The basic characteristics can be summarized as using discounts and cash stimuli to induce users to share and continuously spread in the user’s social relationship chain, so as to achieve the purpose of acquiring new users and activating old users. Regarding market share, Pinduoduo had achieved the seemingly impossible: organic growth despite a preexisting duopoly. The category tab serves as a fixed top navigation bar, and users can swipe left or right to switch tabs. This creates urgency and excitement. This is profound: the desktop e-commerce model (Amazon/JD.com) is based on a multitude of SKUs, the buyer knowing what they want, and the search function. Less intermediate circulation links mean lower intermediate costs and non-branded goods. The growth story behind Pinduoduo is nothing short of impressive. Many original waist and tail merchants have the opportunity to become head merchants on this platform, and the platform’s low-price strategy is bound to tilt its traffic resources to low-priced goods, so merchants Active profit making is the most effective means of competition in the new environment (compared to the complex operations of other platforms). First we downloaded the App and experienced it first hand. The main purpose of the above two links is to use streamlined design to create a sense of scene when users visit low-cost hypermarkets, to attract users to continue to slide down on the product recommendation page, and finally to attract users to click to enter the detailed page. Background ; Pinduoduo was founded in September 2015 by Colin Huang, an ex China. So we decided to dig extremely deep about this company. The author believes that the main supply chain of Pinduoduo in the future may be in the form of one to several super strong products corresponding to one manufacturer. Chinese e-commerce platform Pinduoduo is planning to raise up to $6.1 billion through a convertible notes offering and equity. e-commerce platform that offers a wide range of products from daily groceries to home appliances To support the farmers’ upskilling efforts, Duo Duo University, Pinduoduo’s training arm, equipped entrepreneurial farmers with e-commerce operations know-how, as well as marketing knowledge and … In summary, the company has been growing much faster than China no. In fact, there are some very interesting things that Pinduoduo has invented in the space of e-commerce that Alibaba and JD.com have openly and massively copied (we will cover that in the later part of this article). There are few homepage modules, and there are no various special channels and scene channels that other e-commerce platforms have learned under the first focus, functional entrance, and big promotion floors, but directly access the product recommendation list, so that the recommended products are on the first screen. Pinduoduo was initially founded in early 2015 as yqphh.com, or Pinhaohuo (PHH, “piece together good goods”). Within three years of its founding, Pinduoduo has attracted over 300 million active buyers and over 1 million merchants through a new shopping format and experience. Appnext's technology is used to power app recommendations by most of the largest mobile manufacturers and serves 4 Billion app recommendations in over 60 Thousand different apps. The reason is that most people’s pursuit of high-quality goods will not cover all aspects. Pinduoduo is the fastest growing e-commerce startup in the history of China. relying on WeChat’s huge flow welfare, the social fission gamification has made Pinduoduo’s traffic exponentially increase, but it also buried hidden dangers. Currently, I am the CEO & Co-founder of Appnext, a leading on-device and in-app discovery platform. In many ways, Pinduoduo represents the most successful example of how a mobile commerce app can be designed from the ground up to engineer social sharing, viral engagement and repeat buying as part of the user experience. Pinduoduo is a rising e-commerce platform in China. Pinduoduo, on the other hand, gives the user an item feed they can browse that intelligent agents/AI help tailors and makes more targeted over time. Mastering the supply chain is the core moat for e-commerce. 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. Social group platforms (exemplified by Pinduoduo in China) generate a demand-driven commerce ecosystem based on rich, gamified interactions that don't depend on prior relationships in a direct sales business model. The strategy of Pinduoduo with low-price discounts as its core was to solve 3 problems: The early stage of the establishment and development of Pinduoduo was in 2015 and 2016 when the e-commerce field began to advocate “consumption upgrading”. Introduction – Pinduoduo and its business model. If a friend has a red envelope activity, at the same time, they can also get the amount of their own, mutual benefit, and guide users to share with each other to form multi-directional communication; if there is no red envelope activity, the friend will send a red envelope to the friend, forming a new spread. Since many of the older women are charged with caring for a whole household, Pinduoduo’s bargain-priced group purchasing model has garnered broad appeal among the demographic. Pinduoduo's latest net profit (on an adjusted basis) signals that the business is approaching critical mass. It has so many deals that I want to spend all my time and money on it.”. The name Pinduoduo means “Together, More Savings, More Fun.”  It’s a great summation of the company’s core group-buying value proposition, which has been described as “Groupon on Steroids.”   But there are key differences. A major difficulty for small and medium-sized manufacturers to survive lies in the uncertainty of production: Inadequate knowledge of market information makes it difficult for them to determine exactly what commodities they need to produce and how many commodities they produce. Also from the beginning of the 15th and 16th years, smartphones have rapidly spread to cities below the third and fourth tier cities, and a large number of sinking users who have been taken into the mobile Internet have brought a huge wave of underutilized traffic benefits. Many aspects of Pinduoduo, from the underserved target markets to the unparalleled distribution afforded by WeChat, are singular and cannot be reproduced. Where Groupon focused on local vendors of “want to have” goods and services like fancy dinners and massages, Pinduoduo offers deep discounts for bulk purchases of everyday “need to have” household items. The quarterly growth of active users is 2X of those of JingDong and Alibaba. Currently, I am. Its stock is also underfollowed, as it has only 10K followers on Seeking Alpha compared to JD’s 84K and BABA’s 343K. Pinduoduo has doubters Due to its discount model, the company mainly sells cheap products to lower-income shoppers, especially in China's third- and fourth-tier cities. E-commerce is essentially to solve the problem of the connection between people and goods. As a result, the small manufacturers who originally pushed back the low-end supply chain have achieved the ultimate in single products. You win coupons by spinning a wheel on an in-app game, then the coupon only lasts 2 hours, prompting an impulse buy. What has been the secret to this incredible growth? While the company has invented the ultimate social shopping experience through its low-cost strategy + social fission gamification this precise strategy has also become the barrier to growth after it has reach the current scale. I hope these efforts will lead to more inspirations and business ideas for the future of Pinduoduo. At the top left of the product map (after sliding down, in the middle of the top navigation bar), the positive user behaviors of other users’ initial orders, successful orders, five-star evaluations, etc., are continuously displayed on the floating layer, and the user endorsement is used to increase the user’s trust in the product. Over Pinduoduo’s short history, it has tested two business models. 2019 4th Quarter Operational Loss: RMB 1.34 billions (compared to 2.1 billions YoY). Pinduoduo can achieve a certain degree of mass customization to the upstream supply chain through the aggregation of consumer demand. At present, there are various social games on the platform as follows: There is a certain difference between the activities of getting cash every day on the Android side and the iOS side (price discrimination). The scale of user scenario requirements for low-priced goods is actually enormous. I have more than 17 years of experience founding companies in the digital space, focusing on the future of consumer internet, mobile and marketing. PDD’s stock has … The per capita disposable income of this group is lower, more sensitive to price, and the pursuit of cost performance. Of course, it is even more worth mentioning that what makes Pinduoduo stand out (and also makes it highly criticized) should be its various social fission gamification outside the main process of Pinjang. If Huang could find a way to make buying the most mundane everyday household items exciting and fun, then app developers everywhere can try to find ways to do the same with their apps. 3 . Pinduoduo business model replies on social e-commerce and is designed to unite more people, buy better things at lower prices, and experience more benefits and fun. Pinduoduo is becoming a major force in China's e-commerce industry. Opinions expressed by Forbes Contributors are their own. In a September article on Pinduoduo in Wired magazine, one such buyer, a 46 year old housewife and nanny from rural inner Mongolia, was quoted as saying: “I have to be careful not to use this app too much. I Was Networking, but He Thought It Was a Date, You Don’t Have to Be First But You Must Be Formative to Win, Inside the Takedown That Put Carlos Ghosn in Jail, Richard Branson — How The Virgin Brand Came To Life, The Damnation of Differentiation: How to Be Seen in an Ocean of Competitors Just Like You, Food Safety and Traceability With Technology, how to make merchants willing to sell at very low prices, how to find the target user group on the buyer’s side. This is evident in many game-like features that Pinduoduo uses to re-engage users, including special deals and promotions. In turn, the reduction in production costs can further compress prices, thus forming a positive cycle. A 50 yuan red envelope can form a huge sharing chain, and the most powerful thing is that the amount is only effective if the conditions are met-so, continuous feedback and reluctance to sink the cost will make users find ways to start after the task To complete (of course, the chain of control tasks should not exceed the user’s patience limit); and if the user fails to complete the task, all the previous sharing is just to do the wedding clothes for the platform-the platform gains massive new users through the user’s sharing. This enables item discovery and a space where purchase decisions are dynamic and can be influenced by other people. Would-be buyers have 24 hours to complete a buying group, and the app shows the discount increasing with each additional buyer added. 1 . The same goes for the ultimate models of Netease Yanxuan, Xiaomi Youpin and Beijing-made. This platform has become a mainstream online shopping application. With the further development of Pinduoduo, the user group is no longer limited to “Beijing Fifth Ring Road”, and the proportion of users in first- and second-tier cities has gradually increased. Combined with the core gamification, the basic shopping process of a Pinduoduo user should be: Homepage-flip Category tab page (or click the recommended icon at the bottom)-look at the product recommendation list-view product details-initiate a single order-payment is successful. Its top competitors include Alibaba’s Taobao, Tmall, and JD. The purchase bar below shows the two buttons of separate purchase and initiation of a single order. You get free products for getting friends to install the app, and there are leaderboards showing people who have had the most friends sign up. However the company has proven to be able to churn out unprecedented growth quarter over quarter: 2019 full year GMV (Gross Merchandise Value): RMB 1.997 Trillion, 113% growth YoY. All Rights Reserved, This is a BETA experience. Category tab page: The category tab page is the product recommendation list under the second category, without the filtering function, all users can do is keep scrolling down the page. The problems of counterfeit goods, counterfeit goods and inferior goods have become the deepest pains of Pinduoduo. Recently, it has appeared with much greater frequency in my news feed in this initialized form: PDD. The impact of this consumption escalation movement on consumers is irrespective of the impact on small and medium-sized businesses. Driven by sharing on WeChat, Pinduoduo’s average customer acquisition cost is only $2, compared to $39 and $41 for primary rivals JD.com and Taobao. Pinduoduo has an app and a WeChat Mini Program. I have more than 17 years of experience founding companies in the digital space, focusing on the future of consumer internet, mobile and marketing. Business Overview. But not everyone is impressed with the company’s business model. For shoppers who love a bargain, it’s an irresistible experience. Going by the common classification of China’s municipalities into “tiers” of socioeconomic activity, about 60% of Pinduoduo’s users come from cities in the third-tier and lower, creating huge opportunities for the … Would-be buyers have 24 hours to complete a buying group, and the app shows the discount increasing with each additional buyer added. Launched in 2015 by ex-Google engineer Huang Zheng, the company operates a bulk-buying business model similar to U.S.-based Groupon. Secondly, this is a new platform and new competitive opportunities. China’s e-commerce market is huge and still growing, but the real question remains whether the business model can be expanded abroad to other countries and … The supply chain of small and medium-sized manufacturers is the foundation of Pinduoduo, but it also drags down Pinduoduo’s further upgrade. This unique business model allows Pinduoduo to carve out its niche at the beginning, but its success depends on the excellent quality of the product itself. Based on this, manufacturers can make reasonable planning of production resources for a certain period of time. Let’s Break Down Pinduoduo’s Business Model. Hence, when evaluating e-commerce stocks, one should consider three key metrics. Here we take the iOS side as an example for analysis. The low-price strategy allows Pinduoduo to take over the low-end supply chain. This balancing act applies not just to product design, but to your distribution, business model, and even what categories you operate in. By taking out the top search box they reduce the frequency that users leave the current browsing item. Pinduoduo gathers consumer demand and provides small and medium manufacturers with sufficient demand information. Afterwards, the core purpose of the page design is to guide the user to make orders quickly. There is no brand premium for the goods. And what can Pinduoduo bring to these businesses? Interestingly, compared with the general e-commerce business-driven characteristics, Pinduoduo has strong product-driven characteristics, and excellent product design and gamification directly contributed to its success. The continuous amount forms a continuous sharing power. Pinduoduo operates a mobile e-commerce platform in China, with a wide range of products. The complete elimination of the shopping cart design shortens the user’s decision path drastically, because traditionally many users drop off during the checkout process.The whole package defaults to free shipping, reducing user decision-making costs and guiding users to place orders quickly.Pinduoduo Pindian (Group-pay) supports both stranger and friend lists. Pinduoduo started by targeting price-conscious (as opposed to brand-conscious) buyers in third and fourth tier Chinese cities – an underserved market. The business Pinduoduo is a third-party social commerce platform, mainly providing group buying offers at reduced prices. The first amount of the user’s demolition is large (about 40% of the total amount), and the user’s excitement is used to quickly guide the sharing and dismantle the second amount to the user. Pinduoduo describes its business model as "Costco meets Disneyland," combining value and entertainment. The large fluctuations in production also lead to high production costs (for example: the production line is suddenly more and less, suddenly stopped, and the manufacturer’s effective utilization of production resources is extremely low). ... PDD’s real innovation lies in its business model, and that is the element that its bigger rivals can mimic. The company acquired products, such as fresh produce, from suppliers and sold them directly to buyers. The attractiveness of users with constant rewards will decrease rapidly as the user’s frequency of use increases. In a September, EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, Michigan Economic Development Corporation With Forbes Insights. Here is Huang’s core insight: that the mobile shopping experience is based on browsing, not searching, and that you could push deals rather than items. In some scenarios, low-priced goods have great appeal. First of all, most of these merchants are small manufacturers or low-end sellers that cooperate with small manufacturers. These small and medium-sized businesses that have been squeezed out and eliminated during the continuous upgrade are precisely the resources of Pinduoduo’s early merchants. The third is to open the red envelope by completing the single order, and to guide the user to place the order is the ultimate goal of the platform. Compared with the difficulty of removing the 50 yuan red envelope, the lottery must get a more convenient discount. 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