Pinduoduo Inc. (PDD): An Emerging Internet Giant in China
Pinduoduo Inc. (NASDAQ: PDD) is turning out to be the second most successful e-commerce channel in China. Through its advanced and integrated business model, it has outperformed many of its competitors in a noisy and over-crowded industry. In terms of number of orders and consumers, Pinduoduo is the second largest internet giant in China, according to a detailed analysis by Turner Novak.
Pinduoduo was founded initially back in 2015 as Pinhaohuo (PHH). The initial business model of PHH was buying fruits in bulk from farmers and selling them directly to the consumers using online channel. Pinhaohuo, since a newly established entity did not have its own website or application, used the group chats platform of Tencent’s popular Wechat - often referred to as the Facebook of China. Since a huge chunk of people were using it, it proved a jump-off point for Pinhaohuo’s growth.
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Initially, it got fame and the orders started rolling in. In a few months, it was China’s #01 free app, receiving 100k orders daily and 10 million registered users. Due to the increasing number of orders and deliveries, PHH joined hands with SF traders for delivery. In 2016, PHH merged with Pinduoduo (PDD) which was game-like ecommerce platform. This merger proved an inaugurating point for the new entity as it doubled the number of its users. PDD already had 70 million active users and took 0.6% of all the sales. Majority of the revenue came about the in-app ads for PDD.
Pinduoduo has brought revolution in the market place through its customer-centered business model. The sales strategy is simple: buy everyday products and receive discount up to 90%, invite friends and family. Another strategy of their success is the team buying. Their goal is to make every purchase a team purchase. They charge an upfront amount for team purchases which is refundable if the team size was not met within 24 hours. The team buying concept compels customers to make more sales and to increase the group members. The first purchase from PDD would always be subsidized from PDD by discount. PDD reached the climax purely on top of the Wechat as it did not have its own website or any kind of application.
Another success attribute for Pinduoduo is the Mobile-first approach. The clients get an easy and endless stream of search results. It is just like the Facebook news feed, ensuring more accurate data on user’s behavior. In the mobile-first strategy, feed-based interface has been developed, rather than search-driven interfaces. So the process, unlike the expensive SEO techniques, is less expensive and more accurate. With the help of Tencent, PDD has launched a game where they keep the clients busy and offer them a considerable amount of discounts and packages. Another game is Duo Duo Piggy bank. Users get coins by completing tasks and inviting friends.
Apart from these successful business models and strategies, PDD is onto many more projects to make sure it captures a heavy chunk of market share. On a brief note, the projects are named: movie into real estate, a travel business, emphasis on live streaming, online pharmacy, Logistics tracking platforms, collaborative enterprise software platform, improving efficiency of Chinese agriculture, Custom software for farms to run their businesses and Duo Duo Crush game. Some of these projects have already been launched while some are under considerations. With these projects launched successfully, the growth graph for PDD would always be upward.
Meanwhile, Pinduoduo Inc. (NASDAQ:PDD) saw an increase in support from the world’s most elite money managers lately. PDD was in 30 funds’ portfolios at the end of June, compared to 28 funds at the end of March. However, PDD isn't among the 30 most popular stocks among hedge funds.
Disclosure: None. This article is originally published at Insider Monkey.
