2019 Pinduoduo Product Operation Analysis Report

Pinduoduo has rapidly grown into the third largest comprehensive e-commerce platform by leveraging its advantages such as social fission, low prices and free shipping, information flow recommendations, and gamification experience to cater to the sinking market. What are the things we can learn from Pinduoduo?

Pinduoduo has developed rapidly since its establishment and proposed the C2M model that extremely compresses the traditional supply chain, but it also faces a bad reputation for counterfeit goods and viral marketing. Can Pinduoduo truly find its own positioning and advantages in the red ocean of e-commerce and form a three-way competition with Alibaba and JD.com? The author will analyze Pinduoduo from four perspectives: market, users, positioning, and products.

01 Market Analysis

1.1 Product Introduction

Pinduoduo is a social e-commerce platform that grew up on the WeChat ecosystem. Since its launch in 2015, it has grown from an unknown small application to an e-commerce giant in just four years. Pinduoduo platform now has 443.3 million annual active buyers and more than 3.6 million active merchants, with an annual transaction volume of more than 557.4 billion yuan; in July 2018, Pinduoduo was officially listed on the Nasdaq Stock Exchange in the United States.

In April 2015, Pinduoduo launched its first social e-commerce application "Pinhaohuo", which focuses on group buying of fruits and fresh produce. Users can invite friends to group buy through social platforms such as WeChat groups and Moments. When the specified number of people is reached, the group buy will take effect, and users can buy fruits and fresh produce at low prices.

In September 2015, Pinduoduo Company turned the group-buying model into the platform "Pinduoduo". As its business expanded, Pinduoduo's platform grew rapidly, and its product positioning was adjusted to "a 'new e-commerce' platform dedicated to providing the broadest users with value-for-money products and fun interactive shopping experiences."

1.2 Industry Status

E-commerce in a narrow sense refers to a platform where consumers purchase first-hand goods through the Internet, excluding B2B and second-hand transactions. After more than ten years of development, e-commerce platforms have gradually developed into different types such as comprehensive shopping malls, social shopping malls, fresh food e-commerce, vertical e-commerce, and cross-border e-commerce. Among them, the comprehensive shopping malls mainly include Taobao, Tmall, JD.com, Pinduoduo, Suning.com and other platforms.

According to the "China E-Commerce Report (2018)" by the Department of E-Commerce and Informatization of the Ministry of Commerce, the national online retail sales in 2018 was 9.01 trillion yuan, a year-on-year increase of 23.9%; the B2C market share of online retail continued to expand, and the growth rate remained ahead. Business big data shows that in 2018, B2C retail sales accounted for 62.8% of the national online retail sales, an increase of 4.4 percentage points from the previous year; B2C retail sales increased by 34.6% year-on-year, and the growth rate was 22.1 percentage points higher than that of C2C retail sales. As consumption upgrades continue to deepen, consumers' attention to online shopping brands, quality, and services is gradually increasing, and the B2C market advantages are becoming more obvious.

1.2.1 Scale and penetration rate of mobile shopping industry

The user scale and penetration rate of the mobile shopping industry are growing rapidly, the proportion of mobile transactions will continue to expand, and the user scale of the mobile shopping industry has reached nearly 800 million.

According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, the user scale and penetration rate of the mobile shopping industry have grown rapidly in the past year, with the user scale increasing by 200 million to 783 million; the penetration rate exceeded 70%, an increase of more than 10 percentage points.

1.2.2 Scale and penetration rate of e-commerce sub-industries

Comprehensive shopping malls are huge in scale, while other e-commerce sub-industries are small in scale but developing rapidly.

According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, the penetration rate of comprehensive shopping malls has increased by nearly 9 percentage points in the past year to 67.7%, and the user scale has reached 745 million. It is the earliest developed and largest sub-industry in the e-commerce industry.

1.2.3 Development Trends of E-commerce Platforms

(1) Strive for lower-tier markets

According to the "43rd Statistical Report on the Development of China's Internet in 2019" released by the China Internet Network Information Center, as of December 2018, the scale of Internet users in my country reached 829 million, with 56.53 million new Internet users throughout the year, and the Internet penetration rate reached 59.6%, an increase of 3.8 percentage points from the end of 2017; the scale of mobile Internet users in my country reached 817 million, with 64.33 million new mobile Internet users throughout the year; the proportion of Internet users using mobile phones to access the Internet increased from 97.5% at the end of 2017 to 98.6% at the end of 2018.

The size of Internet users and the Internet penetration rate continue to increase. More and more users in third- and fourth-tier cities and rural areas are beginning to use the Internet and smartphones. E-commerce platforms are actively striving to tap into the traffic dividends that have not yet been tapped from users in lower-tier cities.

(2) Find new ways and channels to acquire customers

As the growth of online users slows down, my country's demographic dividend in the Internet era has been gradually consumed.

According to the "White Paper on China's Retail Services Industry" released by KPMG, the online marketing costs for new active users of mainstream e-commerce platforms have increased year by year. From 2015 to 2016, when it was a critical tipping point, the average online customer acquisition cost exceeded 200 yuan, exceeding the offline customer acquisition cost.

As the cost of acquiring customers continues to rise, e-commerce platforms have begun looking for new ways and channels to acquire customers.

1.3 Product Performance

1.3.1 Data Overview and Analysis

(1) Annual per capita consumption

According to Curiosity Daily's analysis of the financial reports of Pinduoduo, Alibaba and JD.com, as of March 30, 2018, the consumption of a single Pinduoduo buyer in the past 12 months was 673.9 yuan. During the same period, the annual consumption of Alibaba users was 8,696 yuan, and the annual consumption of JD.com users was 4,426 yuan - both are several times or even dozens of times that of Pinduoduo. The user distribution of Pinduoduo is actually not much different from that of Taobao, but the spending habits are quite different. The number of consumption by Pinduoduo users is higher than that of JD.com, but the unit price is also much lower than that of JD.com.

(2) App penetration rate

App penetration rate refers to the percentage of devices with a certain app installed in the total number of devices in the market. According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, in November 2018, Pinduoduo's penetration rate was 27.4%, an increase of 68.5%.

(3) Number of active users

The main active user indicators include daily active users (DAU) and monthly active users (MAU). According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, Pinduoduo's average monthly DAU continued to grow. In November 2018, the DAU exceeded 60 million, an increase of about two times year-on-year. In November 2018, Pinduoduo's MAU was 280 million, ranking second among e-commerce apps, with a growth rate of about 2 times; Taobao Mobile and JD.com ranked first and third with 540 million and 260 million respectively.

(4) Daily number of new users

According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, the number of new daily users of Pinduoduo in November 2018 was 1.859 million, a year-on-year increase of 35.9%; the number of new daily users of Pinduoduo is relatively stable.

(5) New user retention rate

According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, Pinduoduo's 7-day retention rate of new users is the highest among all e-commerce platforms, at 77.3%.

Analyzing Pinduoduo's data, we can see that Pinduoduo is still in its growth stage. Its app penetration rate, number of active users, and number of new users are all among the best in comprehensive e-commerce platforms. In addition, the retention rate of new users is very high and user stickiness is relatively high.

1.3.2 User evaluation and analysis

Pinduoduo has a rating of 4 on the Apple App Store. A total of 207 reviews were collected on Qimai Data iOS12 appstores from May 17 to May 23. After deleting invalid data, there were 174 valid reviews, of which 142 reviews were rated between 1 and 4. There are 107 valuable reviews with a score of 1 to 4. By analyzing and summarizing the review information, we can find that Pinduoduo has problems in growth marketing strategy (46%) (bargaining assistance, coupons), product quality (23%) (inferior products, counterfeit products), product functions (15%) (crash exit, group purchase anomalies) and service (16%) (customer service, after-sales), which have caused a lot of dissatisfaction among users.

Pinduoduo has developed rapidly through the social fission + shopping discount incentive model, but the platform still has many unresolved issues, causing many users to uninstall the Pinduoduo app due to dissatisfaction with the quality of goods and services, seriously affecting the platform's reputation and being very detrimental to Pinduoduo's long-term development. While focusing on attracting new customers and repeat purchases, Pinduoduo must also work on improving the product quality and after-sales service of the entire platform.

02 User Analysis

2.1 User characteristics

According to the survey reports of QuestMobile and Jiguang Big Data, a comparative analysis of Pinduoduo's user data with other comprehensive e-commerce platforms can lead to the following conclusions:

1. Pinduoduo’s female users account for more than 60% (6%), higher than other comprehensive e-commerce platforms (46.8%);
2. Pinduoduo users in third-tier and fourth-tier cities and below account for nearly 70% (5%), which is also higher than other comprehensive e-commerce platforms (55.5%).
3. Nearly 80% (2%) of Pinduoduo users are over 31 years old, much higher than other comprehensive e-commerce platforms (36.4%).
4. Pinduoduo's willingness to consume online is significantly higher than that of other comprehensive e-commerce platforms, and its users' educational level is relatively low.

Pinduoduo's user base is significantly different from that of other comprehensive e-commerce platforms: female users account for a larger proportion, most users are from third-tier and fourth-tier cities and below, middle-aged and elderly users account for a high proportion, and their willingness to consume online is significantly higher. Comprehensive analysis shows that Pinduoduo attracts atypical e-commerce users, and its channel distribution is more down-to-earth.

Most of Pinduoduo's target user groups have more free time, are more sensitive to prices, and have lower per capita disposable income. Compared with other comprehensive e-commerce users who pursue high shopping efficiency and high product quality, Pinduoduo users' main needs are: saving money and getting "discounts"; gaining a sense of satisfaction and accomplishment through shopping; gaining a sense of social interaction and belonging, etc.

Compared with the average level of other competing products of the same scale in the industry, the "high retention and high uninstallation" characteristics of Pinduoduo APP users are more obvious, with more than 40% of users having uninstalled their apps that month. Considering the destinations of uninstalled users, they still return to the regular e-commerce shopping scene after group buying.

Pinduoduo has formed a consumption scenario of "search-screen-share-purchase", and its user stickiness is better than the overall level of the industry. Pinduoduo users have formed usage scenarios, not phenomenal marketing scenario behaviors.

Pinduoduo's users show the characteristics of "high retention and high uninstallation". The retained users have achieved a closed loop of scenarios in Pinduoduo. Pinduoduo's product strategy of "social fission + shopping discount incentives" is more consistent with the characteristics and needs of the target user groups, and user stickiness is better than the industry average.

2.2 User Value

According to the "2018 E-commerce Industry Research Report" released by Aurora Big Data, the Aurora user value stratification model is modeled based on the e-commerce users' most recent usage time, average monthly usage frequency, average monthly order times, and average monthly consumption amount, and the user groups are stratified. Ultimately, six main user categories are obtained to reflect the value and health of e-commerce platform users.

Core VIP users are the group with the strongest spending power and stickiness among the user groups and need to be carefully cared for; although low-value active users do not consume much, they are the main group contributing to the activity of the app; high-value inactive users should focus on improving their activity level; and high-value lost users need to be recovered.

Pinduoduo's high-value users account for only slightly more than 20% of the total, and their per capita spending is also lower than that of other e-commerce platforms. Among Pinduoduo users, low-value active users and low-value inactive users account for 30% each. The low-value inactive users are older, mainly composed of those born in the 1970s and 1960s, and have a very low net recommendation value for Pinduoduo.

The proportion of high-value users on Pinduoduo is far lower than that of comprehensive e-commerce platforms such as Taobao, Tmall, and JD.com. How to cultivate core VIP users and high-value users and reduce user churn is an issue that Pinduoduo needs to focus on in the future.

2.3 User Profile

Based on the above analysis, the typical user portraits of Pinduoduo can be summarized as follows:

Aunt Wang, 52 years old, female, retired employee from a third-tier city. I have a lot of free time and like to recommend high-quality and low-priced products to my friends.

Aunt Wang is retired and is at home helping her son take care of his grandchildren. After sending her grandson to kindergarten every day, Aunt Wang has plenty of free time to chat with friends and browse e-commerce apps.

Recently, friends in the WeChat group often asked Aunt Wang to help "bargain" on Pinduoduo. Aunt Wang downloaded the Pinduoduo app and bought daily necessities such as paper towels and laundry detergent at low prices through sharing and bargaining. Aunt Wang also received free fruits by playing Pinduoduo Orchard. She felt that she not only bought a lot of cheap daily necessities by using Pinduoduo, but also gained a sense of accomplishment and belonging.

Xiao Qiong, 20 years old, female, a college student in a second-tier city. I love fitness, pay attention to healthy eating, and eat some fruit every day.

Xiao Qiong is a girl who loves sports and fitness and pays attention to diet. She eats a certain amount of vegetables and fruits every day. Xiao Qiong's campus is located in a remote area and there are no large supermarkets nearby. She can only buy fruits in the school supermarket or fruit store. The price of fruit in school is relatively high, and it costs twenty or thirty yuan to buy a little each time. The high cost of fruits means that Xiao Qiong, who only has a fixed living allowance every month, often has no money to buy other things she likes.

When Xiao Qiong was browsing in a shopping community, she saw a girl she followed recommending a fruit direct-selling store on Pinduoduo. With the mentality of giving it a try, she spent more than ten yuan to buy five kilograms of fruit. After receiving the fruit, she found that it was fresh and of good quality. Xiao Qiong was very satisfied. She continued to buy other fruits from the stores she trusted and recommended the stores to her family and friends.

Uncle Zhang, 45 years old, male, security guard in a fourth-tier city. He has a lot of free time at work, is not financially well-off, and prefers low-priced goods.

Uncle Zhang works as a security guard in a residential complex in a fourth-tier city. Both he and his wife have low incomes, and the family has two school-age children, so their finances are not very good.

Recently, my colleague Lao Li recommended that the things on Pinduoduo are particularly cheap. Uncle Zhang's family happened to need to buy a washing machine, so Uncle Zhang downloaded the Pinduoduo APP and found that there were many low-priced washing machines on it, and he could buy them at a cheaper price by sharing and bargaining.

Amy, 26 years old, female, white-collar worker working in a first-tier city: likes to buy high-quality and low-priced goods, does not pursue the brand of daily necessities, and pays more attention to quality.

Amy just entered the workplace after graduating from graduate school. Her salary was not high in first-tier cities and the cost of living, such as rent, was relatively high. Amy doesn't pay much attention to the brands of daily consumables such as paper towels. When the quality is similar, she prefers cheaper products.

Amy often sees friends and family forwarding Pinduoduo links in WeChat groups. Because Amy is busy with work, she has no intention of sharing price reductions by forwarding. She saw the recommended products on the paper towel rankings on the homepage of Pinduoduo and tried to buy them once. After receiving the products, she felt that the quality was worth the price. Later she bought cotton socks and other items and was also very satisfied with them.

03 Positioning Analysis

According to information on Pinduoduo's official website, Pinduoduo positions itself as a "new e-commerce" platform dedicated to providing the broadest users with value-for-money products and interesting interactive shopping experiences. Pinduoduo's "new e-commerce" mainly includes social fission represented by "group buying" and "bargaining assistance" models, shopping discount incentives represented by "Duoduo Farm" and "Golden Pig Piggy Bank", and the C2M model represented by supporting "agricultural product origin brands" and "factory manufacturing brands".

3.1 Social fission + shopping incentives

Pinduoduo is a comprehensive e-commerce platform based on the social fission + shopping discount incentive model.

In April 2015, Pinduoduo launched its first social e-commerce application, Pinhaohuo. Pinhaohuo hosts group orders for fresh fruits and vegetables, and invites friends to group order through social platforms such as WeChat and Moments. The group order will take effect when the specified number of people is reached. In September 2015, Pinduoduo turned the group-buying model into a platform and launched the Pinduoduo app.

Pinduoduo has rapidly expanded with the help of WeChat's social relationship chain. Many users use Pinduoduo for the first time not in the Pinduoduo app, but by clicking on the bargaining or group buying invitation link shared by family and friends on WeChat, authorizing WeChat to log in, completing Pinduoduo's user registration, and becoming Pinduoduo users.

Pinduoduo's ultra-low-priced goods, no shopping cart, and no need to compare prices have shortened users' decision-making time, lowered the threshold for users to shop on their mobile phones, and stimulated user consumption. Users do not need to think too much and can place an order quickly after seeing a product they like, which has formed a shopping habit among Pinduoduo users with high consumption frequency and low order value.

Pinduoduo also has games such as "Duoduo Orchard" and "Golden Pig Piggy Bank", which can attract users to spend more time on Pinduoduo, promote user activity, and increase user retention and repurchase rates.

Relying on the social fission + shopping discount incentive model, Pinduoduo has rapidly developed into the third largest comprehensive e-commerce platform. As the Internet's demographic dividend gradually disappears and customer acquisition costs increase, compared with the traditional operation-oriented model, Pinduoduo's growth-oriented social fission + shopping discount incentive model meets the human needs of a wider group of people, has a lower customer acquisition cost, and helps to add and retain new users.

According to the QuestMobile report, Pinduoduo's growth-oriented social fission + shopping discount incentive model has the following characteristics:

1. With social fission as the core. The sharing mechanism is the core link of profit-driven growth, which is equivalent to turning users into "distributors" and expanding users through the user's relationship circle;
2. Meet the human needs of a wider range of people. Expand from younger populations and areas with a high level of mobile Internet development to previously unreached populations, and reach users with points of interest that a wider range of people may be interested in, such as saving money, making small profits, and turning spending into making money.

In order to get more discounts, Pinduoduo users will actively invite friends to help bargain and group buy. With the help of social fission of social platforms, more users will be exposed to and learn about Pinduoduo, and then become new users of Pinduoduo.

3.2 C2M model compresses the supply chain

Through innovative business models and technological applications, Pinduoduo has restructured existing commodity circulation links, continuously reduced the loss of social resources, created value for users, and effectively promoted the development of agriculture and manufacturing.

The traditional supply chain is compressed through the C2M model to provide consumers with fair and most cost-effective options. Through a decentralized traffic distribution mechanism, Pinduoduo has significantly reduced the traffic costs of traditional e-commerce and benefited both the supply and demand sides. Based on the platform's big data, Pinduoduo helps factories achieve customized production according to consumer preferences and demands, continuously reducing procurement, production, and logistics costs, making "low-priced, high-quality" products the mainstream of the platform.

Pinduoduo closely combines innovative e-commerce models with targeted poverty alleviation, providing an effective way to promote large-scale upward trends in agricultural products. The platform's "group buying" model can quickly split and aggregate consumer demand, achieve large-scale, many-to-many matching, quickly digest large quantities of seasonal agricultural products, and deliver agricultural products directly from the fields to consumers, turning the disadvantage of China's discrete agricultural production and demand into an advantage.

The Pinduoduo platform's "group buying" model of few SKUs, high orders, and short bursts can not only quickly absorb factory production capacity, but also help manufacturers quickly win the trust of consumers and establish a brand image through "phenomenal" hot products.

Pinduoduo has significantly reduced the marketing costs of manufacturers by providing free traffic. The platform also continues to allocate resources to manufacturers who are determined to build their own brands, helping them to transform and upgrade. The C2M model helps promote supply-side reforms in industrial clusters, helping a large number of factories break away from OEM status and achieve branding at the lowest cost.

04 Product Analysis

Pinduoduo has innovated its products in terms of discount systems, shopping decisions, social sharing, and gamification experiences. Through these innovations, Pinduoduo has achieved the goals of reducing customer acquisition costs, increasing user activity and stickiness, increasing user usage time and repurchase rates, and increasing product exposure, helping the platform continue to develop rapidly.

4.1 Preferential system

Pinduoduo’s preferential system mainly includes functional modules such as low-price subsidies, cash check-in, and money-saving monthly cards. Various discount models complement each other to meet the discount needs of different user groups.

4.1.1 Low-price subsidies

Pinduoduo’s low-price subsidy module includes limited-time flash sales, clearance sales, 9.9 yuan special sales, and 10 billion yuan in brand subsidies. After users select products on the corresponding activity page and place an order, they can purchase the products at a discounted price without having to complete additional tasks.

It is worth mentioning that there is no search function on this type of activity page, and users need to spend time looking for the products they need. This design is done for two reasons: first, there are limited products on the event page, and users may not get any results when searching directly for certain product categories; second, users will spend more time on the event page, which can increase user usage time and the number of products browsed. That is, by offering price concessions, more users can be attracted to spend more time browsing platform products and increase product exposure.

4.1.2 Cash Check-in

Cash check-in is Pinduoduo's check-in module. When a user enters the "Sign in and Get Cash" interface for the first time, he/she will be reminded to turn on the notification function of the Pinduoduo app. A notification will be sent around nine o'clock every night to remind the user to log in and sign in.

The cash sign-in module contains many sub-modules, including scheduled red envelopes, red envelope grabbing, red envelopes while shopping, limited-time treasure hunts, discounts on magic coupons, free red envelopes, as well as consecutive sign-in rewards and lucky cats randomly obtained when signing in. Different sub-modules can meet the needs of different user groups. Users with less time can only click on the sign-in and scheduled red envelope modules, while users with more time will continue to play sub-modules such as shopping and receiving red envelopes.

Cash sign-in encourages users to open the Pinduoduo app every day by getting cash for signing in and rewards for consecutive sign-ins, which can improve user retention rate and enhance user stickiness.

4.1.3 Monthly Saving Card

Pinduoduo’s money-saving monthly card is also a strategy to cultivate loyal users. Users who choose a continuous monthly subscription can use 5.9 yuan to get a discount of 194 yuan in the first month, including a 20 yuan no-threshold coupon, a 20 yuan full-reduction coupon, and a 10% off coupon for 104 yuan; they can also get three privileges: free trial, free goods, and discounted goods.

The more money and frequency of consumption a user makes on the Pinduoduo platform, the more worthwhile it is to purchase a money-saving monthly card. By using two 5-yuan no-threshold coupons every month, you can recover the cost of purchasing a monthly card. All Pinduoduo users can get discounts by purchasing a monthly card.

Pinduoduo's launch of the money-saving monthly card will help cultivate more loyal users. In order to make better use of the discounts and privileges brought by the money-saving monthly card, users will first consider using Pinduoduo for shopping.

4.2 Shopping Decisions

Pinduoduo stimulates user consumption through group buying, limited-time discount models combined with free shipping and personalized recommendation strategies, which greatly shortens the decision-making time for users to shop on Pinduoduo and lowers the threshold for users to shop online.

4.2.1 Group buying model

Pinduoduo’s rapid growth into the third largest comprehensive e-commerce platform is largely due to the “group buying” model.

In the early days of the Pinduoduo platform, after users initiated a group purchase and completed payment, they also needed to invite friends and family to complete the group purchase before they could complete their shopping. Now, the group buying model of the Pinduoduo platform no longer requires users to initiate group buying and invite relatives and friends. Users can directly join group buying initiated by users of other platforms, or initiate group buying and wait for users of other platforms to join their own groups.

In the early days of Pinduoduo, the platform used the group-buying model and social fission to quickly acquire a large number of users; and through advantages such as low-priced goods, free shipping for all items, new customer discounts, and simple payment processes, it lowered the threshold for users to make shopping decisions, allowing more users to complete their first transaction on the platform and improving the retention rate of new users.

As it developed, Pinduoduo gradually passed the period of a surge in new users. In addition, comprehensive e-commerce platforms such as Taobao, JD.com, and Suning also launched group buying models. Pinduoduo's group buying model then reduced the difficulty of group buying. Now the main purpose of the group buying model is no longer to attract new customers, but to serve as a marketing tool: the group buying price serves as a "price anchor point", that is, through the "individual purchase price", users are made to believe that they can get more cost-effective goods through the group buying model, thereby stimulating users to buy goods.

4.2.2 Limited Time Offer

When users log in to the Pinduoduo app, there is a certain chance that they will receive coupons from the platform. The coupons are modeled after WeChat red envelopes. After users receive them, they will see that the coupons are only valid for a very short period of time. Coupons with countdowns accurate to the second and recommended products on the coupon redemption page can increase the probability of impulse purchases by giving users a sense of urgency.

Limited-time coupons can lower the threshold for users’ consumption decisions, encourage new users to make their first purchases and old users who have not made purchases recently to reconsume, thereby increasing user retention and repurchase rates.

4.2.3 Free shipping for all items

No matter how low the price of the products on Pinduoduo is, free shipping is available for each item. At the same time, Pinduoduo does not have a shopping cart function. After a user initiates a group order or participates in a group order initiated by other users, he or she will be directly redirected to the payment and checkout interface.

Features such as super low-priced goods, no need to compare prices, free shipping for the entire site, no shopping cart function, and no need to place a purchase to get a discount have greatly lowered the threshold for users to shop on their mobile phones. When users see a low price, they can directly place an order and buy without thinking or comparing prices, thus shortening their decision-making time as much as possible. Pinduoduo stimulates users' impulse consumption through these measures.

4.2.4 Personalized Recommendation

Pinduoduo's search function is not placed on the homepage of the application like other e-commerce platforms. Instead, you have to enter the "Search" tab to search. Pinduoduo has this layout because it prefers users to "browse" rather than "search" on the platform.

Pinduoduo’s products are mainly distributed through personalized recommendations in information streams. The platform analyzes user data such as user order records, product browsing records, store type preferences, and uses a series of algorithms to recommend products that the system thinks the user will like. User clicks, orders, and other behaviors provide feedback on the accuracy of the recommendations and optimize the recommendation algorithm, forming a closed-loop iteration of the recommendation algorithm, recommending more products that users like, and increasing user retention time and repurchase rate.

Pinduoduo not only has recommended products in the recommendation module, but also has endless recommended products on the homepage and personal center. Not only that, although products are divided into categories in the search module, after clicking on a certain category, the products are still recommended through the information flow.

Accurate information flow recommendation of products can allow users who do not have clear shopping intentions to continue to stay on the platform to "browse", which can improve user retention time and increase product exposure. In addition, low-priced and high-quality products that meet user preferences can make users want to shop and increase the platform's GMV.

4.2.5 Featured Modules

Pinduoduo has special modules such as limited-time flash sales, 9.9 yuan special sales, brand halls, and daily good stores. These special modules can meet the shopping needs of Pinduoduo's various user segments and provide more targeted products and services.

The user groups on Pinduoduo can be mainly divided into two categories: those who are sensitive to prices and those who pursue product quality. Initially, the Pinduoduo platform mainly attracted price-sensitive users to shop; with Pinduoduo's listing, the platform hopes to increase the average order value and pay more attention to users in first- and second-tier cities who pursue quality goods.

Modules such as limited-time flash sales and 9.9 yuan special sales are mainly designed for the first user group. By limiting the number of goods and shopping time, they create a sense of urgency for users to shop and stimulate their impulse purchases. By displaying the reduction of goods in real time, users feel that other users are also buying the goods, which stimulates their herd mentality and makes them believe that "buying is making a profit."

Modules such as the Brand Hall and Daily Good Stores are mainly designed for the second type of users. Although first- and second-tier users also want to purchase goods at low prices, they are still very concerned about the brand and quality of the goods. The low-priced authentic products on the platform can better stimulate their shopping desire. Pinduoduo attracts such users to consume on the platform through preferential subsidies, which not only expands the user types but also increases the average order value and GMV.

4.3 Social Sharing

Pinduoduo’s social sharing fully utilizes WeChat’s social relationship chain. Through social fission, Pinduoduo quickly acquires customers at an extremely low cost and gains a large number of users in a short period of time.

4.3.1 Sharing for free

Pinduoduo’s free sharing module allows you to get free orders by helping others and by bargaining. The interface designs of these two modules are very similar. The basic interfaces are the main page, sharing page, and reminder page when exiting.

Help to enjoy free orders

Bargain for a free order

To help enjoy free meals, you need to invite new app users, but the number of invitations is fixed and whether you can get the prize is basically controlled by the user. Helping to enjoy free orders can help motivate old users to help the platform attract new users.

To bargain for free items, you need to bargain with your friends, and your friends do not need to be new users of the app. However, the number of times you have bargained is unknown. Users don’t know how many times they need to bargain before they can get the product. Bargaining to get something for free can increase interaction among users and improve user retention and recall rates.

4.3.2 Sharing rewards

Pinduoduo’s free sharing module allows you to receive cash every day and win a grand prize with 1 point.

Get cash every day by signing in and sharing, and you can withdraw cash after reaching a certain amount within 24 hours. If the user fails to reach the withdrawal amount within one day, the amount already obtained will be invalidated. In order to reach the specified amount and successfully withdraw cash, users will actively share activity tweets on social platforms.

In the 1-point grand prize-Lucky Popular King module, users only need to pay 0.01 yuan to participate in the lottery for the selected product. If they do not win the prize, the 0.01 yuan paid will be returned to their payment account. After completing the payment, the user needs to share the link with a WeChat friend to obtain a lucky code for the lottery; after sharing, more diverse ways to obtain lucky codes will be displayed in the task list. In order to increase their chances of winning, users will continue to share, invite friends to participate, and strive to obtain more lucky codes.

The sharing free-order model of helping others to get free orders or bargaining to get free orders, and the sharing gift model of receiving cash every day and winning a grand prize with 1 point can both encourage users to share platform activities with their relatives and friends. Pinduoduo can reduce customer acquisition costs by utilizing the fission of users' social relationship chains. At the same time, various interesting activities can also increase user activity and user stickiness.

4.4 Gamification Experience

The Pinduoduo platform incorporates the characteristics of low prices and social fission into the three games of "Planting Trees, Raising Pigs, and Eliminating Stars" (Duoduo Orchard, Golden Pigs Make Big Money, and Duoduo Love Elimination), increasing the fun of the platform through relatively complex games with independent level systems. Duoduo Orchard and Golden Pig Make Big Money are cultivation games, while Duoduo Love Elimination is a level-breaking game. Different types of games also provide more choices for users with different preferences.

4.4.1 Duoduo Orchard

Duoduo Orchard is a re-emergence of the "planting and stealing vegetables" cultivation game. Alipay's Ant Forest and Koubei's Word of Mouth Farm are similar to it.

Pinduoduo launched this game in the hope that, firstly, it would increase the frequency of users logging into the Pinduoduo platform, increase the time spent browsing products, and increase product exposure and order volume by having users play games and complete tasks; secondly, it would hope that users would complete tasks, invite friends, add friends, browse products, etc. in order to obtain more "water drops" and "fertilizers", and thereby build the social relationship chain of the Pinduoduo platform itself.

4.4.2 Golden Pig Makes Big Money

Golden Pig Makes Big Money and Duoduo Orchard are both cultivation games. The Golden Pig Piggy Bank helps users earn gold coins. The gold coin tasks and redemption center encourage users to earn gold coins by browsing products, placing orders, inviting friends, etc., and consume gold coins through physical products, etc.

The biggest difference between Golden Pig Makes Big Money and Duoduo Orchard is the time interval between user logins. The Golden Pig Piggy Bank will no longer be able to generate gold coins after depositing a certain number of gold coins. In order not to miss out on gold coins and to upgrade quickly, users will log in once in a short period of time. If there are no water drops in Duoduo Orchard, one will have to wait for a long time before there are water drops. If users don’t want to miss out on the water drops on Duoduo Orchard, they only need to check it once every few hours; but if users want to make money on Jinzhu and not miss out on the gold coins, they may have to check it every few minutes. Therefore, Golden Pig making big money can greatly increase user activity and user usage time.

4.4.3 Duoduoai Elimination

There is not much difference between Duoduo Ai Elimination and other elimination games in terms of setting and difficulty; compared with Duoduo Orchard and Golden Pig Piggy Bank, Duoduo Ai Elimination is more interesting and can attract users to "kill time".

Duoduoai Elimination's rewards for passing levels, ways to obtain props and the characteristics of the platform are combined. Rewards for passing levels can be exchanged for coupons, and game props can be obtained by browsing products, placing orders, etc.

Although these three games are not original to the Pinduoduo platform, the game rules and rewards can be well coupled with the product tone of the platform. In addition to the fun of these games themselves, the various rewards of the games also make users like these games.

The rewards in the game can be roughly divided into four categories: physical rewards, coupon rewards, prop rewards, and level rewards:

1. Physical rewards: Fruit trees planted in Duoduo Orchard can be exchanged for a box of physical fruits when they mature, gold coins accumulated by Golden Pig can be exchanged for goods, and physical fragments collected in Duoduo Love Elimination can be exchanged for goods for free. Physical rewards greatly attract Pinduoduo's target users who are "calculating" and can make them think that playing games is valuable, so they continue to "play games";
2. Coupon rewards: When playing these three games, users have the opportunity to obtain various coupons. As the user level increases, users will have more opportunities to obtain more high-quality coupons. These coupon rewards can also keep users engaged in the game.
3. Prop rewards: In Duoduo Orchard, users can exchange for "fertilizer" and "water drops" by browsing products and placing orders; in Duoduo Love Elimination, users can obtain "level-breaking props" by browsing products and placing orders. These props can help users achieve their goals in the game faster, making them feel "addicted";
4. Level rewards: These three games all have independent level systems. As the user level increases, the user can obtain more game privileges and reward privileges, which can meet the user's display value.

The purpose of Pinduoduo platform launching these three games can be summarized as follows:

1. Occupying time: Currently, the competition among Internet giants has gradually turned into a competition for users' time. Only when Pingduoduo occupies more users' time can it have more monetization possibilities. On the one hand, it is possible to achieve a series of goals such as revenue, traffic, advertising and promotion because it occupies user time; on the other hand, in the zero-sum game between Internet giants, if a platform cannot occupy user time, then the user's extra time will be acquired by the opponent's platform, resulting in user loss and the increasing strength of competitors;
2. Increase revenue: The platform guides users to place more orders through games, which can directly bring benefits to the platform; the platform guides users to browse products can increase the exposure of platform products, which can not only increase the user's chance of placing orders, but also bring more traffic to merchants on the platform. At the same time, it can prove the strength of the platform and attract more powerful merchants to join the platform;
3. Social e-commerce: The platform guides users to invite and add friends through games, which can not only acquire customers at a lower cost, but also gradually build its own social relationship chain.

These games encourage users to spend more time and energy through a series of interesting gameplay and various discounts and rewards. They can not only occupy more users' time and improve daily active users; they can also increase the cost of users leaving the platform, increase product stickiness, and gain more loyal users.

05 Conclusion

Pinduoduo is able to break through the siege of e-commerce. Its positioning of the platform and its innovation in shopping models such as social fission, shopping discount incentives, and gamified experience are worthy of our careful consideration.

Although Pinduoduo has become one of the three major comprehensive e-commerce platforms, there are still many imperfections in the construction of the platform basic system: for example, the platform's account system, membership system, etc. are still in a very primitive state, and the consumer protection system and customer service system are not sound enough...

Pinduoduo relies on strategies of low-price free shipping and preferential promotions to develop rapidly, but it also faces difficulties such as low customer unit price and high marketing expenses. The social fission strategy that helps Pinduoduo quickly acquire customers has also been criticized. While more fakes and poor products have also seriously affected Pinduoduo's reputation and hindered it from gaining favor from more high-value users.

As e-commerce giants such as Taobao and JD.com are increasingly paying attention to the sinking market and launching group buying functions, the competitive environment facing Pinduoduo is becoming increasingly fierce. Whether the platform can be built in a timely manner and a better trading environment for buyers and sellers is the key to whether Pinduoduo can be invincible in the fierce competition in the e-commerce field.

Author: Carol

Source: Carol