Are you wondering how Pinduoduo works? It’s no secret that ecommerce is the future, and it’s already here. The infinite advantages for customers and businesses make online retail and internet shopping fast, easy, and fun. Discover Pinduoduo!
The latest studies project the worldwide retail ecommerce sales to skyrocket to a new high by 2022. Ecommerce businesses anticipate a 265% growth rate, from 1.3 trillion USD in 2014 to 4.9 trillion USD in 2021.
It may not surprise you to read that by the end of 2019, the Chinese market will have 55.8% of all online retail sales globally.
Are you wondering, if Amazon is as relevant a player in China as it is in the rest of the world? And if there are important Chinese ecommerce platforms? Find out in this week’s China Gravy blog article!
The Ecommerce Landscape in China
To begin with, the five largest ecommerce companies in the world are Amazon, Jingdong (JD), Alibaba, eBay, and Rakuten.
Secondly, buying online is the easiest and cheapest way to get anything in China. But you may be surprised to read that Amazon.cn is not the market leader in this country. In fact, Amazon shut down its Chinese website – the domestic ecommerce business – in 2019.
Today, the two most popular ecommerce sites in China now are JD (Jingdong) and Taobao. Well, they used to be. While JD.com and Alibaba’s Taobao were battling for Chinese ecommerce space, a third platform, Pinduoduo, emerged in 2015.
Now, the startup business Pinduoduo managed to shake up the duopoly significantly. In 2018, Pinduoduo introduced livestreaming.
Today, the daily order volume of Pinduoduo ranks second in mainland China after Taobao. Pinduoduo is the fastest growing app in the history of the Chinese internet to date, with Tik Tok ranking second.
So, with this in mind, let’s look at how Pinduoduo works.
What is Pinduoduo?
拼多多 or Pinduoduo in English is a Chinese ecommerce platform. It was created by Colin Huang as Shanghai Dream Information Technology Co., Ltd. in 2015. Users can download the Pinduoduo app on their smartphone or access the platform via its website. Pinduoduo can be translated to 拼 Piece Together 多 A lot 多 A lot.
Tencent, the tech giant behind We Chat, and other investors funded more than 110 million USD in 2016. In 2018, Pinduoduo went public on the NASDAQ stock market in the United States, raising 1.6 billion USD through a US IPO (Initial Public Offering). This made it one of the largest IPOs in 2018.
The Pinduodo IPO price was 19 USD per share. Since then, the Pinduoduo stock price went down to 17 USD and up to 30 USD, averaging at 19 USD by mid-2019. Continue reading about the Chinese investment landscape and Chinese stocks in this China Gravy article.
By 2020, Pinduoduo’s rapid growth led to more than 300 million active users worldwide. And the total sales value exceeded 14 billion USD. However, financially, the company is still in the red with 1.5 billion USD net loss in 2018. This is mainly attributed to investments in branding and ads.
How Pinduoduo Works: App Overview
The ecommerce platform offers a wide range of products from daily groceries to home appliances. Highly attractive prices with discounts up to 90% are the trademark of Pinduoduo. The platform focus on fewer bestsellers that attract more active buyers. How Pinduoduo works can impact the success of your business!
Compared to other ecommerce players, the Pinduoduo business model offers one attractive additional and free service called “team purchase”. Users can share Pinduoduo’s product information on social networking platforms like WeChat China and QQ messenger apps. Both apps belong to Tencent.
The users can then invite their contacts to form a shopping team to get a group buying deal and a lower price for their purchase. This service made Pinduoduo a viral sensation in China.
Taobao has since answered Pinduoduo’s team purchase service with the launch of a dedicated discount app called Tejia in 2018.
Pinduoduo uses WeChat’s online payment system in the form of “automatic WeChat payments”. Once you complete your purchase, it is automatically billed to your WeChat Pay account without the need for further validation.
The first time you pay for something on Pinduoduo, it enables “password-less payments” by default. After your first transaction, you won’t have to enter your password anymore and will be able to use “one-click payments”.
How Pinduoduo Works compared to WeChat and QQ
First, with over 1 billion users on WeChat and over 800 million on QQ, these messenger apps are the driving power behind Pinduoduo’s success.
The typical Pinduoduo users are price-sensitive women residing in low-tier cities. In addition, the platform also serves a target group, which only recently entered the digital world, namely senior citizens.
WeChat is the biggest social media platform in China with over 1 billion monthly users. Even though the majority of its users are based in China, WeChat is available worldwide. That’s why advertising on this popular Chinese messenger app offers access to these users.
For example, stickers are a popular and engaging marketing and income generation tool. And ads on the messenger app enable brands to grow their WeChat Business Accounts. Besides, they drive traffic to their website and generate downloads for their own apps.
Product Sourcing on Pinduoduo
Besides popular Chinese sourcing platforms 1688 and Baidu B2B, Pinduoduo can also be used for sourcing products in China, which is particularly interesting for agricultural products.
On the Pinduoduo app, every page is dynamically personalized. This resembles a virtual bazaar where users can scroll and explore different products. A fun interactive group buying experience is at the center of this model.
More users lead to higher purchase volumes, which in turn lowers the production and supply chain costs. This benefits the group of customers who get more value for their money.
At the same time, companies and sourcing agents can also utilize the power of this business model.
To get started
- download the Pinduoduo app (拼多多App下载)
- login with your existing WeChat account or create a Pinduoduo account
- browse the Pinduoduo app and check out the official accounts/stores; as all businesses have to upload their business license, you can check the company behind the products in your due diligence process; keep in mind that all information is in Chinese language
- contact the factory either through Pinduoduo or directly (after you have obtained the contact details on WeChat or email)
First, you can search for the desired product group on Pinduoduo, e.g. corn.
Secondly, you can select all products that you searched for in the first step of a specific company, e.g. corn.
Finally, you can select the company that you are interested in to see their business license (registration number, Chinese company name, type of company, registered address, representative, if the license is limited, business scope).
Pinduoduo’s C2B (consumer to business) model allows it to ship directly from the manufacturers. This allows to sell products directly. In fact, it eliminates layers of distributors and reduces the price for buyers while raising the profit of manufacturers.
At the same time, disadvantages related to product quality, counterfeit, and slow delivery are a challenge for this platform. As stated in the 2017 National User Satisfaction Study of Major Online Commerce Platforms, the number of complaints on Pinduoduo is 17.87%, and user satisfaction is 1 star.
This demonstrates that a high quality of your product and service, as well as a reliable and fast performance, is crucial to customer satisfaction. To sum it up, this encourages customer and brand loyalty as well as repurchases and improves the way how Pinduoduo works.
How Can You Benefit from the Ecommerce Hype?
Being at the pulse of time and having a state-of-the-art online presence will allow you to join the digital playground in China and around the world.
- Convince with a professional website
- Apply a smart online marketing strategy
- Speak your customers’ language
- Use a WeChat business account
1. Shine with a Professional Website
Show the authenticity of your business with a state-of-the-art responsive website. It allows your audience to find your company on search engines.
A professionally developed website with a fresh design makes it easy for you to tackle new digital avenues. China Gravy is happy to assist you with this task as well as set up your own online shop with WooCommerce.
2. Apply an Integrated Online Strategy
There are two components to digital marketing.
Social Media Marketing
Almost 3.5 billion people worldwide use social media websites. These platforms help you to connect with your specific audience.
It increases awareness of your brand and boosts your leads and sales. With less cost per person reached, popular social media is a low-cost and smart marketing tool.
Get your business noticed online with intelligent search engine optimization strategies. Users trust search engines.
And having a presence in the top positions will increase your website’s relevance and visits. Accurately target and engage your audience, and lower your marketing cost at the same time, whether on Google or China’s own search engine Baidu.
3. Go International
With society connected through the world wide web, customers are no longer bound to local markets. As a business owner, this provides an exciting chance to explore new markets and audiences worldwide.
A professional multilingual digital presence combined with the right digital marketing and branding strategy is the best way to unlock this global potential. China Gravy offers translation and proofreading services in three languages – English, Chinese (Simplified), and German.
4. Create a WeChat Business Account
Access thousands of millions of potential customers by setting up a WeChat Business Account for your company and promoting your brand through influencer marketing. As this can be a challenging task for a foreign business, digitalization and Chinese marketing experts like China Gravy can help you with this.
Unlock the potential of the multi-trillion USD ecommerce world. Not sure where to start? Or do you simply want to focus on other aspects of your business?
A digital marketing agency like China Gravy can help your company to implement an integrated digital marketing strategy professionally, quickly, and at an affordable price.
How Pinduoduo Works – The Takeaway
Now you know everything about how Pinduoduo works. Are you wondering how to lift the potential of the Chinese ecommerce market and social media?
China Gravy is the digital marketing agency of your choice. We offer digital solutions to skyrocket your business – from web development to digital marketing. Reach Chinese customers and an international audience with our professional services.
Are you interested in growing your business online or do you have any questions? Test our online marketing agency services with our FREE consultation! Contact us today! China Gravy is Your Digital Link to China and the World.