Two years after its establishment, the number of products available on its platform exceeds 300,000 and the number of users exceeds 100 million. Pinduoduo is now among the top 3 e-commerce platforms in China ( as of 2018), with monthly gross merchandise of over RMB 3 billion. This company is growing at a high pace and has already taken over the place of the other well-reputed e-retail platform Vipshop.
Overview of the Chinese e-commerce market
As we all know, China’s market is changing fast. Brands need to keep pace and new entrants must be strong enough to face the giants Alibaba and JD in China’s e-commerce sector. These two major e-commerce platforms have a strong influence on the market and current stability. Pinduoduo cut through this situation of duopoly and has even started to share the cake with his peers. How did Pinduoduo reach this position?
The success of Pinduoduo is largely based on the current model used by e-commerce players, also called social e-commerce. This concept has emerged in recent years. As its name suggests, this consists to integrate e-commerce channels into social media platforms and vice versa, create a sort of sharing community into e-commerce platforms.
Read also: China eCommerce Guide & How to sell on Pinduoduo? a step by step guide
Pinduoduo, the winner of the social e-commerce in China
The giants of the industry have obviously jumped into this new business model. Taobao, for example, has a “live streaming” section, where sellers, buyers, and KOLs (the Keys Opinion Leaders or Chinese) can share and interact on a product/topic directly with users connected online. Alibaba and Tencent actively participate in this trend, trying to combine e-commerce with social media platforms daily used by Chinese consumers. We notice that Taobao and Tmall belong to the Alibaba Group and JD.com is supported by Tencent.
However, they are only keeping at a level of “public entertainment” or in other words, they are only enriching the buying experience by providing a social section. However Pinduoduo, the company has dug further and developed a whole system of sharing. The app encourages its users to invite their friends on the platform.
Pinduoduo, as its name means in Chinese, is based on group purchases that bring down prices. “The more you are, the better you’ll save money” is his slogan. For example, the application often displays flash sales, with products that can be obtained almost freely. The purpose of the game is to share the product you want to obtain among your contacts (most of the moment in WeChat and in the discussion groups) in order to reduce the price of the product until the indicated amount. Your friends will enter the application without the need to download it, directly via WeChat App. Then they help to “cut the price” on Pinduoduo’s interface. Each person will help to decrease the price (randomly, with a minimum of 0.01 yuan). More there are participants, and faster the goal will be achieved so you can get your product for free or cheap.
This method allowed to increase the application’s awareness among the Chinese. Moreover, Pinduoduo is actively doing its promotion campaign currently, sponsoring many well-known reality shows followed by a large number of Chinese such as “Happy Camp” or “Where is Daddy going?” “.
E-commerce helps the consumption growth in China
Today, e-commerce is one of the driving sectors in China. More and more Chinese are adopting this buying channel as it is convenient and offers a greater range of available items. Indeed, the delivery time, after-sales service, access to product information … the whole process is continuously optimized to make the customer experience better. While e-commerce was initially focused on consumer products or clothing, now even shopping is done online for a lot of Chinese.
Many merchants and supermarkets collaborate with these platforms to reach more customers and benefit from this new business model. In the following years, the digitalization of society will keep amplifying this trend.
Social media is the new driving force
Chinese are very connected to each other every day. One of the most used applications, also the one Pinduoduo is collaborating with, is WeChat. With more than 1 billion active users now, WeChat is the reference and must-have application in China.
The main barrier for an online buyer is the fact that he can’t see the product and try the product before the purchase. Quality problems are still quite common in China, so although the return/exchange service on e-commerce platforms is now very developed, it remains a waste of time if the product is not good … Thus, the Chinese have developed the habit of watching online reviews, taking the recommendations of others before making their purchases.
Most of the shops on e-commerce platforms (these are merchants who opened their online store on the e-commerce site itself) have their WeChat official or individual account. Others also have their Weibo account. This allows them to better manage after-sales, to better provide their customers with information, and to be able to share new products or new releases of their shop. WeChat discussion groups allow them to create a small community and keep constantly in touch.
In this highly competitive environment, merchants and brands must meet the expectations of their consumers, particularly about the quality of products and services. There are new things that come up every day in China, making customers less loyal. It is necessary to maintain a relationship with consumers and elaborate a strategy to attract flow constantly.
Are you looking to develop a business in China? Contact our agency for more advice. GMA is specialized in digital marketing in China. We have developed many successful projects because we know how to effectively promote your business in China, according to the market, according to Chinese consumers. Our team is familiar with the latest digital tools and market trends, which allow us to provide you with a complete range of services from business consulting to marketing operations.
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