Pinduoduo have managed to get more than 5 percent of the vast e-commerce market in China in just three years by enabling steep discounts to users in lower-tier cities. Their business model involves provision of discounts of up to 90 percent if a user is able to invite enough friends on WeChat and QQ to buy in bulk and directly from the manufacturer.
Pinduoduo Makes Fortunes through Social
One should bear in mind that it took five years for Taobao to reach 100 billion yuan (some USD 14.4 billion) in gross merchandise value while Pinduoduo have managed to exceed this threshold in just half the time. Another of their competitors, JD.com, needed ten years to exceed this amount.
The truth is that the Shanghai-based Pinduoduo are so successful because of the social aspect of the classic online shopping process.
Consumers are encouraged to actively share product and service offers with their friends on WeChat . The more friends you invite to join, the better deal you get while conversing and sharing with friends and relatives. It is a smart business approach where one gamifies the online shopping process with social e-commerce.
Sure, Alibaba is still the largest e-commerce retailer in China with a market share of around 58 percent. Second placed JD.com has a market share of some 16 percent but Pinduoduo's 5.2-percent market share puts them in a good position to expand further.
China's lower-tier cities, where Pinduoduo is popular, are yet to expand and the market for socail e-commerce is largely underdeveloped as well as undermined by other e-commerce market players. Nonetheless, Pinduoduo is prime example how you can combine social and shopping to create a highly attractive e-commerce solution.
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