But within the world’s second-largest economy, the e-commerce firm is growing faster than major rivals Alibaba and JD.com and gaining share quickly. Pinduoduo’s growth came from an existed crowded Chinese ecommerce environment, dominated by Alibaba and JD.com. The Free Pass Card enables users to enjoy the group-buying discount without having to form a team.
One price is for individual buyers while the other is for community group purchases, and is generally lower. This incentives users to bring friends and family onto the platform in order to access cheaper prices. Data from research institute Jiguang shows that users from third- and lower-tier cities account for around 65 percent of Pinduoduo’s total user base, while JD’s users in first plus second-tier cities and the rest of China were half-and-half. Additionally, females account for 70 percent of Pinduoduo’s user base. Pinduoduo’s active buyer numbers make it one of the largest e-commerce platforms in the world. This active user base also attracts merchants to Pinduoduo and the scale of its sales volume allows the latter to offer competitive prices thereby creating a virtuous cycle.
- Its net losses reached RMB 201 million ($30 million) in the first quarter of this year.
- Pinduoduo suffered a net loss of RMB 292 million ($43 million) and RMB 525.1 million ($77 million) in 2016 and 2017, respectively.
- Pinduoduo’s active buyer numbers make it one of the largest e-commerce platforms in the world.
- Four months after Pinduoduo received undisclosed A round from IDG and Lightspeed China in March 2016, the company secured over $110 million in Series B financing four months later from Baoyan Partners, New Horizon Capital, Tencent, and others.
Through social sharing, users are sending the product information precisely to friends and groups that may have similar income and consumption preferences. Viral marketing is a more clever way to build the identity of all the lesser-known brands on its platform. Financially, the platform could even out part of discounts with less marketing budgets. By sharing Pinduoduo’s product information on social networks such as WeChat and QQ, users can invite their contacts to form a shopping team to get a lower price for their purchase. The mechanism keeps the users motivated and better hooked for a more interactive and dynamic shopping experience. Coupled with other incentives such as cash, coupon, lottery and free products, Pinduoduo manages to acquire users at a very low cost.
Counterfeit products
Company founder Huang insisted Pinduoduo’s decision and punishment of the owners is just and fair. But it is succeeding thanks to a new ecosystem consisting of super app WeChat, mobile payment infrastructure, and mobile-first users. Consumption upgrade, a trend in which affluent Chinese customers are increasingly https://www.day-trading.info/8-best-online-stock-brokers-for-beginners-for/ willing to pay for quality, has dominated China’s e-commerce industry in the past few years. Taobao and JD’s globalization initiatives to bring overseas quality products, the boom of cross-border e-commerce sites like Red and NetEase Yanxuan and Kaola are all based on the consumption-upgrading backdrop.
Many of Pinduoduo’s users only became internet users in recent years, and use the app not only for shopping, but as a way to spend their free time. The most typical Pinduoduo users are price sensitive women that reside in low tier cities. But how to maintain these users and its growth momentum is a big challenge for Pinduoduo now given rising product quality complaints. However, there is massive potential for companies to gain traction in lower-tier cities in China in the upcoming decade which will be a key driver of revenue growth.
The incredible rise of Pinduoduo, China’s newest force in e-commerce
His previous startups include consumer electronics e-commerce site Ouku.com, Leqi, e-commerce platform marketing agent service and a WeChat-based role-playing game company. Cost performance is still the most important factor to consider for consumers. A higher price tag does not necessarily represent the better quality or vice versa. The huge potential in this often-overlooked market is luring more competitors.
1 Integrate social commerce into affiliate marketing
This reduces the farmer’s dependence on large distributors which reduces the overall cost and improves the supply chain. Pinduoduo has grown quickly in its seven-year history to become one of China’s biggest e-commerce firms. The company has tended to focus on lower-income consumers by offering heavily discounted products.
Duo Duo Orchard was the first popular game on the platform, users can grow virtual fruit trees, collecting water droplets to water their tree by shopping, browsing, and interacting with other users on the platform. The Mini game is an in-app games to allow users enjoy playing the online game beyond purchasing. To get the item for free, the user must share their link with as many friends as possible. It utilizes the social networking to connect like-minded shoppers and various gamifications https://www.topforexnews.org/investing/best-cryptocurrency-to-invest-in/ to draw so many users gradually addicted to the platform. Its users are drawn by deals on a wide range of good which include things like clothing, fresh productsm electronics, as well as common household necessities like tissue paper. Four months after Pinduoduo received undisclosed A round from IDG and Lightspeed China in March 2016, the company secured over $110 million in Series B financing four months later from Baoyan Partners, New Horizon Capital, Tencent, and others.
Huang seems to be right about how the two industries can work together. Pinduoduo’s annual GMV (gross merchandise volume) surpassed RMB100 billion ($14.7 billion) in 2017, that’s around two years since its inception. To hit the same milestone, Taobao took five years, VIP.com took eight years and JD ten years. Pinduoduo now claims more than 343.6 million active buyers with an annual GMV of RMB 262.1 billion, or $38.5 billion.
Over 88.4 percent of Pinduoduo’s RMB 1.2 billion ($180 million) Q1 revenue was spent on marketing. This could be translated as a sign of difficult traffic acquisition. But tightening regulation is causing more friction between Pinduoduo and What is the eps its merchants on the platform. In June, fourteen store owners who sell products on Pinduoduo protested under the company’s office building claiming that Pinduoduo conducted improper product-quality checks which damaged the owners’ rights.
Instead of making multiple trips to wet markets, community group buying programs see orders made on mobile and pick-up arranged at a nearby location. The GMV basically represents the value of the total amount of goods purchased on the company’s platform. But now Alibaba and JD have put a larger focus on gaining ground in these lower tier cities and have released products to compete with PDD.
A huge turning point occurred in the third quarter of 2017 when the weekly active rate, penetration rate, and open rate of the Pinduoduo app all surpassed those of JD. Compared to the previous year, it reaches up to 1,000 percent year on year growth according to data from Jiguang. Last August, the company started Duo Duo Grocery which is a next-day grocery pickup service that allows users to order products online and collect them from designated pick-up points the next day. 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.
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