Taobao, the customer-to-customer e-commerce platform under Alibaba Group Holding Ltd, has unveiled a namesake app featuring discount products, as its dominance in selling small-ticket items is being eroded by latecomers like Pinduoduo.

The Taobao Special app, launched on Friday, is a virtual shopping avenue that encapsulates social and gaming elements. By distributing cash rebates and timed offers, it promotes goods on sale in 16 categories from cosmetics, apparel to appliances.

A majority of merchandise advertised on the homepage are priced between 6 yuan (95 cents) and 30 yuan.

This unique version of Taobao serves to meet the needs of those who value cost-effectiveness in shopping, at a time when consumer demands show signs of diversification, said an Alibaba spokesman.

To draw new users, the app incentivizes people with generous "red packets" containing real money to invite friends to register and place orders. For instance, anyone who gets 25 friends on board can earn up to 1,000 yuan and redeem the gains on a monthly basis.

Besides, the more the invitees spend on the platform, the more financial rewards one stands to receive. It also incorporates a lottery mechanism, allowing buyers to try their luck on monetary return upon every single deal.

"E-commerce is no longer a monolithic shopping channel, after years of blockbuster development in China," said Qi Zhe, an analyst at China International E-commerce Center.

"Just like the elderly have different shopping habits from youngsters, it is only natural and even imperative to roll out services that cater to different market segments."

The setting of Taobao Special is reminiscent of Pinduoduo, a two-year-old group-buying app that claimed to have over 200 million users by the end of last year. Through compelling motivations, the Shanghai-based firm is doing everything to push people to recommend its app to friends and keep them hooked.

For instance, one can enjoy a lower price tag for an item only when he/she invites a friend to join in the purchase. And it's easy to pitch people via WeChat, the ubiquitous messaging app with 1 billion users where sharing Pinduoduo links has become prevalent.

The app is doing exceptionally well in smaller cities. Nearly 65 percent of Pinduoduo users come from Tier 3 cities or smaller, against just 50.1 percent of users for another e-commerce major JD, according to Jiguang Big Data. And only 7.6 percent of Pinduoduo users come from Tier-1 cities like Beijing and Shanghai.

But such models have also prompted complaints from unhappy customers on botched deliveries and substandard merchandise derived from low prices.

"Fruits sold on Pinduoduo aren't of good quality. But it's just not worth the trouble going through a rather lengthy after-sales service for refund for such products," said Lu Jinli, a 45-year-old housewife from Guiyang, Guizhou province.