Most conversations about Chinese e-commerce companies revolve around market leaders like Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), and Pinduoduo (NASDAQ:PDD). Those three companies account for about 80% of China's e-commerce market, according to eMarketer, which doesn't leave much room for the underdogs.

Yet plenty of smaller Chinese e-commerce players have gone public over the past few years, and many of them flopped and burned investors. Let's discuss three stocks which fit that description -- Mogu (NYSE:MOGU), Secoo (NASDAQ:SECO), and Best (NYSE:BEST) -- and see if they can ever recover.

A bear figure in front of a declining stock chart.

Image source: Getty Images.

1. Mogu: a failed experiment in social shopping

Mogu's main platform is a digital fashion portal. It initially sold products via Pinterest-style pinboards and display ads, and eventually expanded that platform with live video streams that let merchants directly sell products to viewers.

Prior to its IPO, Mogu attracted big investments from JD and its partner Tencent, which were both trying to widen their moats against Alibaba. It uses JD's logistics network to fulfill orders, and sells about a third of its products through a Mini Program on Tencent's WeChat.

Mogu went public at $14 per share last December, but it currently trades at about $2 a share. The stock plummeted as its double-digit revenue growth faded and turned negative with a 3% annual decline last quarter. It also remains deeply unprofitable.

Mogu lacks a meaningful moat against its rivals. Alibaba launched a similar stand-alone video streaming app for Taobao last September, and it integrates various streaming videos into its Tmall marketplace. Alibaba's annual active consumers rose 15% to 693 million last quarter, but Mogu's active buyers grew just 6% to 32.7 million.

Wall Street expects Mogu to squeeze out less than 2% revenue growth this year, but that estimate could still be too optimistic. It's a company built on half-baked ideas, and it could gradually fade away as the market leaders keep growing.

2. Secoo: A tiny luxury marketplace

Secoo is an online marketplace for luxury products. It's tiny compared to Alibaba and JD, but its IPO filing declared that it was "Asia's largest online integrated upscale products and services platform" in terms of gross merchandise volume (GMV).

That bold claim, based on an opaque study from the controversial firm Frost & Sullivan, indicated that Secoo was trying to exaggerate its market share to raise some quick cash from its IPO. Its IPO filing also revealed that it was about to run out of cash.

Secoo went public at $13 in Sept. 2017, but the stock now trades at about $6. But unlike Mogu, Secoo's growth still looks solid. Its revenue rose 40% annually last quarter, its total orders more than doubled, and it remains profitable by both GAAP and non-GAAP metrics. Analysts expect its revenue and earnings to rise 36% and 14%, respectively, this year.

Yet Secoo's shopper base remains tiny. Its number of active customers grew 68% annually to just 428,400 last quarter, clearly contradicting claims that it was "Asia's largest" luxury e-tailer. It also faces tough competition from much larger luxury marketplaces like JD Mall and Alibaba's Tmall Luxury Pavilion. Therefore, Secoo might be holding onto its niche in China's luxury goods market -- but it could still easily be wiped out by the bigger players.

Tiny parcels on a laptop keyboard.

Image source: Getty Images.

3. Best: An investment in low-margin logistics

Best is a logistics, supply chain, and retail company. Its freight network covers most of China, it operates warehouses in the U.S. and Europe, and it runs a network of company-owned and franchised stores. One of its top backers is Alibaba, which uses Best's network for some of its shipments.

Best went public at $10 per share in Sept. 2017, but today it trades at about $5 a share. The company's revenue growth decelerated as it started to face more competitors (including JD Logistics and other Alibaba-backed companies like Cainiao) and China's economic slowdown throttled the growth of the logistics market.

Best's express service and freight revenue rose in recent quarters, but that growth was partly offset by a slowdown in its supply chain management and its retail store divisions. Analysts expect its revenue to rise 25% this year, but that marks a steep drop from its 40% growth in 2018. It's expected to remain unprofitable, and its slowing revenue growth and competition from other platforms could exacerbate the pain.

The only major e-commerce company with a first-party logistics network is JD, and that unit remained unprofitable for years before finally hitting a breakeven gross margin earlier this year. Alibaba clearly prefers to own stakes in Best, Cainiao, and other logistics services instead of developing its own capital-intensive network. Based on those facts, it doesn't make much sense for investors to buy shares of Best or other stand-alone logistics players in China.

Stick with the winners

It might be tempting to take a contrarian view of unloved Chinese e-commerce plays like Mogu, Secoo, and Best. However, these stocks trade below their IPO prices for obvious reasons, and it's smarter for investors to stick with the market leaders instead.