From zero to the third largest e-commerce company, how did Pinduoduo increase its user base?

It took Pinduoduo two years and three months to become the third largest e-commerce company , and recently received another $3 billion in investment led by Tencent. In an almost dreamlike way, Pinduoduo has completed the journey that Taobao and JD.com took more than ten years to complete.

Of course, on the road to e-commerce advancement, Pinduoduo has been playing its ear-splitting advertising songs on a loop while enduring deafening insults. Even some programs sponsored by Pinduoduo shyly omitted its slogans when they were replayed.

But Pinduoduo has a strong heart: let him be as crazy as he can, the bright moon shines on the river; let him be as arrogant as he can, the breeze blows on the hills.

The money is already in my pocket, so what does a little scolding matter?

It was founded in October 2015 and received investment from Tencent in 2016. In just two years, the number of paying users exceeded 300 million, and the transaction volume increased from 36 billion in 2016 to 120 billion in 2017.

Pinduoduo’s growth has “no bottom line” so far.

In January 2018, Pinduoduo's GMV reached an incredible 40 billion (only 3 billion at the beginning of 2017). According to this standard, Pinduoduo's annual GMV may exceed 500 billion!

Note: GMV (Gross Merchandise Volume) refers to the total transaction amount of goods within a certain period of time.

What does 500 billion GMV mean? This is a quarter of Tmall’s GMV in 2017 (2.1 trillion), and almost half of JD.com’s GMV in 2017 (13 trillion).

JD.com’s GMV only surpassed the 10 billion mark after 6 years of e-commerce, but Pinduoduo has already crossed this small hurdle!

Behind the rapid development, the question we need to think about is: such a huge GMV must be supported by a huge customer base, but why can Pinduoduo's customer base grow so fast?

1. Let’s start with “0 Yuan Purchase”

When Pinduoduo entered the e-commerce industry, it launched a group buying model that seemed extremely low-end to "insiders": 0 yuan purchase.

Or maybe you are still questioning: Can you really make money by buying for 0 yuan?

Now I tell you: Yes! And you can make a lot of money!

The basis of “0 Yuan Purchase” is: you can really get the product for 0 Yuan, and shipping is free, but the process is too laborious.

For example, you posted a request in your circle of friends asking for help in bargaining. At the beginning, your friends would come to your aid and help you. At that time, a single bargain could reduce the price by more than ten yuan. You might feel secretly happy and think that Pinduoduo was being stupid.

But in the end, when there was just that last little bit left, it felt like every cut was like cutting on cotton, and only a few cents or even dimes could be cut off.

However, no matter how long the process is, in the end, Pinduoduo's free and free shipping goods are delivered. Obviously, this is a losing deal - but Pinduoduo doesn't see it that way.

The essence of 0 yuan purchase is to attract users' attention and build a moat for future traffic monetization.

Just like the Alipay “Collect Five Blessings” activity that we all participated in during the Spring Festival, didn’t we still have a lot of fun even though we knew we wouldn’t get much money in the end?

Let's analyze the operation of Pinduoduo's 0 yuan group purchase in detail:

Theoretically, for a product worth 500 yuan, it would take more than 1,000 people to bargain for it, and for a product worth around 200 yuan, it would take more than 300 people to bargain for it.

In other words: the wider your network, the greater your chances of getting a product.

But have you ever noticed how much the “0 Yuan Purchase” products are actually worth?

For example, a pair of earrings priced at 70 yuan on Pinduoduo may be priced much lower on Taobao.

If the group purchase is successful, you can get hundreds of users with a cost of 10 yuan. Even if the group purchase fails, you can at least get dozens of users.

Small capital in exchange for large traffic, Pinduoduo’s “0 yuan purchase” money-making logic is so simple.

2. What is the secret behind Pinduoduo’s success in user growth ?

Pinduoduo’s “success” can be summarized as follows:

First, Pinduoduo has done its best in developing potential WeChat customers.

The potential WeChat customers here include two aspects: one is the consumer market in fourth- and fifth-tier cities; the other is the group that was previously isolated from e-commerce.

A large number of grandparents don’t know how to use Taobao, so Pinduoduo lowered the threshold for using its own app, with no shopping cart, no search...

The easy-to-use operation and the cheaply priced products have made a group of elderly people addicted to online shopping. Pinduoduo has captured the WeChat customers in this way.

Second, traffic monetization was achieved through social networks .

This can be said to be Pinduoduo's biggest innovation in its business model .

In the past, the mainstream approach to social e-commerce was to seek KOL endorsements, which solved the problems of trust and traffic diversion, but did not solve the problem of traffic monetization.

Pinduoduo achieves traffic fission and monetization through group buying and social networks, which is its core value.

Third, a brand new e-commerce logic.

Pinduoduo founder Huang Zheng talked about his views on the current e-commerce logic.

Huang Zheng said that Pinduoduo created a new logic: people-centered e-commerce. "We get to know people through group buying, and have people recommend products to us. Later on, we will transition to machine recommendations."

In other words: Pinduoduo is not simply selling goods, but matching goods with people. Some people are suitable for high-quality and high-priced goods, while others are suitable for cheap and low-quality goods.

Pinduoduo first considers what the person needs, and then determines the person's needs by analyzing consumption habits, allowing the right person to buy the right things in the right scenario.

This is completely different from the previous e-commerce approach that focused solely on products.

In short, Pinduoduo has adapted to the development trend of social e-commerce. Its strategy is more tasteful than that of the WeChat merchants who got the aircraft carrier. It has been omnipresent in understanding user needs. There is still logic behind Pinduoduo's explosion.

3. Pinduoduo, you have successfully attracted the attention of the bosses!

Now, without even saying hello to its big brother, Pinduoduo has managed to attract the attention of Alibaba and JD.com.

As a big player in the e-commerce industry, Alibaba will naturally not "allow" its younger brothers to cause trouble on its own turf: Alibaba recently launched the Taobao Special Price Edition APP, which can be regarded as a positive response to Pinduoduo.

At the same time, JD.com officially launched the low-price group-buying platform JD.com Pinduoduo in March 2018, and attracted merchants to join with a low commission of 1%.

Relatively speaking, given Alibaba's size, Pinduoduo cannot pose a substantial threat to Alibaba.

So the most panicked person at this time should be JD.com.

JD.com’s 2017 full-year financial report released in early March showed that its net revenue increased by 40.3% year-on-year in the 2017 fiscal year.

However, in this quarter's financial report, JD.com still did not list the GMV growth rate. On the day the financial report was released, JD.com fell 7% before the market opened and closed down 5.22%, with its market value evaporating by about 21.8 billion yuan.

Compared with Pinduoduo's rapid user growth, as of the end of 2017, JD.com's annual active users were 292.5 million, a year-on-year increase of 29.1%, far lower than the 46% growth rate in the same period last year - by analogy, it slowed down by 16.9 percentage points year-on-year.

It was already difficult to confront Tmall head-on, but Pinduoduo suddenly overtook it from behind!

Of course, it is hard to say how long Pinduoduo will remain popular.

The biggest problem: Pinduoduo’s quality is currently difficult to fully control.

Data shows that the current consumer complaint rate about shopping on Pinduoduo has reached an astonishing 13%, which even exceeds the peak complaint rate of 8.6% on Taobao that year.

Perhaps, without anyone else having to do anything, Pinduoduo began to collapse from within?

As Pinduoduo said: "We are comprehensively rectifying and standardizing the Pinduoduo platform and strengthening supervision of product quality of merchants. In the end, consumers have the final say on how big Pinduoduo can be."

Regardless of how big Pinduoduo can become in the future, this passage at least tells us one of Pinduoduo's points of view: putting users first is a prerequisite for user growth.

The author of this article @Shanghai Jun was compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting!

Product promotion services: APP promotion services, advertising platform, Longyou Games