1.08 million mobile users, with the app being the 11th most popular free download on Apple’s China App Store.

Pindoudou’s success hinges on targeting lower-income, middle-class customers in smaller cities. Only 7.6% of their users come from China’s first-tier cities — Beijing, Shanghai, Guangzhou, Tianjin, and Chongqing.

While there’s still great wage inequities in China, the growing middle class is expected to expand from 430 million to 780 million in the mid-2020s. Typical middle-class living standards in a second-tier city (300,000 to 1 million population) like Tianjin, Harbin, Quindao, Changsha, Yangshuo, Xi’an, and, Chengdu are on par with those in some of the poorer states in the United States.

Since the 1970’s, hundreds of millions of Chinese have moved from rural farms to the cities, increasing China’s urbanization from 19% in 1979 to nearly 60% today. People who lived off the land, and moved to the cities, were suddenly exposed to products sourced from around the world and the concept of buying what they needed, when they needed it, by simply walking into a store or shopping online.

This purchasing power awakened the rapid expansion of consumerization in China, including ownership of cars, shopping at mega-malls, and even overseas vacations. One of the fastest growing retail channels in China is groceries purchased at convenience stores. The growth of this segment is expected to grow 13% annually until 2025.

Even though wage inequity in China continues to be an issue, and millions are excluded from the opportunity to participate in the growing economy, the purchasing power of those in urban areas, coupled with the proliferation of mobile devices helps companies like Pindoudou experience remarkable growth.

Limitations in Purchasing Power in the US

The ability to grow a business with limited advertising and the extraordinary purchasing power of millions of consumers would probably not be possible in the United States. The reason is startling and upsetting.

In a 34-year period from 1980 to 2014, the share of wealth in the U.S. for the top 1% grew from 22% to 39% while the income share for the bottom 50% decreased from more than 20% to 13%. In 2016, 13.9% or more than 44 million people in America lived in poverty. It’s the level of impoverishment where every day you need to consider whether to eat or fill a prescription, pay the rent or the utility bill, buy gas or walk, scrounge up enough money to go to the laundromat or buy school supplies for your children.

The number of people living in poverty increases from 44 million to 50.8 million, 43% of Americans, when ALICE households are added. ALICE is the United Way acronym for Asset Limited, Income Constrained, Employed. These individuals and families are unable to afford basic monthly necessities, including housing, food, transportation, child care, healthcare, and smartphone bill. Often, they’re one paycheck away from insolvency.

ALICE populations aren’t hidden. They’re child care workers, cashiers at supermarkets, gas attendants, sales people at big box stores, waitresses, office clerks, and increasingly retired people on Social Security.

This week, MSN reported on the 15 places in American that are getting poorer. For instance, the poverty rate in Buffalo, NY in 2016 was 31.2% with the per capita income just $21,566 or just $1,797 per month. Since 1969, the poverty rate has jumped 22.1%. Rochester, NY is considerably worse off with a 32.8% poverty rate, and a per capital income of just $19,830.

With the average balance of American’s savings being $30,600 with a median balance of $7,000 (meaning 50% of people have saved less than $7,000), the purchase power of Americans is alarming stinted. Not only are people living paycheck-to-paycheck, but their “rainy day” funds are earmarked for medical expenses, car and home repairs, and illusive retirement.

America’s tremendous economic growth, following World War II, was tied to mass consumerization with people producing and purchasing cars, appliances, furniture, houses, and whatever was being touted on “new-fangled,” black-and-white TVs.

There are many forces that impact the growth of companies. The strongest is consumer demand and increased purchase power, buoyed by increased opportunities and wages. In the future, China and its innovative companies will no doubt continue to grow, while those in American might falter, hampered by weak consumer demand with limited expendable income.

Chinese photo by Nate Landy on Unsplash.   Black and white photo of man on bench by Katleen Vanacker on Unsplash Black and white photo of man panhandling by Steve Knutson on Unsplash