{"id":39458,"date":"2020-05-19T09:52:58","date_gmt":"2020-05-19T09:52:58","guid":{"rendered":"https:\/\/ecommercechinaagency.com\/?p=39458"},"modified":"2021-06-24T03:45:32","modified_gmt":"2021-06-24T03:45:32","slug":"can-taobao-new-p2m-option-rivals-with-pinduoduo","status":"publish","type":"post","link":"https:\/\/ecommercechinaagency.com\/can-taobao-new-p2m-option-rivals-with-pinduoduo\/","title":{"rendered":"Can Taobao new P2M option rivals with Pinduoduo?"},"content":{"rendered":"\n

Pinduoduo exponential growth in recent years<\/h2>\n\n\n\n

E-commerce in China is a phenomenon in full development, which becomes more relevant every day in economic terms. Among the possible Apps to choose from, Pinduoduo<\/a> has distinguished itself in recent years. An application that, thanks to its advantageous offers, is especially loved in third and fourth-tier cities and challenging Alibaba’s Taobao <\/a>monopole. <\/p>\n\n\n\n

Pinduoduo is an e-commerce platform allowing users to participate in group buying deals. In fact, a large part of Pinduoduo\u2019s appeal is the group buying function where the more people who buy a product lead to a lower price. This Chinese eCommerce platform has seen explosive growth since its launch in 2015, becoming the third-largest e-commerce player behind Alibaba and JD.com in China and now outranking JD.<\/p>\n\n\n\n

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Pinduoduo boasts a base of 300 million users. 65% come from third tier cities and only 7.6% come from first tier citied.<\/p>\n\n\n\n

Most of the users of Pinduoduo are female, over the age of 40, and live in the third and fourth-tier cities. It is a price-sensitive target, which makes frequent purchases and often for the whole family. Users who do not have much experience with e-commerce, but who once known the medium could bring high long-term profits.<\/p>\n\n\n\n

Unlike other e-commerce apps such as JD.com or Taobao, it has decided to focus on small towns. Its strength is also to be found in incredibly low prices. This policy has made it possible to attract low-income families to the App.<\/p>\n\n\n\n

What led Pinduoduo to succeed? <\/h2>\n\n\n\n

The\nexplosive growth of Pinduoduo in recent years is due to the considerable\nfunding received, such as that of Tencent and IDG in 2016 of the value of 110\nmillion dollars, to its ability to take hold in the smaller cities, but above\nall to its marketing strategy that has brought the app to grow exponentially in\nno time.<\/p>\n\n\n\n

Pinduoduo’s strategy for success is based on two main concepts: addiction and virality. All the marketing strategies adopted push users to share the App with friends, subsequently obliging them to always remain active. <\/p>\n\n\n\n

Discounts for group purchases<\/h3>\n\n\n\n
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When a user selects an item on Pinduoduo, they can choose to buy it at the official price or participate in group buying to access the discounted price. <\/p>\n\n\n\n

In order to access the discounted price, you must find at least one friend to join in the purchase. This encourages buyers to share links to the item they are buying with friends and family or over social media. <\/p>\n\n\n\n

The idea is\nto involve as many users as possible in a purchase: the greater the number of\npeople involved, the lower the price. <\/p>\n\n\n\n

So if by\nhypothesis a user had a very large number of friends willing to help him, he\ncould almost have a free product. This may seem counterproductive, but in\nreality it is an excellent strategy for expanding the public and making them\naware of the brand.<\/p>\n\n\n\n

Free products<\/h3>\n\n\n\n

For each user who thanks to another follows the official account, installs the App or registers via Wechat, the former can receive a long series of free products.<\/p>\n\n\n\n

Very short term discount coupons<\/h3>\n\n\n\n

As everyone in China, Pinduoduo also offers many discount coupons. Unlike other platforms, Pinduoduo coupons have a very short duration, typically 2 hours. This strategy is very clever because it pushes you to shop instinctively, not to linger, and to always be active in the App. So to stay updated on all offers.<\/p>\n\n\n\n

The hongbao<\/a> ranking <\/h3>\n\n\n\n

Like many platforms, Pinduoduo also offers cash prizes to those who invite friends to sign up for the App. Unlike the others, Pinduoduo has created a public ranking of the most awarded users, in which you can see the amount of their prize pool.<\/p>\n\n\n\n

Sweepstakes <\/h3>\n\n\n\n

As in\nnormal sweepstakes there is a product up for grabs, and to win it you must\nregister. The operation is very simple: to participate in the lottery you pay a\nvery low registration fee (0.01 RMB). You must then invite friends to\nparticipate and if there are enough members within the time limit the winner is\ndrawn.<\/p>\n\n\n\n

If the minimum entry fee is not reached, the lottery is canceled. The registration fee is returned to all those who do not win and a coupon is given to them to be used on Pinduoduo. Sweepstakes help many brands to advertise themselves without high marketing investments.<\/p>\n\n\n\n

Customer service messages<\/h3>\n\n\n\n

Official\nWeChat accounts have a maximum limit of 4 broadcast messages per month,\ninsufficient for aggressive and continuous communication such as that of\nPinduoduo. That\u2019s why the e-commerce app has decided to take advantage of\ncustomer service messages. <\/p>\n\n\n\n

Used primarily to expel requests for assistance, but also to recommend new products and promotions. This is possible thanks to the monitoring of the order history and the fact that the customer service messages are fully customizable.<\/p>\n\n\n\n

Fast payment<\/h3>\n\n\n\n

The main\naudience of Pinduoduo are adults not used to online shopping. To solve this\nproblem for users, the App takes advantage of the ease of WeChat Pay payment.\nIn practice, the first purchase requires a password, which for subsequent times\nenables automatic payment without confirmation. In this way the expenses are\nautomatically charged to the WeChat wallet.<\/p>\n\n\n\n

A large\npart of Pinduoduo\u2019s growth has been driven by the fact that it can be accessed\non Tencent-owned messaging service WeChat. WeChat is a key part of daily life\nin China and allows people to make payments within the app. So a buyer can\naccess Pinduoduo via WeChat and make payments there.<\/p>\n\n\n\n

PINDUODUO VS TAOBAO<\/h2>\n\n\n\n
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Different marketing\nmodel<\/h3>\n\n\n\n

Currently,\n100% of Pinduoduo\u2019s revenue comes from online marketplace services. This is\nlargely made up of the commission Pinduoduo takes from sales on its platform\nand the advertising it manages.<\/p>\n\n\n\n

While\nAlibaba derives most of its money from e-commerce, it has other emerging\ncompanies such as cloud computing. <\/p>\n\n\n\n

Compared to Alibaba, the revenue stream of Pinduoduo is less. Anyway, its revenue is growing faster in percentage terms, in fact, the December quarter, PDD’s revenue reached 10.79 billion yuan ($ 1.55 billion), an increase of 91%.<\/p>\n\n\n\n

As we said before, a large part of Pinduoduo\u2019s user base is from smaller Chinese cities where there are perhaps more price-conscious consumers. While Alibaba appears to dominate in the so-called tier 1 cities in China.<\/p>\n\n\n\n

Taobao C2M new\nmodel <\/h3>\n\n\n\n

Now Alibaba has put a larger focus on gaining ground in these lower-tier cities and has released products to compete with Pinduoduo.<\/p>\n\n\n\n

In March,\nAlibaba launched a special version of its Taobao app that focuses on the\nso-called customer-to-manufacturer (C2M) model, which has been behind the rise\nof Pinduoduo. <\/p>\n\n\n\n

That\u2019s\nwhere consumers can interact and buy direct from the manufacturer rather than\ngoing through a third-party seller. Alibaba is building up relationships with\nfactories for the C2M model of business. And with the Alibaba\u2019s strong cloud\ncomputing business, the success is almost certain. <\/p>\n\n\n\n

Alibaba has strong logistics capabilities (delivering items on the same day or day after), while Pinduoduo logistical capability is not so fast.<\/p>\n\n\n\n

Anyway in\nMarch, Pinduoduo made a private placement of newly issued Class A ordinary\nshares for $ 1.1 billion. The company\u2019s funding will help its “strategic\nflexibility for expansion to offer our users more interactive experiences and\ngood value for money”.<\/p>\n\n\n\n

Pinduoduo announced that it would invest in convertible bonds issued by GOME Retail listed in Hong Kong. The investment will see GOME’s product range, logistics, and after-sales support integrated with PDD.<\/p>\n\n\n\n

Therefore due to the efforts they both made in improving their marketing model it will be interesting to see the changes they will bring in the future.<\/p>\n\n\n\n

In-depth\nanalysis of Pinduoduo\u2019s marketing model <\/h2>\n\n\n\n
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Based on the Pinduoduo marketing strategy, How a brand can succeed in the Chinese market?<\/p>\n\n\n\n

Buyer\ntraffic to Pinduoduo is generated from word of mouth referrals by its existing\nbuyers as well as the effect of its marketing campaigns.<\/p>\n\n\n\n

A big portion\nof the Company\u2019s buyer traffic comes from its user recommendation or product\nintroduction feature which buyers can share with friends or contacts through\nsocial networks such as WeChat and QQ.<\/p>\n\n\n\n

Branding through word of mouth<\/h3>\n\n\n\n

Specific target market <\/h4>\n\n\n\n

Pinduoduo\ntarget market is consumers from third and fourth tier cities, in fact 65% come\nfrom third tier cities and beyond, only 7.6% come from first tier cities.<\/p>\n\n\n\n

The choice\nof a specific target market is due to the increase in the demand for a platform\nthat would also reach third tier cities. In fact, while the major e-commerce\nsites such as Alibaba and JD were concentrated on first tier cities, nobody\nmanaged the e-commerce market in third tier cities. <\/p>\n\n\n\n

Pinduoduo\nhas filled a gap, has satisfied a need. <\/p>\n\n\n\n

In addition,  because of the most of the users of Pinduoduo are price sensitive target, platform allowing users to participate in group buying deals, where the more people who buy a product leads to a lower price. He used discounts as marketing strategy for its target market.<\/p>\n\n\n\n

Social newtorks   <\/h4>\n\n\n\n
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As you can see from the image above, Pinduoduo used Chinese social networks like Wechat and QQ to improve its word of mouth strategy. In fact, in order to access the discounted price, you must find at least one friend to join in the purchase. <\/p>\n\n\n\n

This\nencourages buyers to share links to the item they are buying with friends and\nfamily or over social media. This has produced an increase in brand awareness\nexponentially. Anyone in third tier cities and then successively in first tier\ncities spoke and continues to speak of Pinduoduo.<\/p>\n\n\n\n

Wechat<\/h5>\n\n\n\n

WeChat (\u5fae\u4fe1) is a Chinese multi-purpose\nmessaging, social media and mobile payment app developed by Tencent. It was\nfirst released in 2011, and became one of the world’s largest standalone mobile\napps in 2018, with over 1 billion monthly active users. <\/p>\n\n\n\n

WeChat has been described as China’s “app for everything” and a “super app” because of its wide range of functions. That\u2019s why is a fundamental way to reach your consumers, to build a strong brand awareness and to share brand\u2019s value.<\/p>\n\n\n\n

Wechat and Pinduoduo are patner and you can easily share a pinduoduo link on Wechat. Actually buyers are encourage to share Pinduoduo content on wechat in exchanges for coupons on give-away. Affiliate marketing at his best.<\/p>\n\n\n\n

QQ<\/h5>\n\n\n\n

QQ<\/a> is another popular messaging app that was Tencent’s flagship product\nbefore the advent of WeChat. It still represents the main communication tool\nfor desktop computers and is a very popular brand. <\/p>\n\n\n\n

In general, its mobile migration has proven to be quite effective because it offers a viable alternative to WeChat, even though most Chinese people use both. In fact, it’s not easy to come across a Chinese mobile user under 50 who doesn’t have a QQ number.<\/p>\n\n\n\n

KOCs <\/h4>\n\n\n\n

KOCs (Key\nopinion consumers) have played a key role in spreading this platform across\nChina. Due to the big use of social platforms in China, and the discounted\nprice which encourages consumers to share links and information to friends, the\nnew platform has had a boom in visits and therefore sales.<\/p>\n\n\n\n

In fact, KOCs are consumers like everyone else. They have a few hundred followers and are almost entirely involved in product reviews. They are therefore characters with which it is easy to identify and who inspire a lot of trust in other users. For this reason, some Chinese brands have already made it their ambassadors.<\/p>\n\n\n\n

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Do you want\nto know more about How to manage Pinduoduo? Contact GMA a digital marketing\nagency, specialized in Chinese digital market.<\/p>\n\n\n\n

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