5 Incredible Facts About China’s Pinduoduo
Pinduoduo a purely Chinese e-commerce powerhouse has shot to fame because of its secret formula that consists of good deals + group shopping at excruciatingly low prices. The e-commerce powerhouse has gone public and has raised $1.6 billion through a U.S. IPO. The company is now under the mainstream limelight with its 195 million monthly active users and an ecosystem of loyal buyers that have found their haven for products that they can buy in quantity.
Image Source: Statista
Why Is Pinduoduo So Famous?
Here are 5 moves that Pinduoduo pulled off:
Team Purchase model
Picture a shopping trip with your friends only to get your hands on the bulk of goods at the cheapest prices. The experience is a win-win situation for both the seller and the buyers because the seller gets rid of his stock in one shot and the buyer gets his stock at the cheapest price!
Pinduoduo mimicked this group buying behaviour of the Chinese online. Pinduoduo’s integration of social media that allows shoppers to create shopping groups on WeChat and QQ keeps users motivated and creates an entire experience around shopping.
Extremely Low Discounts
Pinduoduo usually offers steep discounts of up to 90 per cent, including everything from RMB 10 ($1.50) bedsheets to RMB 1,000 ($150) PCs. Daily items like household appliances, cutlery etc. are the regular bestsellers. About 6.4 million units of tissue paper rolls were sold at RMB 12.9 ($1.90) for 10 boxes and 4.8 million umbrellas were purchased at RMB 10.3 ($1.51) a piece.
Taobao’s interface is search-based and focuses on multiple product displays, while Pinduoduo’s interface is more similar to a news feed, giving more exposure to a single product with higher chances of product virality (The owner was an ex-google employee so he knew what he was doing). Pinduoduo channelizes its focus on a few bestseller items instead of dividing it into multiple products.
Pinduoduo cuts off many middlemen involved in the process of selling and as a result allow its products to ship directly from manufacturers to consumers, thereby reducing the price tag for buyers and also increasing the profit margins for manufacturers (What a typical win-win situation looks like).
In addition to that elimination, Pinduoduo also sells quaint and upcoming brands in order to cut off the premium attached to branding. Another smart move was reducing advertising and marketing costs because of its social media integration and word of mouth publicity through group selling.
The e-commerce platform focused on selling its products to tier 2 and tier 3 cities, a gap that was ignored by other e-commerce companies. These cities accounted for 65 percent of Pinduoduo’s total user base. Females accounted for 70 percent of Pinduoduo’s user base because they are the decision-makers for the products that the platform sells, along with being prince conscious.
Key Takeaways For e-commerce Start-ups:
- Understand the gap that exists in the market you plan to target
- You can create a smart digital strategy that can get you the publicity you need without spending a penny
- Cater to the audience that is longing for you to reach out to them
- Create a community
The middle class is rising up in countries like China and India. This aspirational class is spending more on e-commerce goods that are cost-effective as long as they serve the purpose. As a start-up, it is important to be sensitive to this market and leverage social media instead of targeting mainstream traditional media for a wider reach.