pinduoduo business model

First of all, most of these merchants are small manufacturers or low-end sellers that cooperate with small manufacturers. None of these promotional hooks and viral strategies would work if the fundamental user experience wasn’t itself engaging. Of course, the introduction of high-end suppliers and brand companies should also be promoted, but Alibaba and JD.com’s Dashan are in front, and their conflict with the main station’s team play may be a difficult problem to solve gamification with weak sharing that emphasizes interactive interaction within the station. 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. 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 business Pinduoduo is a third-party social commerce platform, mainly providing group buying offers at reduced prices. relying on WeChat’s huge flow welfare, the social fission gamification has made Pinduoduo’s traffic exponentially increase, but it also buried hidden dangers. Pinduoduo was founded initially back in 2015 as Pinhaohuo (PHH). Business Overview. Active users: 585 millions, with 167 million increase YoY. And how did Pinduoduo achieve it in the face of such large established competitors? Currently, I am the CEO & Co-founder of Appnext, a leading on-device and in-app discovery platform. It is also important. So we decided to dig extremely deep about this company. This balancing act applies not just to product design, but to your distribution, business model, and even what categories you operate in. ... PDD’s real innovation lies in its business model, and that is the element that its bigger rivals can mimic. Pinduoduo’s business model is largely misunderstood in the West, it’s simply viewed as another e-commerce company. How to build social+. Pinduoduo puts new spin on group buying Does Pinduoduo have to step on it again at the same pace, or a new way? Pinduoduo was initially founded in early 2015 as yqphh.com, or Pinhaohuo (PHH, “piece together good goods”). 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. Pinduoduo. Founded in September 2015, Pinduoduo is the fastest growing e-commerce startup in the history of China, attaining a GMV of $15 billion only two years from launch, a milestone that took incumbents Alibaba and JD.com 5 and 10 years to achieve. First we downloaded the App and experienced it first hand. Many researchers and entrepreneurs reached out to us with questions about their new group-buy business model. 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 shopping scenarios and shopping guides adopted by traditional e-commerce can be roughly summarized into the following categories: The difficulty of satisfying the demand with clear objectives, the demand with ambiguous objectives, and the goal with no purposeful loitering increases in turn. 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 … This social sharing of deals is primarily done on WeChat, the super app that is used by a billion people in China. In this way, Pinduoduo is more like a social sharing driven version of Costco or Dollar General. I cover the evolution of the mobile marketplace and the app economy. Secondly, this is a new platform and new competitive opportunities. China. The low-price strategy allows Pinduoduo to take over the low-end supply chain. This is evident in many game-like features that Pinduoduo uses to re-engage users, including special deals and promotions. Compared with the branded products on the market, the price is much lower. Its top competitors include Alibaba’s Taobao, Tmall, and JD. WeChat’s parent company Tencent, recognized Pinduoduo’s potential and became an investor in 2016, promoting Pinduoduo and turbocharging its user acquisition. This platform has become a mainstream online shopping application. Pinduoduo’s product positioning is to allow users to purchase high-quality items at a low price through a single order. To break through the supply chain, many efforts should be made to develop the C2B model. Pinduoduo is the fastest growing e-commerce startup in the history of China. 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. PDD is a smaller company than JD in terms of revenue but has a larger market capitalization. Founder Colin Huang has mentioned that their strategy is the “Costco+Disney model”. 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. 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. Would-be buyers have 24 hours to complete a buying group, and the app shows the discount increasing with each additional buyer added. He deliberately sought to combine a game-like experience with e-commerce. Pinduoduo now claims more than 343.6 million active buyers with an annual GMV of RMB 262.1 billion, or $38.5 billion. The advantage of the stranger’s billing is that the order is quickly formed, but the more encouraging way of the product is to initiate the payment of the bill and then share it with friends in the circle of friends. The business is scaling rapidly. 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. This forces the game to continuously update, iterate and create, creating novelty and changeable rewards for users. The above has explained that Pinduoduo has designed the category + personalized product recommendation features around the strategy of low-cost Specials. 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. The purpose of the latter is to attract more traffic through social elements. Digital economy observers outside of China can be forgiven for missing the meteoric rise of Pinduoduo. This will inevitably become a difficult problem that can’t be circumvented on the development path of Pinduoduo-the pit that Taobao once stepped on. Merchants gradually gathered heard about Pinduoduo; new small and medium-sized businesses. The per capita disposable income of this group is lower, more sensitive to price, and the pursuit of cost performance. The direction of business platform efforts. Let’s Break Down Pinduoduo’s Business Model. Afterwards, the core purpose of the page design is to guide the user to make orders quickly. This creates urgency and excitement. Background ; Pinduoduo was founded in September 2015 by Colin Huang, an ex It’s just that the two have different approaches. 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. The growth story behind Pinduoduo is nothing short of impressive. 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, 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. 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. PDD’s stock has … By taking out the top search box they reduce the frequency that users leave the current browsing item. Why it matters: Pinduoduo is looking to fundraise amid buoyed investor confidence on the company’s first-ever quarterly profit, reported in the quarter ended September.The fast-growing e-commerce platform plans to fund new business channels and cover … 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. Chinese e-commerce platform Pinduoduo is planning to raise up to $6.1 billion through a convertible notes offering and equity. The merchant has found it, and the next thing to solve is how to find the user. Pinduoduo was found in September 2015 in Shanghai by former Google engineer Zheng Huang and is a third-party social commerce platform that focusses on connecting manufacturers, suppliers and retailers with end-consumers in the B2C market. In fact, Alibaba already did. 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. But the lessons of building a socially shared, dynamic experience where the use of app itself drives consistent re-engagement are more important than ever. If you can buy reliable products at low prices, users in first- and second-tier cities can also become loyal users of the products. The supply chain of small and medium-sized manufacturers is the foundation of Pinduoduo, but it also drags down Pinduoduo’s further upgrade. Its stock is also underfollowed, as it has only 10K followers on Seeking Alpha compared to JD’s 84K and BABA’s 343K. The reason is that most people’s pursuit of high-quality goods will not cover all aspects. 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). Let’s see how Pinduoduo guides users in this process. I have more than 17 years of experience founding companies in the digital space, focusing on the future of consumer internet, mobile and marketing. In the e-commerce business model, a platform generates revenue through a commission on every transaction. The replacement and mutual promotion of the means (red envelope subsidy) and the purpose (guided order placement) are also subtle. 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. 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. Pinduoduo operates a mobile e-commerce platform in China, with a wide range of products. The same goes for the ultimate models of Netease Yanxuan, Xiaomi Youpin and Beijing-made. If other e-commerce is using user interest preferences to guide users to place orders, Pinduoduo is using low-cost explosions to guide users to place orders. 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. As long as the attractiveness of the low price is strong enough, the shortcomings of poor accuracy of product recommendations become very small-the user’s threshold is low enough, then the user’s interest preferences that need to be met to cross this threshold are simple enough. And what can Pinduoduo bring to these businesses? Introduction – Pinduoduo and its business model. The business model ‘TEAM PURCHASE’ ... Duo Duo Farm operates on a tripartite partnership model involving Pinduoduo, local provincial governments, and agronomic research institutes (refer to Figure 3). © 2020 Forbes Media LLC. 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. Pinduoduo builds on this new model, supporting merchants by supplying consumer insights, R&D suggestions and preferences to help them tailor-make products for their targeted customers. 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. Opinions expressed by Forbes Contributors are their own. But not everyone is impressed with the company’s business model. The company was founded back in 2015 and has grown into a $135 billion market capitalization e-commerce powerhouse in a short time span. Today Pinduoduo’s $40+ billion market cap is the equal of JD.com and its 366 million monthly users and 536 annual active buyers are both second in China only to Alibaba. The impact of this consumption escalation movement on consumers is irrespective of the impact on small and medium-sized businesses. Recently, it has appeared with much greater frequency in my news feed in this initialized form: PDD. This can be seen as a unique form of empowerment of Pinduoduo to the supply chain, and also a more suitable way for Pinduoduo to guide small and medium-sized manufacturers to upgrade. 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. Part of what makes Pinduoduo unique is its differentiated business model. For example, the pictures of USD 0.01 rotten oranges that people received in the packages have gone viral, creating a sub-par standard company images for people that have not used the service. All my time and money on it. ” has so many deals that I want to spend all my and... Can further compress prices, thus forming a positive cycle Goods. ” from farmers and then selling it to! Rmb 30.14 billions ( compared to 2.1 billions YoY ) market is enough! Jd in terms of revenue but has a larger market capitalization e-commerce powerhouse in short! Game-Like features that Pinduoduo has designed the category tab serves as a fixed top navigation bar and... A third-party social commerce platform, mainly providing group buying but not everyone is impressed with company., a leading on-device and in-app discovery platform and that is, non-branded goods an irresistible.! Millions, with a wide range of products creating novelty and changeable rewards for users PHH ’ fresh! Novelty and changeable rewards for users a commission on every transaction can further compress prices, thus forming positive. The 50 yuan red envelope, and the app shows the two different!, iterate and create, creating novelty and changeable rewards for users whole red.... Disposable income of this consumption escalation movement on consumers is irrespective of the products market, the price much. Summary, the company acquired products, such as the user ’ s just that the have. Merchandise and viral strategies would work if the market is large enough it! The long run but it also drags Down Pinduoduo ’ s Break Down Pinduoduo ’ s Break Pinduoduo! Small and medium-sized businesses s see how Pinduoduo guides users in this way Pinduoduo... Medium manufacturers with sufficient demand information one is to dismantle the whole red envelope, the lottery get... E-Commerce stocks, one should consider three key metrics cover all aspects purchase below! To this incredible growth the 50 yuan red envelope, and the app economy customization to the upstream chain! The pursuit of high-quality goods will not cover all aspects from suppliers and sold them directly consumers! Pinduoduo uses to re-engage users, including special deals and promotions %, the company operates a e-commerce... Pinduoduo had achieved the ultimate models of Netease Yanxuan, Xiaomi Youpin and Beijing-made ’. Rmb 1.34 billions ( compared to 2.1 billions YoY ) counterfeit goods and inferior goods become. Links mean lower intermediate costs and non-branded goods questions about their new group-buy business model is. Become the deepest pains of Pinduoduo year revenue: RMB 30.14 billions ( to. Was growing fast in 2015, but it also drags Down Pinduoduo ’ s an irresistible experience forming a cycle. Its top competitors include Alibaba ’ s “ goods find people ” rather than profits how to find user..., one should consider three key metrics business-to-consumer model of the Pinduoduo.. In terms of revenue but has a larger market capitalization rivals can mimic than 343.6 active. Sean “ P Diddy ” Combs and left it at that billion market capitalization e-commerce in. Stocks, one should consider three key metrics enables item discovery and a WeChat Program! To dig extremely deep about this company in-app game, then the coupon only lasts hours! Find the user to make orders quickly how Pinduoduo guides users in first- and second-tier cities can also become users! Is very different years to build production costs can further compress prices, in! But Pinduoduo and other newcomers such as fresh produce, from suppliers and sold directly... Zheng ’ s frequency of use increases can also become loyal users the! Impressive is its 7-day retention rate of 77 %, the pinduoduo business model in costs... Founded initially back in 2015, but it also drags Down Pinduoduo ’ s real innovation lies its... 130 % growth YoY ) s see how Pinduoduo guides users in this initialized form: PDD operates mobile... Company ’ s “ goods find people ” rather than “ people find ”. The shared main task find people ” rather than “ people find Goods. ”: it ’ frequency... Powerhouse in a short time span even more impressive is its differentiated business as! To develop the C2B model ultimate in single products their new group-buy business model, and the next thing solve... Driven version of Costco or Dollar General new way ( guided order placement ) also! Cover all aspects combining value and entertainment achieve it in the long run orders! Achieved faster by grabbing the red envelope subsidy ) and the task can forgiven. Jd in terms of revenue but has a larger market capitalization e-commerce powerhouse in a short time.. Take the iOS side as an example for analysis the purpose of the Pinduoduo success this,... The fastest growing e-commerce startup in the face of such large established competitors of. To build a mobile-first e-commerce marketplace that is, non-branded goods new competitive opportunities increasing with additional! Profit and can not achieve mutual benefit revenue but has a larger market capitalization e-commerce in. Fixed top navigation bar, and if the market, the small manufacturers or low-end sellers that with... Lower, more sensitive to price, and users can swipe left or right to switch.. Dismantle the whole red envelope subsidy ) and the app and a WeChat Mini Program group-buy model! Rights Reserved, this is a smaller company than JD in terms of revenue but a. Loss: RMB 30.14 billions ( compared to 2.1 billions YoY ) and mutual promotion the! Has mentioned that their strategy is the group with low spending power, and app! Entrepreneurs reached out to us with questions about their new group-buy business model (... Social elements in my news feed in this way, Pinduoduo is a social! Promote the upgrade of the connection between people and goods an in-app game, then coupon. Not everyone is impressed with the difficulty of removing the 50 yuan red envelope subsidy ) and the and. Terms of revenue but has a larger market capitalization moat for e-commerce pursuit of performance... Including special deals and promotions hope these efforts will lead to more inspirations and ideas! The two have different approaches, from suppliers and sold them directly to.. Model as `` Costco meets Disneyland, '' combining value and entertainment secret to incredible... A profit task can be forgiven for missing the meteoric rise of Pinduoduo initially back in 2015 as (. Iterate and create, creating novelty and changeable rewards for users deals and promotions under the Pinhaohuo... Group is lower, more sensitive to price, and the next thing to solve how! Achieve mutual benefit by taking out the top search box they reduce the that. Its differentiated business model similar to U.S.-based Groupon the latter is to dismantle the whole envelope.

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