Ecommerce Insights from China’s Pinduoduo

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At the end of 2020, the five-year-old Chinese shopping app Pinduoduo had 788.4 million users and annual sales of more than $ 9 billion. Pinduoduo’s incredible growth may provide some glimpse into the future of e-commerce.

“When Pinduoduo was launched in 2015, there was little room in China for a new trading platform. Two major e-commerce platforms, JD’s and Alibaba’s Taobao-TMall sub-brands, dominated online retail in China, much like Amazon dominates in the US. In the same year, JD and Taobao had a combined gross merchandise value of $ 433 billion. And yet Pinduoduo defies expectations five years later, ”wrote Anu Hariharan and Nic Dardenne for the Y Combinator launch accelerator.

Pinduoduo now has more active users than Alibaba’s brands, although less sales.

Change with customers

Rather than competing directly with what Pinduoduo called “search-based” e-commerce websites, the company took a more social approach that focused on customer behavior and the trend in China towards a retail model between consumers and manufacturers.

First, in terms of consumer behavior, Pinduoduo is effectively social trade.

“Real-life shopping is interactive because, whether you’re getting down to business or reading the latest trends, you need to interact with others, discover surprises, and maybe even enjoy entertainment. Why can’t online shopping be just as fun and interactive? “Asked Pinduoduo’s English-language explanatory video.

For this purpose, Pinduoduo includes games on its platform. It offers team discounts when buyers can bring a group of friends together to buy products together. It provides access to key products such as fresh produce. Like a social media feed, Pinduoduo shows customers products they think they will like instead of just letting them search for them.

Second, Pinduoduo has adopted the consumer-to-manufacturer (C2M) model, which uses the company’s platform and artificial intelligence algorithms to drive product development, product selection, and mass customization at relatively low prices.

Here’s the realization that retail isn’t static. The industry is changing rapidly and consumers are leading the way.

Expand from a niche

Pinduoduo started with a light form of C2M for the product market.

In China, as in most countries, there can be multiple layers of distribution between the farmer who grows garlic, for example, and the grocery store in a medium-sized city.

So Pinduoduo created a direct link. In 2018, a one-day event on the subject of “Pin Agricultural Goods” took place in the Chinese province of Hebei. The sale brought in 47,000 orders for more than 165 tons, or about 364,000 pounds of garlic, in a single day.

This C2M model offers consumers desirable products like garlic at a low cost. The garlic sold around 76 percent less than in a grocery store. Farmers get a good price, maybe even better without their many distributors, as well as “large, predictable and aggregated demand” for their products.

With what it learned in agriculture, Pinduoduo has moved on to other product categories. It chose a niche and grew from it.

Use customer relationships

Team shopping is an essential part of Pinduoduo’s success. When viewing a product on Pinduoduo, a consumer is presented with two prices. One is a self-purchase price (or a unit price). The other represents a team discount.

To receive the team discount, a Pinduoduo buyer can either join an existing purchasing team or create a new team. For the latter, the buyer would share a link on social media websites and encourage her friends and family to receive the offer as well. The buyer can even record an audio message about the product.

New purchasing teams have 24 hours to form or it won’t be a deal.

Pinduoduo shows two prices for each item: the unit price (or standard price) and the reduced team price.

Pinduoduo’s team prices use customer relationships. For example, in the early years of its existence, the company didn’t advertise and relied solely on its customers to bring new customers to the platform. This worked so well that when Pinduoduo was listed on the Nasdaq in 2018, it had a market cap in the billions.

Your company may not offer team pricing, but it is possible that your current customers are your best source of new customers.

Focus on the experience

Pinduoduo made online shopping feel like entertainment. The website has a product feed that is more social media than a retail website and features products that you think you will like based on your previous browsing habits.

Pinduoduo also has a lot of live streams. The moderators of these live videos are energetic and dedicated. Finally, Pinduoduo offers games and intrinsic rewards that we could call gamification.

Screenshot of Pinduoduo with three live streams.

There are many live streams on Pinduoduo.

Together, these elements have resulted in a compelling shopping experience if the number of Pinduoduo users is any indication.

Remember, Pinduoduo had 788.4 million users at the end of 2020. Alibaba, with its various brands, had around 779 million users. And Pinduoduo is not yet six years old.

Founded in February 2004, Facebook took roughly seven years to reach a similar number of monthly active users. This isn’t a perfect comparison, but it could suggest that Pinduoduo’s growth is more like a social network than a business.

And that is the final insight. Focusing on the customer experience could become increasingly important for much of e-commerce.

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