E-commerce website Pinduoduo, which offers low-price items based on a group-buying model, is seeking to raise at least $1 billion in a United States IPO as it looks to challenge bigger domestic rivals such as Alibaba Group Holding Ltd.

A new entrant to China's 6.1 trillion yuan ($920 billion) online shopping arena, Pinduoduo saw revenue more than triple to $278 million in 2017, according to its filing with the US Securities and Exchange Commission over the weekend, under the name Walnut Street Group Holding Ltd.

Its losses rose 55 percent to 525 million yuan, while transaction volumes reached 141.2 billion yuan.

Founded three years ago by ex-Google engineer Colin Huang, Shanghai-based Pinduoduo operates like a social network and group-buying mashup. Users spot deals on the app, share links online and recruit friends to buy together to get a better price, usually up to 20 percent cheaper.

The site's nearly 300 million users rely heavily on Tencent Holdings Ltd's popular WeChat messenger app to circulate product information and jump on the discount bandwagon. Tencent is the company's second-largest shareholder with a 18.5 percent stake, after Huang, according to the prospectus.

E-commerce giants such as JD and Alibaba's Tmall have in recent years sharpened their focus on customers with more disposable income who favor quality over price. Pinduoduo, however, targets those in lower-tier cities who are more price-sensitive.

Its differentiated strategy is starting to pay off. Pinduoduo's daily active users surpassed JD's in January and reached 55.9 million in June, according to Shenzhen-based Jiguang Big Data.

"Pinduoduo's real gamechanger is that it implants social media sharing into online shopping. This sets it apart from traditional e-commerce models, where shoppers normally enter a key word and pick out an item upon sorting through a few options," said Xu Rongcong, chief retail analyst at China Merchants Securities Co Ltd.

Such economies of scale can effectively lower costs on the production side and rejuvenate the supply side by summoning active users on Tencent's WeChat, Xu said.

Taobao is taking steps to fight back against the stellar rise of Pinduoduo. It launched the Taobao Special app, which encapsulates social and gaming elements by distributing cash rebates and timed offers on small-ticket items.

Xu said future headwinds for Pinduoduo include the surging challenges and costs to acquire new customers, as well as its lack of core competence in technology and logistics.

"Business model innovation alone is insufficient. Pinduoduo should consider expanding to a broader customer base and enhancing shopping frequency and per-customer transactions," he said.