Remember the times when the early morning vegetable market visit was a ritual? It might not be as relevant in the current consumption scenario, but there used to be a time when the only mode of purchasing used to be carrying a hand-woven basket to the local market to purchase fresh veggies off the farms.
From woven baskets to virtual shopping carts, from open markets to tapping on the screen, from bargaining for bulk purchases to fetching for discount codes, the market has evolved, and so has the consumer’s path towards making a purchase. While modes of shopping might have evolved, cognitive behavior seems to be looking for familiarity in terms of experience.
Introducing Pinduoduo that is changing the way we shop
We have collectively transitioned from stage 0 of cultivation for self to opting for same-day delivery. Today, the path to make a purchase seems pretty defined, we are at the pinnacle of evolution, but there is always room for improvement. While Amazons and Alibabas of the world seem to be walking this predefined path, a few are redefining.
Pinduoduo Inc. is the largest agriculture-focused technology platform in China and also the biggest online shopping platform in terms of the number of active users (In March 2021 it surpasses Alibaba also). It has created a platform that connects farmers and distributors with consumers directly through its interactive shopping experience. It was founded in 2015 and today has become China’s highly competitive online marketplace for agricultural products with annual revenue of $9,000mn as of 2020.
In 2019, nearly 600,000 merchants sold farm produce through Pinduoduo. That translated to some 12 million farmers who supplied their fruits and vegetables to the merchants. In August 2020, Pinduoduo pledged to sell $145 billion worth of farm produce annually by 2025.
Not just agriculture, Pinduoduo is leading in every segment. The success of Pinduoduo has relied on its unique business model, a combination of group buying and social shopping. The business model of Pinduoduo is dependent on users sharing products with their network, which effectively lowers the customer acquisition cost.
What’s so distinct about the business model of Pinduoduo?
Combining Online and Offline shopping experience:
Integrating social media as the backbone of one’s shopping experience instead of treating it as a mere touchpoint is what helps Pinduoduo stand out and deliver top-notch experiences. This is called social commerce. Social commerce simply means leveraging the power of social media networks in eCommerce transactions.
The founder Colin Huang spotted a wide gap between the number of people present on social media platforms and the number of people who actively shop on e-commerce platforms, despite China’s super high smartphone and internet penetration statistics. It was essential to fill this gap to capitalize on the low-income cohorts while also helping them take advantage of the internet.
The platform has advanced further by gamifying the experience for users – through the concept of collective/team shopping. As a user, one is encouraged to invite his/her social network contacts to make team purchases and avail of significantly discounted prices.
Pin signifies sharing, exploring, and purchasing TOGETHER, duo signifies volume- resembling a bazaar model. The experience is built by combining aspects of online and offline shopping i.e., a wide range of products and the fun of impromptu discovery, respectively.
The e-commerce masterpiece has optimized simple economic rules of scale to expand its presence and to seem appealing to the masses. It’s the mere culmination of old-world charms of strolling through the market lanes along with the convenience of today’s digital dialogues that makes this experience truly a path-breaking one. Despite being at the pinnacle of evolution, the room for improvement seems to be quite the large one.
Tapping on human centricity: Leveraging the power of social commerce
What’s more compelling are the insights that Pinduoduo has tapped on that explain their paced progress in less than a decade. The entire model functions on three key insights-
- Encouraging impulse purchase through social media integration
- Making influenced yet informed choices through the list of recommendations based on one’s network
- Getting validated on one’s purchase through the live streaming feature
Projection of self has by far been a social media phenomenon with very little to do with one’s shopping patterns. But what you buy and consume talks volumes about you. It’s remarkable to see one’s identity being extended and showcased through a simple shared virtual shopping basket.
What makes Pinduoduo so reliable for the common person is this power of relatability. The platform is built, run, influenced, and validated for and by people like you and me. This by and large works wonders in specific communities and for people residing in tier two and three cities who aren’t as exposed. If you are still wondering what is social commerce, check out this video below.
Pinduoduo is known for its steep discounts of up to 90%. But how is it possible? Users can share on social media what they have browsed or purchased from various sellers on the application. They can then form a team within 24 hours to enjoy a lower price. This way, sellers enjoy economies of scale, and hence these sellers are able to offer heavy discounts. Did you see the beauty of the business model of Pinduoduo?
How did the Pinduoduo team arrive at this business model?
In contrast to the most known and practiced concept of centralized AI, Colin & the team opted for a distributed AI infrastructure to study multiple platforms. Consumers perceived, related to, and recommended platforms basis different categories of products and the life stage of purchase. E.g., a young shopper might rely heavily on social media for decision making while the elder ones might still look for a peer-to-peer influence.
Pinduoduo has made the experience equally enticing for producers and manufacturers by letting them make a virtual sales pitch, making it a C-to-M (Consumer to Manufacturer) model.
In addition to empowering producers by connecting them to consumers, the supply chain is built in direct relationship with the actual needs of the market, making for a sustainable business model.
Through their pin and team purchase feature, Pinduoduo can aggregate large volumes of order within a short span of time. To make the functioning more customer-centric, producers can Livestream their yield and the consumers can place an order for the same directly with the producers. Pinduoduo is even getting its users, tailor-made products by partnering with the manufacturers.
Riding on the SUSTAINABALITY wagon and HOW!
Right from digitizing the supply chain, building a C-to-M business model, powering rural revitalization to focusing on agriculture output as their core deliverable, Pinduoduo is in sync with the UN sustainability goals of Affordable and Clean Energy, Decent Work and Economic Growth, Industry Innovation and Infrastructure, Climate Action, Partnership for the Goals.
The tech giant is also constantly researching innovation in packaging design & material, creating job opportunities in the un-touched parts of the country, promoting digital inclusivity & smart agriculture.
Such a model that taps into multiple aspects of conserving the environment & humankind’s tomorrow is sure to thrive in the times to come. It’s truly a win-win situation for producers and consumers, with no intermediaries to tackle with as well. Talk about a world without brands. Who could have possibly imagined having an unbiased shopping experience?
Setting a new benchmark by disrupting category norms
Pinduoduo is truly disrupting the category’s ways of functioning with their robust ideology and promising working and business model. With their current focus on agriculture, since it remains one of the lowest digitally activated segments despite having touched the greatest number of consumers and producers, Pinduoduo is marching towards being one such technology giant which is rooted in agriculture produce.
By democratizing and opening the market for all manufacturers and consumers to freely interact with each other and make smart collective purchases, the last born of Chinese E-commerce market has definitely become a model that needs to be replicated across distinct markets and categories.
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