What is Pinduoduo?
E-commerce in China is a phenomenon in full development, which becomes more relevant every day in economic terms. Among the possible Apps to choose from, Pinduoduo( 拼多多) has distinguished itself in recent years. An application that, thanks to its advantageous offers, is especially loved in third and fourth-tier cities.
Pinduoduo is an e-commerce platform allowing users to participate in group buying deals. In fact, a large part of Pinduoduo’s appeal is the group buying function where the more people who buy a product lead to a lower price. Pinduoduo translates into “together, more savings, more fun” alluding to the platform’s unique selling point: group shopping for discounted prices.
Social eCommerce and Affiliate Marketing
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 with ideas for new product developments. Pinduoduo builds on this new model, supporting merchants by providing insights, suggestions, and research and development preferences to help them customize products for their target customers.
Pinduoduo growth in recent years
Pinduoduo has seen explosive growth since its launch in 2015, becoming the third-largest e-commerce player behind Alibaba and JD.com in China. Although Taobao and JD.com are still the market leaders, Pinduoduo is the app that benefits from the best loyalty rate.
The explosive growth of Pinduoduo is essentially due to two main factors:
- The first concerns the number of funds received from hi-tech platforms such as Tencent and IDG, which allocated an investment of $ 110 million in 2016.
- The second factor is the ability of the app to penetrate the markets of lower-tier cities.
Thanks to this rapid growth, Colin Huang has become one of China’s youngest billionaires and the 10th richest person in the country with $ 13.5 billion in assets.
In June 2018, less than three years after the launch, Pinduoduo’s monthly active users reached 195 million people, representing 31% of the monthly active users of the total Alibaba ecosystem.
In March, to improve its logistical capability, Pinduoduo made a private placement of newly issued Class A ordinary shares for $ 1.1 billion. The company’s funding will help its “strategic flexibility for expansion to offer our users more interactive experiences and good value for money”.
Pinduoduo announced that it would invest in convertible bonds issued by GOME Retail listed in Hong Kong. The investment will see GOME’s product range, logistics, and after-sales support integrated with PDD.
Today, 343 million shoppers use Pinduoduo for their online purchases. In addition, many international brands such as Huawei and Apple have launched their single-brand stores on the platform, further consolidating the company’s credibility.
Who are Pinduoduo users?
Pinduoduo boasts a base of 300 million users. 65% come from third-tier cities and beyond, only 7.6% come from first-tier cities.
Most of the users of Pinduoduo are female, over the age of 40, and live in third and fourth-tier cities. It is a price-sensitive target, which makes frequent purchases and often for the whole family. Users who do not have much experience with e-commerce, but who once known the medium could bring high long-term profits.
Unlike other e-commerce apps such as JD.com or Taobao, it has decided to focus on small towns. Its strength is also to be found in the incredibly low prices. This policy has made it possible to attract low-income families to the App.
Pinduduo new cross-border import business
Pinduoduo has been intensifying its foray into the cross-border e-commerce industry. The company first launched the business in early 2019, announcing that it planned to work with large suppliers such as Nestle, Unilever, Swisse, Biostime, Gerber.
Pinduoduo historically has focused on customers in lower-tier cities, but that’s starting to change as growth in those areas slows down. Therefore its new cross-border e-commerce business is designed to target more premium customers in China’s Tier 1 and 2 cities, who have more spending power and are likely to be the beneficiary of Chinese economic growth.
Pinduoduo’s channel gives merchants more options than Alibaba and JD.com, and since it’s a new entrant, commercial terms could be better for brands and retailers who elect to sell on the platform.
What led pinduoduo to succeed?
The app works slightly differently from other platforms, allowing users to participate in group purchase offers.
More than just a digital shopping platform, it is actually a social e-commerce app, which uses a “team purchase” model and uses social sharing on Chinese social networks, in particular WeChat.
This is a model that applies perfectly to a cashless society like China, where around 583 million people used mobile payments last year.
Using the app is simple. The consumer can buy a full-price item or get a discount if he invites other people to participate in the purchase. After paying, there are many ways to invite friends, not only through WeChat, but also with QQ, QR code, simple image, or with a voice note. Hence, the discounted order is not shipped until the required number of people purchase it.
The explosive growth of Pinduoduo in recent years is due to the considerable funding received, such as that of Tencent and IDG in 2016 of the value of 110 million dollars, to its ability to take hold in the smaller cities, but above all to its marketing strategy that has brought the app to grow exponentially in no time.
Pinduoduo’s strategy for success is based on two main concepts: addiction and virality. All the marketing strategies adopted push users to share the App with friends, subsequently obliging them to always remain active.
A truly social and shareable eCommerce experience through “Group buy” discounts
When a user selects an item on Pinduoduo, they can choose to buy it at an official price or participate in group buying to access the discounted price.
In order to access the discounted price, you must find at least one friend to join in the purchase. This encourages buyers to share links to the item they are buying with friends and family or over social media.
The idea is to involve as many users as possible in a purchase: the greater the number of people involved, the lower the price.
So if by hypothesis a user had a very large number of friends willing to help him, he could almost have a free product. This may seem counterproductive, but in reality, it is an excellent strategy for expanding the public and making them aware of the brand.
Engagement through entertainment
- Free products
For each user who thanks to another follows the official account, installs the App, or registers via WeChat, the former can receive a long series of free products.
- Very short term discount coupons
As everyone in China, Pinduoduo also offers many discount coupons. Unlike other platforms, Pinduoduo coupons have a very short duration, typically 2 hours. This strategy is very clever because it pushes you to shop instinctively, not to linger, and to always be active in the App. So to stay updated on all offers.
- The hongbao ranking
Like many platforms, Pinduoduo also offers cash prizes to those who invite friends to sign up for the App. Unlike the others, Pinduoduo has created a public ranking of the most awarded users, in which you can see the amount of their prize pool.
As in normal sweepstakes, there is a product up for grabs, and to win it you must register. The operation is very simple: to participate in the lottery you pay a very low registration fee (0.01 RMB). You must then invite friends to participate and if there are enough members within the time limit the winner is drawn.
If the minimum entry fee is not reached, the lottery is canceled. The registration fee is returned to all those who do not win and a coupon is given to them to be used on Pinduoduo. Sweepstakes help many brands to advertise themselves without high marketing investments.
Benefits of customer service messages
Official WeChat accounts have a maximum limit of 4 broadcast messages per month, insufficient for aggressive and continuous communication such as that of Pinduoduo. That’s why the e-commerce app has decided to take advantage of customer service messages.
Used primarily to expel requests for assistance, but also to recommend new products and promotions. This is possible thanks to the monitoring of the order history and the fact that the customer service messages are fully customizable.
The main audience of Pinduoduo are adults not used to online shopping. To solve this problem for users, the App takes advantage of the ease of WeChat Pay payment. In practice, the first purchase requires a password, which for subsequent times enables automatic payment without confirmation. In this way the expenses are automatically charged to the WeChat wallet.
A large part of Pinduoduo’s growth has been driven by the fact that it can be accessed on Tencent-owned messaging service WeChat. WeChat is a key part of daily life in China and allows people to make payments within the app. So a buyer can access Pinduoduo via WeChat and make payments there.
Pinduoduo live streaming
Pinduoduo has launched a live streaming tool called Duoduo Livestreaming for “partners” who can boost the sales of goods on its platform.
Duoduo Livestreaming has already been integrated into the Pinduoduo app, allowing all its 536.3 million active users to be live streaming partners to promote millions of products listed on its platform.
To be a live streamer, a Pinduoduo user must undergo a face scan for identity verification, upload copies of the identity card, and wait two days for final approval from Pinduoduo.
Those approved are allowed to promote goods during their live streaming sessions and earn commissions ranging from 1% to 80% of the value of the goods.
Duoduo Livestreaming is now Pinduoduo’s answer on how to integrate live streaming into its business after Alibaba’s Taobao has already shown that live streaming is an effective marketing tool.
The importance of live streaming for Brands
Live streaming e-commerce has grown rapidly in China. The industry surpassed 433 billion yuan (U $ 61 billion) in transactions in 2019, according to an iiMedia report. Now, live streaming is getting a boost from the coronavirus pandemic. The same report predicts that the industry will reach 916 billion yuan (the US $ 129 billion) in 2020.
According to a survey from the China Consumer Association, people like this method of shopping because it’s more social and interactive. They can also get a better understanding of a product.
As a result, China’s biggest eCommerce and live streaming platforms have been pouring in to take advantage of the trend. And this year, they’ve been seeing some big results.
Therefore the fusion of eCommerce and live streaming, known as ‘live commerce’, is a huge and growing trend in Chinese e-commerce.
It focuses on influencers, known in China as key opinion leaders (KOLs), who broadcast live to millions of viewers and show products, trying and describing them.
Special discounts are often offered as part of the live stream and live trade broadcasts are known to move record quantities of product in just a few hours.
Live streaming offers a great opportunity to you to gain visibility, keep in touch with your customers, increase your followers, and thus increase sales.
Pinduoduo provides great opportunity for brands
This social e-commerce app provides all the necessary features and added extra functions that attract consumers to shop. It appeals to anyone who is price-sensitive and time-conscious. The app reflects an in-person shopping experience that contributes to the overall value of the platform.
PDD frequently executes targeted initiatives (such as coupons, free gifts, and lottery events) to boost user engagement. Furthermore, brands can also tap into China’s booming mobile gaming market, and engage with consumers via Pinduoduo’s games.
Group-buys provide a direct financial incentive for users to share listings with friends and family. This transforms online shopping into a fun, socially engaging, and rewarding experience. This provides a world of opportunity for brands to connect with customers in truly innovative and engaging ways.
In order to promote your brand and if you have any questions related to digital marketing on Pinduoduo, contact GMA now!