This was Pinduoduo’s first ever annual operating profit since becoming a public company. Similar to most other early-stage e-commerce stocks, Pinduoduo was unprofitable for around 5 years after launching. The company’s first ever quarterly net profit was recorded in the second quarter of 2021. https://www.1investing.in/ Buyers can access the platform and make group purchases by visiting Pinduoduo directly or via popular social networks such as QQ and Weixin. The total gross merchandise volume (GMV) on the Pinduoduo platform has increased from US$72.75 billion in 2018 to $383 billion in the 2021 calendar year.
● Develop a Localized Branding Strategy
In the long run, “Ten billion subsidies” is a quick way to attract consumers in the early stage of the platform, but not a sustainable business model. After Pinduoduo users become scale, the scope and role of subsidies will be reduced accordingly. Despite the subsidies, some consumers remain loyal to specific brands, not channels like Pinduoduo. Last month, Pinduoduo reported that second-quarter revenue had more than doubled from a year earlier.
Transaction Services
This function also helped Pinduoduo to displace Taobao from the No. 1 position of e-commerce apps in just two years. Its mobile platform provides buyers with a wide selection of merchandise as well as an interactive shopping experience, while enabling sellers to seamlessly connect with customers. Pinduoduo’s growth has been underpinned by the community group buying model which has allowed the company to expand its buyer base at a fast clip and establish strong brand recognition. Pinduoduo makes money from online marketing services, transaction services, as well as merchandise sales. The success of Pinduoduo has relied on its unique business model, a combination of group buying and social shopping.
What is community group buying?
Turning to what we view as a fairer benchmark of company performance, operating income trends differ drastically across the three competitors. Alibaba is the only company among the three to have significant and positive operating income over the past four years, while JD’s operating income has been gradually increasing and turned positive in 2019. In contrast, Pinduoduo has been operating at a loss since its founding, and there are no indications yet as to when the company will finally turn a profit.
These online personalities are often trusted by a large follower base and hold power over their purchasing decisions. In fact, according to statistical data in 2019, approximately 600,000 merchants shipped fresh produce around China. Want to have a first free consultation session about e-commerce and digital marketing in China? Pinduoduo is literally recognized as a consumer-to-manufacturer (C2M) model, consumers create value for manufacturers and provide merchants ideas for the production according to the consumer demands. Besides, elderly retirees’ community in China has showed especially loyal to Pinduoduo. They may not have a lot of money to spend, but they want to take part in the national pastime and, on the way, offer their family members discounts as a way to combat loneliness.
Why Pinduoduo succeeded and what problems are stopping its growth?
- Pinduoduo removes the middle-man from the supply chain and provides an opportunity for farmers to interact directly with consumers, thus helping them get a better price for their produce.
- Since Pinduoduo represents a unique target market of mostly low-income households with lower levels of education, there is still a huge growth potential for the platform to gain even more market share.
- Pinduoduo is even getting its users, tailor-made products by partnering with the manufacturers.
- Pinduoduo, which can be roughly translated to “Together, More Savings, More Fun.”, is an online marketplace that promotes group buying.
- The site arose from my fascination with how modern-day businesses utilize technology and product-led thinking to become dominant players in their industry.
When it was first launched in China, Pinduoduo users were predominantly female. However, over the years, the purchases from the local male demographic have increased. Moreover, this direct-to-consumer model indicates to cut out the middlemen and further deliver price savings to the customer, which in turn generates more demand and economies of scale. The in-app game is aiming to mimic a real shopping experience for the users in order to maintain as longer as the user retention.
But neither is Pinduoduo a silver bullet for sellers, as some find it difficult to sell higher-quality items on the platform, or make enough sales margin to earn a profit. Many sellers now hold the philosophy that the only sustainable strategy is to sell across multiple platforms and thus maximise their customer base. Pinduoduo has leveraged its platform and developed the Internet+ Agriculture initiative to facilitate direct sales between small-scale farmers and consumers. The platform makes recommendations to consumers based on their shopping preferences due to which it is able to aggregate demand and generate large volumes of orders for farmer merchants. This reduces the farmer’s dependence on large distributors which reduces the overall cost and improves the supply chain. The most popular sales on Pinduoduo are always those which meet people’s daily needs with lower price.
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E.g., a young shopper might rely heavily on social media for decision making while the elder ones might still look for a peer-to-peer influence. Consumers can share product details with family and friends definition of barter system to form a shopping team and enjoy a more attractive price option. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
After downloading and installing, users must provide details manually or choose other login methods. They can connect the app to their WeChat profile or give a mobile number for registration. Although Pinduoduo recently launched a website for its e-commerce system, the fastest way to access it is through downloading its app. Because of recent issues about security, you can’t download it from Apple’s App Store or Google Play Store. The Daily Check-in mechanism is to encourage users open the apps everyday with the redeemable points reward which can be deducted in their item purchasing. HealthEquity said the March data breach included personal information and protected health data on millions of people.
Pinduoduo is truly disrupting the category’s ways of functioning with their robust ideology and promising working and business model. In addition to empowering producers by connecting them to consumers, the supply chain is built in direct relationship with the actual needs of the market, making for a sustainable business model. Integrating social media as the backbone of one’s shopping experience instead of treating it as a mere touchpoint is what helps Pinduoduo stand out and deliver top-notch experiences. Social commerce simply means leveraging the power of social media networks in eCommerce transactions. From woven baskets to virtual shopping carts, from open markets to tapping on the screen, from bargaining for bulk purchases to fetching for discount codes, the market has evolved, and so has the consumer’s path towards making a purchase. While modes of shopping might have evolved, cognitive behavior seems to be looking for familiarity in terms of experience.
