Pinduoduo: a surprising Chinese marketplace
Laia Ordoñez
23/09/2021
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Behind this strange-sounding name hides the latest revolution in Chinese eCommerce. Pinduoduo is spicing up one of the biggest markets.
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When we think of e-commerce in the Asian giant, the first reference that comes to mind is always the Alibaba group. It is logical, because we know that it is the only marketplace capable of fight for Amazon's throne (in fact, it sells more) and has a presence in the rest of the world.Another thing is what happens in the country. For some years now, a competitor that has literally emerged from the ground has burst onto the scene.In today's post, we are going to tell you what Pinduoduo is and how it has managed to reach a larger number of customers than the leading marketplace in its market.
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The instant success of Pinduoduo
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It was 2015 when a group of entrepreneurs led by Colin Huang, formerly of Google, created a company called Pinduoduo. Just 2 years later, it had become the fastest growing Chinese startup in history.In just 2 years it reached a GMV (Gross Merchandise Volume) of over $15 billion. To give you an idea of these lots we are talking about, it took Alibaba 5 years to achieve that result and JD.com had to wait 10.
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INSIGHT: In 2020, Pinduoduo managed to surpass Alibaba in millions of customers for the first time. It surpassed 788 million active users vs. its rival's 769. It may not seem like a big gap, but it is important because it sets a trend.
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What is different about Pinduoduo?
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The secret of their success lies, in a way, in the fact that they have been able to apply lateral thinking to offer something completely different, but using the basic codes of a consolidated channel to which the user is more than used to.Let's dissect these differences to better understand this phenomenon and draw some conclusions about what their differential advantage is.
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#1 Its catalog
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At this point, we are not at all surprised to find business cases, regardless of their volume, that start with a vertical offer and then become more horizontal, including products from other categories.Originally, Pinduoduo was a vertical marketplace specializing in something that none of its competitors were selling well: fresh produce and consumables. That is, mainly fruits and vegetables.
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These are products that have a low margin and certain logistical complications due to their perishable nature. However, they also have a very important advantage: recurrence.
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INSIGHT:If you are able to build loyalty among a large critical mass of buyers of any given product, it will be easier to sell them different products and ranges later on.
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#2 - Domestic market
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China is the largest global producer. Its factories feed the rest of the world with almost any product that can be found in eCommerce and physical storefronts. That is where the problems we are having recently with containers come from, by the way.However, Pinduoduo's focus from the beginning has been on Chinese consumers. Its entire technology and strategy is designed to be the largest supplier of this type of "proximity" product in its country.
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INSIGHT: When you have a market with the potential of China's, domestic demand can be more than enough for a very large turnover. In addition, perishable products are more complicated and expensive to manage globally.
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#3 - Ethical positioning
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Chinese companies and institutions are not exactly known for being very scrupulous about workers' rights and are far less concerned about the consequences of the industry's actions on the environment or sustainability in general.
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Pinduoduo has very different standards in this respect. To begin with, because it is a company that cares about corporate social responsibility and takes action:
- Thanks to its model without intermediaries and the technification of processes, they have managed to be more efficient and reduce aspects such as carbon footprint or inefficient energy use.
- They boost social inclusion and access to the digital economy for groups and segments that are usually outside of it. They focus on training to help their vendors.
- It is a company that invests part of its profits in actions that improve the community's capacity to grow from technology.
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INSIGHT: Pinduoduo is part of the movement or current that has come to be known as agrotech. Although they have incorporated new products from other categories such as fashion or technology, the truth is that they continue to lead this type of companies in China with direct aid, training, congresses, giving them visibility...
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#4 – Gamification and Social Commerce
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Their slogan is: "Together, More Savings, More Fun". It could be a typical empty slogan, but it is not at all. It actually sums up part of the shopping experience in their marketplace very well.
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Just as eBay made auctions part of its purchasing mechanics, Pinduoduo has chosen to give a twist to the way it sells. Based on crowdfunding-style collective buying, it offers discounts for joint orders. Anyone can buy the product outright or create/join a buying group. The more users join, the bigger the discount.To promote the social aspect, the product cards allow direct sharing of our buying group on any of the most widely used platforms in the country.
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INSIGHT: Pinduoduo is particularly strong on WeChat, an instant messaging service in the style of Whatsapp or Telegram, but with integrated shopping capabilities.
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Moreover, it is taking advantage of video streaming as a commercial tool like no one else. But not only for impulse sales of a low average ticket, no. Pinduoduo has reached the point of closing sales of... trucks!The Chinese brand Sany Heavy Industries has already managed to use this channel to place no less than 10,000 trucks in one year, but its forecast is to reach 22,000.From this marketplace we can draw many conclusions to apply in our own eCommerce. The most important one is that things can always be done differently and that "everything has not been invented", because there is always one more twist that can be given.
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What do you think of Pinduoduo's model? What could you implement on your store from what you have seen?
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Images | Unsplash, Pinduoduo.