Pinduoduo(PDD) is a leading social ecommerce company in China that just went public on July 26th 2018, less than 3 years after it was founded. With over 300 million active buyers, it has risen to become one of China’s top 3 shopping apps, right behand Taobao and JD. PDD’s success results from its business model and technical strategy.
PDD has a different business model compared with competitive incumbents. Many people compared it to Groupon, because customers forming a shopping team with friends can win discount price. But PDD focused more on social network, rather than strangers. It encourages customers to share links among their friends on social platform like WeChat to win rewards, invite their friends to join shopping team to get discount, and invite friends to register as new users to get bonus. In this way, PDD achieved a rapid growth of users. In addition, by offering low-price goods, PDD focused on low-income customers mostly living in tier 4 or lower tier cities. This is a customer group that has been ignored by incumbents before but has great potential with penetration of mobile telephones.
PDD makes use of technical strategy to increase customers’ stay on the platform. Taobao/JD and PDD have completely different user behaviors: Taobao/JD users find products through keyword search, while most of PDD users are looking at which special deals are available every day. By the AI and recommended system, PDD can recommend right products to the right users based on product popularity and users’ purchase history.
PDD’s success comes from both demand side and supply side. On demand side, it catches an overlooked market with low-income customers, who pursue lower price and have plenty of free time. On supply side, it offers opportunities for small retailers who are crowded out by the negative same-side effect on big platform like Taobao and JD.
Although PDD is facing the complains of poor quality, slow delivery, misleading ads and so on, it is a new force in China’s hypercompetitive ecommerce market. A lot of brands and platforms can take cues from PDD’s success.
Source:
1. https://walkthechat.com/pinduoduo-close-look-fastest-growing-app-china/
2. https://medium.com/@hanstung/how-pinduoduo-works-e8abe6db94e6
3. https://techcrunch.com/2018/07/26/the-incredible-rise-of-pinduoduo/
