What took Taobao five years, and JD.com 10 years, Pinduoduo has achieved in only three years.
Founded in 2015, Pinduoduo stated in their IPO prospectus in July that it achieved RMB 141.2 billion gross merchandise volume (GMV) in 2017, surpassing the RMB 100 billion milestone. Chinese e-commerce giants JD.com and Taobao were founded in 2004 and 2003 respectively. That’s when China’s e-commerce market began to grow, and more companies joined the competition.
Now, a decade and a half later, Alibaba, owner of T-mall and Taobao, makes up 58.3% of the e-commerce market in terms of sales volume, JD makes up 16.3%, and the young Pinduoduo somehow successfully grabbed 5.2%, according to WalktheChat’s analysis.
One of the most distinguishable features of Pinduoduo is how deeply the success of the platform is rooted in social networks. Thomas Graziani, co-founder of WalkTheChat, demonstrated the social networking strategy in front of the crowd at TechNode’s “Pinduoduo and E-commerce in China” event in Beijing.
There are two prices for a single product on Pinduoduo; one is the full price and the other is the “Group Buy” price, lower than the full price. If the customer wants to purchase a product at the “Group Buy” price, they can initiate a group buy by sharing the link of the product with their friends on WeChat or join an existing “Group Buy” already in progress.
Usually, WeChat discourages links that would direct users to non-Tencent apps or even disables them, but Pinduoduo isn’t concerned as Tencent has been investing in Pinduoduo since June 2016 and owns 18.5% of the company, according to its prospectus.
There are other promotional campaigns in the app, but all of them include interacting with people’s connections on Tencent-owned WeChat or QQ. Graziani said that when he first subscribed to the Pinduoduo official account, Pinduoduo spammed him with 15 messages within the first 48 hours of registration, and all of the messages were curated for him based on his activities on Pinduoduo.
However, when considering the time devoted to buying the relatively cheap product, the spammy messages may only work for people who are really looking for bargains, said Graziani. One of the reasons that Pinduoduo has such momentum in China is the country’s sizable wealth gap.
“I think the point with China is that part of the country is extremely developed, and there’s also part of the country which is mostly rural, about 50%…so you see a population that really needs these bargains,” he said.
Apart from the spammy promotions, another issue has drawn public attention is the considerable volume of fake products sold on Pinduoduo. Graziani said Pinduoduo is using a very polished answer to this problem: it’s impossible to solve in a short period, but they are resolved to clean fake products throughout the platform, starting with sensitive areas like baby and maternity products.
Pinduoduo released an open letter on August 22 saying it has started a campaign against counterfeits after China’s State Administration of Market Regulation asked the company to resolve the issue. From August 2 to August 9, the platform took down 4.3 million products, shut down 1128 stores, and intercepted 450,000 links of fake products. The company said it would keep fighting against counterfeits, violations of intellectual property, and other illegal activities.