In recent years a new leading player has entered the already crowded Chinese e-commerce landscape: Pinduoduo (拼多多). The platform exists as a smartphone app and is a full-fledged marketplace, on a par with the better-known Taobao, Tmall and JD. Pinduoduo is currently available only in Chinese and therefore mainly targets the domestic market of the PRC.
Founded in 2014 by Colin Huang (a former Google employee), over the last few years Pinduoduo has raised, through three funding rounds, $3.1 billion from the largest Chinese technology groups and funds, including: Tencent, Banyan Capital, New Horizon Capital and Cathay Innovation.
In recent years the marketplace has managed to attract more than 300 million users to its platform, threatening the market leadership in China held by Taobao (with over 500 million users). This has been possible thanks to a few distinctive features that have increased its visibility and appeal to consumers: integration with the WeChat payment system (allowing users to make “one-click” purchases) and an innovative business model based on "group buying".
Group buying and other ways to save through Pinduoduo
The principle on which the platform is based is sharing. When a user finds an item to buy, they can involve friends or other users to form a buying group and obtain a substantial discount on the price.
Other purchasing methods that have proved very effective in attracting users to the platform include discount coupons (usually expiring after 2 hours) and free gifts (in some cases offered by brands as a marketing strategy).
Other significant figures
Pinduoduo's latest market valuation stands at $15 billion. Its growth rate is remarkable considering that only a year ago the marketplace was worth a tenth of that.
Monthly sales made through Pinduoduo amount to $6 billion, and 114 million users access the platform at least once a month.
Most of the platform's users live in third- and fourth-tier Chinese cities and are the consumers who are gradually being left out by the traditional players of Chinese e-commerce. Alibaba's recent strategy has in fact been to focus on big luxury brands, seeking to attract high-income consumers. This has left the field open to new business models and new players that cater to the needs of the lower-income segments of the population, which are increasingly digitalized.
For this reason, Pinduoduo's growth does not appear to have reached its limit, and over the coming years the platform may well capture an even larger share of the 772 million active users in the People's Republic of China.