However, over the years, the purchases from the local male demographic have increased. This is important for the platform that most of the Chinese consumers reply heavily on the reviews and recommendations of the items from the existed buyers to make decision. Member Card are different kinds of the rewarding, aiming to help users save money via vouchers or special discount by sharing amongst their friends. Still, Pinduoduo remains unprofitable, and critics accuse it of essentially buying revenue with heavy marketing spending. Sales and marketing expenses in the first half of the year nearly equalled revenue, and even the most optimistic analysts don’t expect the company to post a profit before the middle of next year. “They don’t really understand how the other makes money,” Huang said to Bloomberg.
As a company targeting low-tier cities, PDD is adept at handling fluctuating market conditions. It leverages the distinct consumer habits of Chinese consumerism where they’re eager to find package deals on small purchases like diapers and slippers but can readily splurge on luxury items like watches, jewelry, and cosmetics. Shoppers like Li—price conscious and far from China’s big cities—have made Pinduoduo China’s hottest ecommerce player. Its 366 million monthly active users trail only Alibaba, outranking better-known rivals such as JD.com. Last month, Pinduoduo reported that second-quarter revenue had more than doubled from a year earlier. Its $40 billion market value exceeds eBay’s and places it among China’s five most valuable internet companies.
What is Pinduoduo’s model?
Hangzhou-based Alibaba has long dominated China’s online industry, but it has been facing stiff competition from rivals and increased regulatory scrutiny from Beijing. Since Pinduoduo represents a unique target market of mostly low-income households with lower levels of education, there is still a huge growth potential for the platform to gain even more market share. PDD has over 5.1 million merchants on its system marketing their products.
- Due to the oversupply of manufacturing capacity, the processing industry relies heavily on the digestion of large capacity in the cycle, so that the end of production was in a weak position compared to the end of circulation.
- The company sells everything from groceries and home appliances to iPhones.
- Now Huang is the billionaire head of one of China’s top three ecommerce platforms.
- These influencers engage with their followers by creating engaging and valuable content like product reviews and live-streaming sessions.
Although brands in PDD still produce a sufficient amount of interest among young online shoppers in China, most purchased and shipped items are directed to the older demographic. According to the 2020 market data, the two dominating age groups in the app are people between 36 and 45 years old or 46 and higher. The advantage of PDD over other social commerce channels in the country is its consumer-oriented approach. It offers products at up to 20% cheaper compared to their market price by letting users directly purchase from manufacturers. PDD pioneered the concept of mixing online shopping with social media interaction between sellers and their consumer base.
China’s second-richest man blasts Pinduoduo for hurting brands with cutthroat pricing
This demographic data clearly shows that Pinduoduo’s user base comes from rural areas with moderate to What is contango low cost of living. That addictive, playful element makes sense, given founder and CEO Zheng “Colin” Huang’s prior experience heading Xunmeng, a studio that made online-based role-playing games. Tencent is a powerful ally, as WeChat blocks links from rivals, including Alibaba.
As much as 65% of the Pinduoduo’s transactions are completed through its WeChat mini program. Pinduoduo makes it seamless that without having to download its app, users could directly share the items with do not even have to leave the WeChat app throughout their entire ordering process. Later in 2018, Pinduoduo has also started to incentivize users to go to the standalone Pinduoduo app, over 60% of active users have come from and rely on Pinduoduo’s WeChat mini program. As Pinduoduo gets into life as a public company, the firm is following the e-commerce giants in cleaning up the platform.
As of March 2021, Pinduoduo says it has trained more than 100,000 new farmers in how to operate e-commerce businesses and has committed to train 100,000 more in the coming years. Many of these trainees are digitally savvy youths who have returned to their hometowns to set up online businesses and help their rural communities sell produce. Pinduoduo removes the middle-man from the supply chain and provides an opportunity for farmers to interact directly with consumers, thus helping them get a better price for their produce. Due to its robust business model, Pinduoduo has managed to increase revenues from just over $2 billion in 2018 to $14.7 billion in 2021. Analysts tracking the stock expect the company will grow its sales to $22.5 billion in 2022.
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Read along as we share insights on why you should utilize Pinduoduo for your local e-commerce business goals and guide you on how to navigate the app, from account creation to launching digital marketing campaigns. Users will get one Brand Card after they purchased a branded item, and they can alternatively share with their friends to attract them browsing and ultimately purchasing the branded products. This is an effective incentive for the platform to promote its branded products. Although Pinduoduo claims to have several channels to lower product prices, increasing product quality and counterfeit complaints still raise concerns for a possible low-cost and low-quality association. Complaints mainly target at the problems of poor quality, slow delivery, misleading ads, etc. Consumption upgrade, a trend in which affluent Chinese customers are increasingly willing to pay for quality, has dominated China’s e-commerce industry in the past few years.
The investment will see GOME’s product range, logistics and after-sales customer support integrated with PDD. In terms of market share, PDD is the third-largest e-commerce player in China behind Alibaba and JD.com, according to a report released in July 2019 by eMarketer. Almost everyone believes that Alibaba and strategies for tax planning JD.com have reached the ultimate limit of China’s e-commerce and leave no room for e-commerce startups. However, the rapid rise of Pinduoduo has shown that there will be new models in the e-commerce market. “As our business grows, consumers and regulatory bodies are holding us accountable for ever-higher compliance requirements and also the merchants doing business with us,” he said.
The company combines products the user may need, like toiletries, with other things they may want to buy. A Pinduoduo blog post says that sharing products with friends helps users customize recommendations. Currently, 100% of PDD’s revenue comes from what it calls “online marketplace services.” This is broadly made up of commission PDD takes from sales on its platform as well as advertising it runs. “I hope Mr. Zhang Yiming, Douyin, Toutiao, and all the media that have hurt me personally with rumors will apologize,” Zhong said, according to local media. Douyin is the Chinese version of TikTok; Toutiao is a social news and information platform.
Pinduoduo’s founder, Colin Huang (Huang Zheng) believes that most present-day Chinese consumers have used the Pinduoduo platform. It took a very short time for Pinduoduo to achieve the growth that has taken Alibaba and JD.com many years. But the extremely fast growth rate will always bring many problems at the same time, such as the problems of counterfeiting, logistics and Low volatility option strategies services, and how eventually the unit price for each customer can be increased. The problems experienced by Alibaba and JD must also be solved by Pinduoduo.