Pinduoduo, founded in September 2015, runs one of the top mobile shopping apps. By launching a group purchase with friends, family, neighbors, etc., the user buys the product at a lower price.
Pinduoduo business model replies on social e-commerce and is designed to unite more people, buy better things at lower prices, and experience more benefits and fun.
Within three years of its founding, Pinduoduo has attracted over 300 million active buyers and over 1 million merchants through a new shopping format and experience.
Its top competitors include Alibaba’s Taobao, Tmall, and JD.
Download Dossier: Pinduoduo statistics.
PDD incorporated Walnut Street Group Holding Limited under the laws of the Cayman Islands as its offshore holding company in April 2015 to facilitate offshore financing. In the same month, it established HongKong Walnut Street Limited, or Walnut HK, its wholly-owned Hong Kong subsidiary, and Walnut HK established a wholly-owned PRC subsidiary, Hangzhou Weimi Network Technology Co., Ltd., or Hangzhou Weimi.
Walnut HK established two additional wholly-owned PRC subsidiaries, Walnut Street (Shanghai) Information Technology Co., Ltd. (formerly known as Shanghai Pinduoduo Network Technology Co., Ltd.) and Shenzhen Qianhai Xinzhijiang Information Technology Co., Ltd., in January 2018 and April 2018, respectively, which, together with Hangzhou Weimi, are referred to as its WFOEs in this prospectus.
In July 2018, it renamed the company as Pinduoduo Inc.
China’s social e-commerce platform Pinduoduo updated its IPO prospectus previously filed with US Securities and Exchange Commission (SEC) on July 17, 2018. Read details on Pinduoduo IPO here.
On July 26, 2018, Pinduoduo was listed on the NASDAQ stock market in the United States under the ticker symbol PDD. The IPO price was $19. It raised US$1.6 billion, making it one of the largest IPOs of 2018.
Check out Pinduoduo stock price here.
Pinduoduo works on a social e-commerce model. By launching a group purchase with friends and family (often shared in social media like QQ and WeChat Moments)., the user buys the product at a lower price.
Pinduoduo leverages a platform and an ecosystem comprised of hundreds of millions of users, merchants, platform management personnel/operators and platform infrastructure/service providers; while each player is interdependent with one another, all of them evolve and improve as they constantly try to balance cost-effectiveness, efficiency, user experience, and satisfaction.
In the past three years, Pinduoduo has established and promoted a new e-commerce concept and experience of “team purchase” (or “pin”).
Find out the 3 popular social e-commerce business models.
Team Purchase Model
Pinduoduo pioneered an innovative “team purchase” model on its platform.
For each product on the platform, a buyer can choose between buying the product individually or initiating or joining a team purchase. Team purchasers typically enjoy a lower price but the purchase order will only be confirmed once a team is formed.
A buyer can initiate a team purchase and share product information on social networks, such as Weixin and QQ, to invite his or her social contacts to form a shopping team.
The buyer’s social contacts can in turn refer the platform to their social contacts easily and thus reach even more potential buyers. After initiating a team purchase, a buyer may also wait for other buyers on PDD platform to join the team purchase.
Alternatively, a buyer can choose to join an active team purchase listed on the platform, which is initiated by other buyers who may or may not be his or her social contacts.
After a team purchase is initiated, it will have 24 hours to meet the minimum team size mandated by the merchant. As soon as the minimum number of buyers is reached, the team purchase will be confirmed. If the minimum team size is not reached within 24 hours, the team purchase order will be canceled, and all payments made by the buyers will be refunded.
The team purchase option allows Pinduoduo to acquire buyers effectively and efficiently and expand its buyer base organically. Buyers refer the platform to their social contacts in order to take advantage of the more attractive team purchase prices compared to the individual purchase option.
The new buyers, in turn, introduce the platform to even more buyers. The established trust, similar shopping interests, and consumption patterns shared among Pinduoduo buyers and their friends, family members, and other social network contacts help enhance buyer engagement, grow the buyer base while keeping buyer acquisition costs low.
After the buyers receive the products, they may return to the product description pages and leave reviews on the purchased products and their shopping experiences.
Huang Zheng is the founder and CEO of Pinduoduo, who graduated from Zhejiang University and got a master’s degree in computer science from the University of Wisconsin. He was also an ex-Google engineer and an ambitious entrepreneur.
Pinduoduo differentiates itself from its competitors:
Innovative “new e-commerce” platform with rapid growth;
Value-for-money merchandise with a strong focus on quality control;
Highly active buyer base cultivated by a fun and interactive shopping experience;
Strong commitment to technology;
Experienced management team with extensive technology and operational background.
Pinduoduo has become a threat to Alibaba and JD’s dominance in China’s e-commerce market, especially in lower-tier cities. JD launched Jingxi while Alibaba launched Taobao Special Offer platforms to compete directly with PDD.