So it’s not completely opaque, but yes, it’s less hands on when it comes to investors than, for example, some of my other companies that guide quarterly revenues and earnings and so on. When we do our work on PDD and Temu the job is essentially an exercise of triangulation between different data points. We talk to a lot of the logistical providers that help both PDD and Temu in the international market. There’s no denying that Pinduoduo and Temu are selling huge amounts of merchandise to huge numbers of people around the world.
So there’s a lot of mystery around the company with a great deal of secretiveness around how it runs. When you start looking at Pinduoduo you very quickly realise this is not a normal company. Chun also noted that Alibaba and JD are building up relationships with factories for the C2M model https://www.forexbox.info/ of business. And with the Alibaba’s strong cloud computing business, it “may have more to offer to the factories” in terms of digital capabilities, Chun said. “We’re here to serve everyone, and wanting value for your money isn’t dictated by where you live,” a PDD spokesperson told CNBC.
ETOC also provide free educational content to help brands understand more about China e-commerce and digital marketing. Duo Duo Orchard was the first popular game on the platform, users can grow virtual fruit trees, collecting water droplets to water their tree by shopping, browsing, and interacting with other users on the platform. The Mini game is an in-app games to allow users enjoy playing the online game beyond purchasing.
- This retention comes from the continuous re-engagement at the prospect of winning deep discounts.
- There is an option to just buy the item directly but the price of that product is higher than that of buying it in a group.
- But now Alibaba and JD have put a larger focus on gaining ground in these lower tier cities and have released products to compete with PDD.
- Driven by sharing on WeChat, Pinduoduo’s average customer acquisition cost is only $2, compared to $39 and $41 for primary rivals JD.com and Taobao.
The question is whether they’re going to be able to recreate this with Temu abroad. There have been a slew of companies that have tried this cross-border e-commerce model, shipping packages https://www.currency-trading.org/ directly to US and European consumers. And no one has yet been able to do it and make a lot of money from doing it, although Shein is beginning to show that the model could have potential.
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The problem is, I can’t see how, given the lack of information about the company, anyone on the outside can really claim to properly understand it. Comparatively, the forward price to sales multiple for peer e-commerce companies such as Etsy and Hello Fresh stand at 30x and 29x respectively. Analysts tracking Pinduoduo have an average target price of $70.55, which is around 10% above its current trading price. In the 2021 calendar year, Pinduoduo’s reported an operating profit of just over US$1.2 billion. This was Pinduoduo’s first ever annual operating profit since becoming a public company.
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. 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. Member Card are different kinds of the rewarding, aiming to help users save money via vouchers or special discount by sharing amongst their friends.
What is community group buying?
A large part of PDD’s growth has been driven by the fact that it can be accessed on Tencent-owned messaging service WeChat, which has over a billion monthly users. WeChat is a key part of daily life in China and allows people to make payments within the app. Besides, elderly retirees’ community in China has showed especially loyal to Pinduoduo.
Since the listing of the Pinduoduo Inc ADR on the NASDAQ in July 2018, the Pinduoduo stock price has increased by more than 100%. Meanwhile, JD and Alibaba both have strong logistics capabilities. JD is known for being able to deliver items on the same day or day after.
The fastest growing platform in China — Pinduoduo
Meanwhile, Temu tells European customers to get in touch with the Dublin office that we went to, and data protection queries should be sent to the same office, but addressed to WhaleCo. There are definitely reasons why PDD might want to be in Ireland. Ireland has a low corporate tax rate, and that’s helped attract other global tech companies like Apple and Meta and Google.
Alibaba said it had 711 million annual active consumers on its Chinese e-commerce marketplaces in the 12-month period ended September 30, 2019, the latest available figure. When a user selects an item on Pinduoduo, they can choose to participate in group buying. The more people that join in, the lower the price of the item goes. Pinduoduo’s growth came from an existed crowded Chinese ecommerce environment, dominated by Alibaba and JD.com.
In March, PDD carried out a private placement of $1.1 billion worth of newly issued Class A ordinary shares. At the time, the company said the funding will help its “strategic flexibility for expansion to bring more interactive experiences and value-for-money products to our users.” The more you shop on the platform the more water droplets you receive, or team purchases and sharing https://www.topforexnews.org/ items alternatively enable users to obtain special tools which are accelerating the growth of the tree. Users will get one Brand Card after they purchased a branded item, and they can alternatively share with their friends to attract them browsing and ultimately purchasing the branded products. This is an effective incentive for the platform to promote its branded products.
3 Price Chop
The combination of featuring both e-commerce and social sharing creates a new social life for Chinese users that they can purchase online items by engaging with the social groups and team purchasing. Therefore, a social chat platform like WeChat acts as a crucial weapon for Pinduoduo to build a good “word-of-mouth” and ultimately facilitate the social sharing function. This function also helped Pinduoduo to displace Taobao from the No. 1 position of e-commerce apps in just two years. Founded in 2015, Pinduoduo is a mobile-only marketplace that connects millions of buyers directly with sellers. It has become one of China’s most popular e-commerce platforms in recent years for fresh produce, household items, clothing and electronics. The company aims to bring more businesses and consumers online so that local communities and rural agricultural prodcuers can benefit from the growth of the digital economy.
We’re in an age where it’s become very obvious that there is an environmental cost to fast fashion and to overconsumption. But over the past two years we’ve seen these companies whose whole business model is premised on us buying more, throwing it away, and updating our wardrobes, filling our cupboards with things that we didn’t even know that we needed or wanted. As of March 2021, Pinduoduo says it has trained more than 100,000 new farmers in how to operate e-commerce businesses and has committed to train 100,000 more in the coming years.
How Does Pinduoduo Attract Millions of Users?
Pinduoduo has captured this chance which helped boost itself through the rural online sales. Since I started following Pinduoduo, the question for me has been, why do they operate the way they do with this extreme secretiveness? At least within China, Pinduoduo has really proven that their business model does work, according to their financial statements.
That means that 55% still comes from tier three cities or below. “They (PDD) have made no in roads into existing market share of tier 1 cities,” Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm that helps foreign brands sell in China, told CNBC. “Direct buyer traffic to PDD is primarily generated from word of mouth referrals by its existing buyers as well as the effect of its marketing campaigns,” Shanghai-based Guotai Junan Securities, said in a report from March.