China’s e-commerce market has been in a state of flux recently, and the rise of Pinduoduo has aroused the alarm of former e-commerce overlords such as Alibaba and JD.com. Pinduoduo recently delivered a financial report that exceeded market expectations, causing its stock price to surge by 18%, and its market value was once close to Alibaba.
Chinese technology media “Bad Review” analyzed that in the third quarter of 2023, Pinduoduo’s revenue increased by 94% year-on-year, and its net profit increased by 47%. During the same period, the average revenue growth of China’s e-commerce market was only about 40%.
Pinduoduo has beaten its competitors at an astonishing growth rate. What is the reason behind its success?
Social e-commerce platform
The key is that Pinduoduo adopts the so-called “social e-commerce platform” strategy. “Nikkei Asia” pointed out that Pinduoduo has been different from the established e-commerce companies Alibaba and JD.com from the beginning.
It is paired with an intensive advertising campaign that allows Chinese users to share Pinduoduo’s discount links with friends through WeChat to obtain more discounts or free gifts.
By sharing discount links, Pinduoduo quickly became popular in the WeChat ecosystem, especially among the elderly in rural areas of China. Coupled with the binding of WeChat payment, many early users who did not use Alipay found that it was more convenient to pay directly using WeChat wallet. Moreover, most of Pinduoduo’s products are cheap and the deduction amount is not large. It saves the need to bind Alipay to a bank. Account troubles.
At the same time, in order to differentiate itself from its competitors, Pinduoduo also focused on introducing vegetables and other agricultural products in the early stage, targeting the low-income consumer groups that have long been ignored by established e-commerce companies, because these rural users have consumption power that cannot be ignored in China’s underlying economy.
Temu’s U.S. users surge
Pinduoduo’s outstanding performance is also due to the performance of its brand “Temu” in the US market.
According to analysis by “Nikkei Asia”, Temu’s U.S. users increased by approximately 41% in October this year, while Amazon increased by approximately 15%; according to calculations by market agencies, Temu is now the fourth most visited e-commerce platform in the United States, with only Second to Amazon, Walmart and eBay.
However, Temu was only launched in September last year. How could it attract so many American users in just over a year?
Pinduoduo Temu has become Americans’ favorite shopping app, with usage time nearly twice that of Amazon. Market analysts believe that one of the reasons for Temu’s rise is also to copy China’s success – thanks to a very expensive advertising strategy; according to statistics, Temu’s marketing expenses this year may be as high as 2 billion to 3 billion US dollars.
In February, Temu spent US$14 million to buy two 30-second ads during the Super Bowl. The Super Bowl has always been a battleground for American advertisers. Advertising fees are increasing year by year. It is said that the average Advertising costs $230,000 per second. Although the advertising fee of US$14 million sounds like a sky-high price, on the whole, Temu has hit the target with one stone.
Super Bowl ad, Temu 2023 with the phrase “Shop like a billionaire” (Shop Like Billionaire) slogan attracted the attention of low-income consumer groups in the United States, and was even named the youngest brand in the history of Super Bowl advertisers by foreign media.
According to SensorTower data, in the first 31 days of 2023, Temu occupied the top list of North American iOS free shopping app downloads for 28 days. During the 2022 “Black Friday” shopping festival, Temu’s average single-day sales exceeded US$7 million.
Even if it can rely on advertising to increase its popularity, the key to becoming popular is still the “breaking price”. The secret lies in the “fully managed model” operating platform.
Full custody model is the key to breaking market prices
In the fully managed model, sellers only need to simply provide products to Temu or Pinduoduo, and operations, promotion, logistics, contract fulfillment and after-sales services are all completed by the platform.
Compared with general seller platforms, taking Shopee, a common platform in Taiwan, as an example, stores must be independent and self-reliant. In order to retain customers, you have to go to great lengths to maintain five-star reviews. This also leads to the more merchants entering, the more intense the bidding, and the more advertising fees, which will eventually be absorbed by consumers in disguise.
On the other hand, Pinduoduo is a “full trusteeship” for stores, only collecting deposits and not taking commissions, and the price of goods is also set by it. Stores only need to provide goods and deposits, and do not need to advertise to attract customers. The advertising costs, logistics costs, etc. saved by stores allow Pinduoduo and Temu to provide low-priced products, making them more competitive than other platforms.
Low-priced products can obtain more traffic, forming a traffic distribution mechanism with small profits but quick turnover, which is also difficult for other platforms to copy.
However, in recent years, Pinduoduo has been vigorously promoting the “high-quality development” strategy to clean up its past image of being full of “copycat products”. While taking into account both price and quality, it can further attract more brands to enter, allowing Pinduoduo to compete in the fierce e-commerce market. stand out from the business competition and keep pace with Alibaba.
(Author: Chen Yiling; This article is written by“Business weekly”Reprinted with permission; source of first image: shutterstock)
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2023-12-30 02:33:57
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