Pinduoduo the fastest growing platform in China

China’s biggest technology companies from Tencent to Pinduoduo’s e-commerce rivals Alibaba and JD.com continue to pursue international markets. Pinduoduo, a much younger company than Alibaba and JD.com, having only been founded in 2015, is behind its rivals when it comes to the overseas push. Pinduoduo launched its U.S. online shopping site as the Chinese e-commerce giant makes its first major push overseas. A large part of PDD’s user base is from smaller Chinese cities where there are perhaps more price-conscious consumers. JD.com and Alibaba appear to dominate in the so-called tier 1 cities in China.

1. Its mobile platform provides buyers with a wide selection of merchandise as well as an interactive shopping experience, while enabling sellers to seamlessly connect with customers.
2. Alibaba said it had 711 million annual active consumers on its Chinese e-commerce marketplaces in the 12-month period ended September 30, 2019, the latest available figure.
3. The most important key figures provide you with a compact summary of the topic of “Pinduoduo” and take you straight to the corresponding statistics.

Combined with the extra satisfaction of scoring a good deal with your friends as a team, Pinduoduo soon became a viral sensation in China. Its mobile-only social shopping platform has allowed Pinduoduo to grow revenue at an enviable pace over the years. The company’s team purchase model transforms online shopping into a dynamic social experience and its platform resembles a virtual bazaar. This dynamic business model has also allowed Pinduoduo to increase customer engagement and ensure repeat purchases. Like Alibaba’s Taobao and rival JD.com, Pinduoduo is an e-commerce platform that offers a wide range of products from daily groceries to home appliances. Pinduoduo’s twist lies in its integration of social components into the traditional online shopping process, which the company describes as the “team purchase” model.

Counterfeit products

Further, the increase in the purchasing power of China’s middle class and rising GDP numbers make e-commerce companies like Pinduoduo a good bet for long-term investors. As Pinduoduo gets into life as a public company, the firm is following the e-commerce giants in cleaning up the platform. The company set up an RMB 150 million ($22 million) fund to deal with after-sales disputes. 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. The percentage of complains on Pinduoduo is 17.87 percent, and the user satisfaction rating is only 1 star, according to the 2017 National User Satisfaction Survey of Major E-commerce Platforms released by the China E-Commerce Research Center. Complaints mainly target at the problems of poor quality, slow delivery, misleading ads, etc.

It’s the combination of the viral acquisition loop and the addictive shopping experience that has caused Pinduoduo to become bigger than eBay in just four short years. The Shanghai-based company just went public raising $1.6 billion through a U.S. IPO this week, which stands out as one of the largest deals of the year. Excitement is quickly intensifying surround the company, which claims 195 million monthly users and has managed to become successful within China’s highly competitive e-commerce market inside just three years.

Business model

Extremely low prices are another compelling attraction of Pinduoduo. The discount is usually up to 90 percent, including everything from RMB 10 ($1.50) bed sheets to RMB 1,000 ($150) PCs. More than 6.4 million units of tissue paper were sold at RMB 12.9 ($1.90) for 10 boxes and 4.8 million umbrellas were purchased working capital business directory at RMB 10.3 ($1.51) apiece. 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. Pinduoduo has captured this chance which helped boost itself through the rural online sales.

Comparatively, the forward price to sales multiple for peer e-commerce companies such as Etsy and Hello Fresh stand at 30x and 29x respectively. Analysts tracking Pinduoduo have an average target price of $70.55, which is around 10% above its current trading price. Community group buying has seen a rapid shift in fresh produce and grocery shopping habits in many parts of China.

Buyers are encouraged to share product information on social networks and invite their friends and family to form a shopping team and benefit from attractive prices. Hence, buyers actively introduce others to Pinduoduo allowing the company to lower customer acquisition costs and increase organic traffic without too much difficulty. Lesser-known brands were chosen over famous brands to erase any premium that comes from branding. Additionally, the costs for advertising and marketing are also lowered through user sharing to social media.

Key financials

And last year, JD rolled out a group buying app called Jingxi, which is also accessible through WeChat. Alibaba and JD have found success in larger so-called tier 1 and tier 2 cities in China which include the likes of Beijing and Shanghai. This has led to lower customer acquisition costs, according to analysts. While Alibaba and JD.com make most of their money from e-commerce, they both have other emerging businesses such as cloud computing. There is an option to just buy the item directly but the price of that product is higher than that of buying it in a group.

A large part of PDD’s growth has been driven by the fact that it can be accessed on Tencent-owned messaging service WeChat, which has over a billion monthly users. WeChat is a key part of daily life in China and allows people to make payments within the app. ETOC also provide free educational content to help brands understand more about China e-commerce and digital marketing. The in-app game is aiming to mimic a real shopping experience for the users in order to maintain as longer as the user retention. Member Card are different kinds of the rewarding, aiming to help users save money via vouchers or special discount by sharing amongst their friends. Launched in 2015, Pinduoduo has been now a leading social e-commerce application and one of the fastest growing platforms in China.

Taobao launched Taobao Tejia, a dedicated app for China’s low-end users. But the growth of Pinduoduo has sparked an argument focusing on whether the platform represents consumption downgrading. It is just one more piece of evidence for how big and segmented the Chinese market can be. Rising income may give part of Chinese urban citizens the freedom to vote for quality, but RMB 1 difference in price tag may be enough of an incentive for their countryside counterparts, who have been more neglected by e-commerce so far. Pinduoduo’s C2B model allows it to ship directly from the manufacturers eliminates layers of distributors, not only reduces the price tag for buyers but also raises the profit of manufacturers.

Here’s a look at how the platform works, its financial performance and how it competes with Alibaba and JD. If you don’t reduce the price to 0 within 24 hours you don’t get https://www.forex-world.net/brokers/study-for-coming-to-the-trade/ the item for free and you have to start all over again. Every friend that clicks on the link (no purchase required) drives an incremental discount for the initiator.

Pinduoduo users

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 https://www.topforexnews.org/software-development/what-is-natural-language-processing/ 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.

Users usually get one Free Pass Card after completing two purchases on Pinduoduo. “The retention rate is a big challenge of Pinduoduo, implying potential GMV slow down. Pinduoduo will have difficulty in upgrading to a marketplace of premium products because of its user demographics and brand image,” according to 86 Research.

Want to have a first free consultation session about e-commerce and digital marketing in China? Moreover, this direct-to-consumer model indicates to cut out the middlemen and further deliver price savings to the customer, which in turn generates more demand and economies of scale. In return, users will receive free fruit from Pinduoduo after the virtual tree reaches its maturity virtually. “If you close your eyes and visualize the next stage for Pinduoduo, it would be a combination of ‘Costco’ and ‘Disneyland’, driven by a distributed network of intelligence agents,” Huang wrote in the IPO prospectus.