Everything retailers need to know about Pinduoduo, China’s new e-commerce leader

Counting an enormous 135 million daily active users (DAUs) and a market value of $29.6 billion, Pinduoduo has emerged as the second most popular e-commerce site in just 4 years since it was founded in 2015. Reporting exponential growth, the platform’s annual active buyers already significantly surpass those shopping on traditional e-commerce giants such as JD and Alibaba, generating 536.3 million in Q3 2019, a 39% increase year-on-year. The annual spend per buyer increased by 75% to $219.2/year.

Pinduoduo offers products such as clothing, fresh produce, household items and electronics. When looking at a product, users are presented with two price options, a standard price to buy directly and a discounted price. Discounted prices are unlocked when users form 'teams' of at least two buyers. Pinduoduo (拼多多) translates to "together, more savings, more fun" alluding to the platform’s unique selling point—group shopping for discounted prices. Users persuade their friends to join their purchase via WeChat, QQ and QR code scanning. This model simultaneously reduces the price for consumers while creating large orders, stronger economies of scale and raising profit for retailers. Users become unofficial recruiters for the platform, keeping Pinduoduo’s cost per acquisition lower than competitors. Recognized as a consumer-to-manufacturer (C2M) model, consumers create value for manufacturers and provide merchants ideas for new product developments. 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.

Pinduoduo’s platform is designed to look like a virtual bazaar. Unlike the conventional search model used by global peers, Pinduoduo engages its users with scrollable personalized recommendations (based on an algorithm of their past viewing behaviour). There is no obvious search bar in the app and Pinduoduo users don’t use the platform to search for an item that they already have in mind, they typically browse for fun. This model replicates the fun of discovery typically associated with offline shopping. The integration of social is key during the Pinduoduo online shopping process and the bigger the shopping ‘team’, the lower the price of purchase. This interactive function hooks consumers who are motivated by deals, making the platform addictive while gamifying e-commerce. Pinduoduo also offers incentives such as free merchandise, cash rewards for daily users and free delivery, keeping users hooked. If users aren’t able to motivate friends, they can join other online users to form a team and buy a product — there are always deals to be had on Pinduoduo and this makes the platform extremely sticky.

The social sharing model means users share product information with friends that typically have similar income and consumption preferences. Pinduoduo’s discounts can reach up to 90%; such heavily discounted prices cater to China’s rural and lower-tier cities which have limited disposable income and less brand conscious. This demographic makes up 73% of China’s population. Pinduoduo taps into a new market that is steadily becoming familiar with e-commerce: rural Chinese customers spent RMB1.37 trillion on e-commerce in 2018 — a 30% year-on-year increase. Pinduoduo is particularly popular with women who make up 70% of the user base. They are considered to be responsible for family purchases and more price-sensitive.   Want to know more about the Chinese e-commerce market? Check out our guide:

Images: Pinduoduo