Pinduoduo, also known as PDD, founded by the Ex-Googler Colin Huang, is currently the fastest growing app in the history of the Chinese Internet and the leading Chinese App for social e-commerce. Pinduoduo is reported to have raised a US$3 billion investment round led by Tencent Holdings, at a valuation of US$15 billion. A significant point here is the collaboration with Tecent’s WeChat app (The Chinese analogy to WhatsApp), which plays the most significant role in the functionality of the app and the way it works.
The app has a list of techniques to push the users share it with their friends and to keep them actively using it after. Pinduodo allows users to participate in-group buying deals with their friends, mostly via Wechat. Pinduoduo can be described best with the words, viral, quick, addictive, attractive, and convenient. Also, probably the most contemporary version to online shopping, bringing into integration the most powerful tools of nowadays communication- messaging and group chats.
The app, often used through WeChat messaging service, offers merchandise at times 20 percent cheaper than market price by letting consumers buy directly from manufacturers, cutting out middlemen, advertising and acquisition costs. Huang and his developers also used their experience to add gaming elements to the shopping experience, offering coupons and rewards.
At the end of December 2017, PDD had more than 156.5 million users. PDD gives people a different experience than at traditional e-commerce sites like Amazon.com or Alibaba. PDD is like a digital version of shopping at the mall with friends.
The strongest asset of PDD is that it is doing extremely well in small cities. Most of the users are price-sensitive women above 40 years old, living in small cities in China. Which gives us a clear picture – frequent purchases for the whole family.
Pinduoduo has got a few main features:
1. Group Buying. In order to get discounted price, find a friend to join the group buy deal.
2. Free products. If you get enough new users to follow the Pinduoduo Official Account, install the App and sign up via WeChat login.
3. Buy it now coupons. Unlike other coupons in China, PDD offers coupons for two hours only. Which means the user has to take action immediately.
4. “Bargain” with friends. Each time a friend volunteers to help you “bargain”, the price decreases a bit. You can even succeed getting the product free.
5. Get cash rewards for inviting friends.
6. Use of lotteries. Invite friends to join within a specific period of time and win the product for less than 10% of the cost.
7. Automatic payment. PDD uses automatic WeChat payments. After allowing “password-less payments” by default at the end of your first purchase, you will not have to enter your password anymore and you will be able to pay with one-click payments.
Pinduoduo has a strong asset over other online retailers and it is in offering cheap deals. To maximize this, Pinduoduo makes the best out of its own users. You may ask how? Very simple, to get the best bargains, users have to invite more buyers, which helps the company maintain the low prices.
What are the reasons for the fast growth?
The first point to highlight is the “social shopping” that PDD offers. WeChat has a monthly active user base of over 1 billion. It allows purchases as a group through which users can receive a group discount for purchasing as a group. Users get a product link that they can share with their WeChat friends. The will of users to get a good deal, it is what makes them want to share the app, with as many as possible people. In 2016, when people did not think it was impossible to exponentially grow user traffic, Pinduoduo accumulated one hundred million users through the above method.
The second smart move of Colin Huang, the Founder of Pinduoduo is the fact that he knew that he must know his market. To understand Pinduoduo, we must understand the users behind Pinduoduo. Comparing Pinduoduo and JD.com’s user distribution, we see that 65% of Pinduoduo users are from third tier cities or more rural areas, while half of JD.com users come from first plus second tier cities, and half from the rest of China. Pinduoduo has achieved unprecedented growth by targeting the low-income population who are also new internet users with its value game.
Last but not least key move of Huang was giving more profit for the merchants. Pinduoduo attracts merchants by charging zero fees for selling on their platform. Advertising is achieved through users sharing to social media. As the number of Pinduoduo users grows, the app has formed an ecosystem of user-generated product promotion, allowing merchants to reach the 300 million users directly. By this, satisfying the survival needs of the mid-tail merchants. Colin Huang gave the small merchant a dream opportunity to grow big. And stories such as “Girl born after 1980 achieves 5 million yuan in sales after four months on Pinduoduo”, and “Selling 260 million packs of napkins in two years with three cents of profit per pack” began to appear on the news.
Along with that, Huang does not compromise on the quality and makes sure that users know that the rapid rise of PDD is not accidental. After some users being dissatisfied with the poor quality, speed of delivery, inconsistencies between product and photo, and failure to receive refunds after waiting for a long time. To address these problems, a customer protection fund was set up by PDD. It helps consumers deal with after-sales disputes and claims. By this focusing on maintaining returning customers and not one time excitement, that will be the end of the customers’ interaction, with the app.