Chinese social e-commerce platform Pinduoduo has established a unique model that enables factories and farmers to sell their products directly to customers and eliminate layers of distributors.
The company successfully integrated social networking with online shopping, a model numerous internet firms have tried and failed.
Pinduoduo owed much of its success to support from Tencent, which owns a 18.5 percent stake in the three-year-old entity.
The startup started with a public account on Tencent’s WeChat, without even a website or mobile app.
Pinduoduo sell products at much wider discount provided certain volume is reached.
This is how it works: Users share Pinduoduo’s offering on Tencent’s social network platform. By inviting their contacts to form a shopping team, they can often drive down the prices to a much lower level.
That has provided great incentive for shoppers to invite their friends and families to join group purchases, and helped transform the online shopping process to a social networking activity.
Friends and relatives invited to join the purchases would see participation in this kind of team purchases as part of connecting and bonding with each other.
The model has turned out to be a great success. Pinduoduo has accumulated nearly 300 million active users since its inception less than three years ago.
Certainly, Tencent is happy. When Pinduoduo wins more users, the WeChat platform would also become more ‘sticky’.
Most customers of Pinduoduo would pay with WeChat Pay, which would help Tencent’s mobile payments business.
Meanwhile, Pinduoduo is also seen as fighting a proxy war for Tencent against Alibaba.
Tencent has always been trying to tap into e-commerce area, while Alibaba, for its own part, is looking for ways to shake Tencent’s strong hold in the social networking world.
Pinduoduo may not be able to take the number one spot from Alibaba, but at least it would give the latter enough headache.
This article appeared in the Hong Kong Economic Journal on Aug 1
Translation by Julie Zhu
[Chinese version 中文版]
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