Pinduoduo’s “divine” common-use model, which turned users into salespeople, created the $ 39 billion four-year empire, frightening both Alibaba and JD.

Pinduoduo means “buy more together”, the fledgling brand was officially listed on the stock market in 2018, brought in more than 1.6 billion USD and joined the list of the most successful IPO companies of the year.

Not only that, Pinduoduo also owns an impressive range of indicators when he turns 4 years old:

* 135 million daily users;

* 3.6 million sellers;

* $ 66.2 billion in total transaction value in 2018;

* 11.1 billion orders were generated in 2018;

* US $ 1.8 billion in revenue for the whole exchange, and;

* 652% growth rate in 2018.

“Miraculous” steps

Like leading e-commerce sites Taobao and JD.com, Pinduoduo offers a wide range of consumer goods, from department stores to home appliances. But the difference lies in Pinduoduo’s social networking shopping model, also known as a “generic purchase” feature.

By running a series of shopping programs on the social network WeChat, Pinduoduo not only encourages users to order but also shares with relatives and friends to enjoy preferential prices together. Combined with the “rewards” for successful calling: cash, discount codes, lottery tickets, free products … Pinduoduo quickly turned WeChat users into its own salespeople, and at the same time became a phenomenon in the Chinese market.

Pinduoduo’s secret to persuading users? – “Cheap price”. The discount rate on Pinduoduo products is up to … 90%, including some typical products such as 10 boxes of tissue paper worth VND 44,000 (sold 6.4 million), umbrella for rain cost VND 34,000 (has sold 4.8 million applications).

Pinduoduo’s bulk selling strategy also helps suppliers to be ready to offer better prices, creating a “win-win” situation for the parties involved.

One expert commented: “While the Taobao interface focuses on search and the ability to display as many products as possible, Pinduoduo arranges his products as a news site, customers always have enough time to research each program. ”

Pinduoduo interface (left) and Taobao (right)

Pinduoduo’s model also allows manufacturers to supply directly to end customers, eliminating a range of distribution intermediaries at a high cost. This model has been used extremely successfully with fresh products and once again achieved great success at the hands of Pinduoduo.

In addition, small and medium brands are preferred to avoid affecting the “luxury brands”. Advertising costs are also minimized when users constantly share about deals.

Because successful sharing will receive attractive prizes, Pinduoduo users not only “share harrowing” but also actively send products to the most potential subjects, improving the efficiency of Pinduoduo’s programs.

User featured

Chuchujie said, “Taobao e-commerce currently has just over 500 million users, but the WeChat social network has 1 billion users.

Not only that, Taobao and JD.com, though “occupying” the Chinese market, have never reached users in small cities and elderly customers.

This group of customers is coming to know the Internet with WeChat as the most important source of information, making them a potential segment for Pinduoduo. ”

In addition, Pinduoduo also focuses on the female segment because they are often the ones who make shopping decisions for the family. After a while, Pinduoduo had 70% of its female customers.

The remarkable achievements

Founded in September 2015, Pinduoduo is the fourth startup project of Colin Huang, a former Google employee with experience in search and e-commerce.

Combined with his passion for video games, Huang found the “secret” of success for both Alibaba and Tencent to apply to Pinduoduo.

After only 2 years of establishment, the total transaction value of Pinduoduo has reached the landmark of 14.7 billion USD. To achieve this, the “giants” have spent a considerable amount of time, 5 years with Taobao and 10 years with JD.com.

Pinduoduo’s calling speed is equally impressive, after being successfully funded by IDG and Lightspeed China in the A series, just 4 months later, the fledgling brand received more than $ 110 million from major partners like Tencent. , Baoyan Partners, New Horizon Capital …

By April 2018, Pinduoduo raised more than US $ 3 billion, bringing the total value of the company to US $ 15 billion before reaching the 3-year-old mark. Because of Pinduoduo’s success associated with the WeChat ecosystem, Tencent has continuously poured capital into holding more than 18% of the shares.

After four rounds of funding, Pinduoduo has now become one of the largest e-commerce startups in the world, consistently ranking among the top 5 of China’s largest e-commerce companies.

The model is not perfect

But the “miraculous” journey of Pinduoduo has faced many criticisms, especially the problems surrounding fake goods – poor quality goods, delivery time, loss rate, or unsatisfactory care. unique.

In some cases, the advertised price is also higher than the actual order value due to the number of unsecured buyers, making many customers angry and demanding to cancel the transaction.

Up to now, Pinduoduo has received 18% customer complaints and 1% out of 5 stars are satisfied with their customer satisfaction ratings, according to a survey by China E-commerce Research Center. Quoc. Most users are dissatisfied with the product quality, delivery time and “false advertising” programs.

A series of P&G Pamper diapers

After the successful IPO, Pinduoduo was immediately sued in US court for copyright infringing products.

In 2017 alone, this e-commerce site had to delete more than 10.7 million fake products and close more than 40 million accounts showing signs of fraud. Pinduoduo also had to set aside more than $ 22 million to set up a complaint settlement fund.

But what worries many experts is that the Pinduoduo model is not profitable yet, despite a series of steps to cut operating and purchasing costs. In two consecutive years, 2016 and 2017, Pinduoduo made a loss of USD 43 million, USD 77 million and showed no sign of stopping.

An expert from 86 Research said: “Pinduoduo could not escape the image of” cheap goods “imprinted on the minds of users. It could become a” double-edged sword “for the brand. this in the future. ”