Alex Kelso
23 August 2019 0 Comments

If you’re living under a rock in one of China’s tier-four cities, there’s still a very good chance you’ve heard about Pinduoduo (PDD). In China’s Alibaba and JD-dominated eCommerce market, even giants such as eBay and Amazon struggle to make a dent. Despite the challenges, Pinduoduo has continuously achieved momentous growth since launching in only 2015.

Last year PDD overtook by number of active users and cemented their position as China’s third largest online retail provider. They also raised $1.6 billion on a $60 billion valuation in their NASDAQ IPO, followed by a further $1 billion in a share-raising earlier this year. Their success can be largely attributed to their seemingly intuitive and simple strategy: serving China’s underserved, but fastest growing segments.

Last month, we visited Pinduoduo to gather insight on how Western brands can work with China’s new eCommerce superpower.

Infographic: GMV, Active Buyers, Monthly Active Users (MAU), Orders fulfilled, Merchants, App Installations by number of Devices, Age and Demographic breakdown, Average New Daily Buyers, Average Daily Usage frequency, Retention

Pinduoduo’s Key Strengths


Strength 1. Savings for China’s Underserved Populations

Pinduoduo adopts a customer-savings first mentality towards their supply chain, similarly to flash sales eCommerce platform VIP. However, VIP achieves this by enforcing rigid and complex pricing structures upon their suppliers. By contrast, PDD opts to cut out middle-men and connect consumers directly with manufacturers and distributors (where possible). Consumers also reap the benefits of micro-economies of scale via ‘group buy’ discounts.

A Flowchart demonstrating how Pinduoduo Group Buys work.


The supply-chain efficiencies that follow enable PDD to cut costs and pass these savings onto the customer. The pricing advantages are clear. Pinduoduo’s average order price sits at roughly ¥30-50, a fraction of Tmall’s ¥214 (11:11, 2018) and JD’s ¥422. The UI snapshot below highlights just how cheap these listings can be.

User Interface (UI): Categories, Promotions, Product Feed, Navigation

PDD’s goods also ship express to most lower tier cities and seldom charge for delivery. The same cannot be said for Alibaba’s Taobao, where merchants tend to charge a premium for long-haul shipments.

Strength 2: A Truly Social and Shareable eCommerce Experience

For years, Alibaba has been attempting to create a more social eCommerce experience for their Tmall and Taobao users. Examples include: emulating WeChat’s interface on Alipay, establishing linkages with Douyin, Little Red Book and Weibo, launching live streaming etc. In parallel, Pinduoduo has been building a powerful social eCommerce model, the likes of which has eluded Alibaba. Group-buys provide a direct financial incentive for users to share listings (and the PDD brand) with friends and family. This transforms online shopping into a fun, socially-engaging and rewarding experience. Furthermore, following Tencent’s 2016 investment: PDD also integrates seamlessly into the user’s WeChat experience. This provides a world of opportunity for brands to connect with customers in truly innovative and engaging ways.

Strength 3: Engagement through Entertainment

Relative to Taobao’s search-based interface, Pinduoduo utilises an almost social newsfeed comprised of user-tailored listings and promotions. In other words, on Pinduoduo, the goods find you. PDD also frequently executes targeted initiatives (such as coupons, free gifts and lottery events) to boost user-engagement. Furthermore, brands can also tap into China’s booming mobile gaming market, and engage with consumers via Pinduoduo’s games and ‘game-like occasions‘.

[Above: screengrabs from Pinduoduo’s Valentine’s Day Group Treasure Hunt featuring Durex and Hershey’s.]

Overview of Strengths: Pinduoduo’s Winning Targeting Strategy

Pinduoduo’s core strengths rest in their commitment to bringing modern Chinese eCommerce standards (i.e. cost and delivery efficiencies) to China’s lower-tier and rural (i.e. new-to-internet and lower-income) populations. Beyond growing 3-4x faster than their tier-one counterparts, lower-tier cities are also comparatively underserved and uncontested by major brands and retailers. The overwhelming majority of low-tier internet-active populations regularly use WeChat and can hence engage with Pinduoduo. By contrast, fewer utilise Taobao and even fewer are content paying shipping fees, or for that matter, Taobao’s premium pricing relative to Pinduoduo.

Price Comparison Vs Taobao

“For the same product, I will pay ¥10 on PDD or ¥30 on Taobao”


The net result of Pinduoduo’s approach to eCommerce is a user-base comparatively more loyal than any of China’s other major platforms.

Pinduoduo Loyalty: Relative to Tmall, JD and VIP

Increasingly Important and Relevant, Yet Continuously Overlooked

Leveraging the lower-tier opportunity saw PDD turn hit ¥100 billion Gross Merchandising Value (GMV) in little over two years. This same feat took Taobao over five years and JD fifteen. In 2018, PDD’s GMV hit ¥471 billion (+234%), earning them the crown of third largest online retail provider. Their 443 million active users make them second only to Alibaba. As such, for any FMCG brand developing a China strategy, Pinduoduo is becoming increasingly difficult to ignore. This is particularly true for food brands, which represent PDD’s largest category.

Despite this, a bafflingly high number of agencies continue to omit PDD from their eCommerce market share breakdowns. The most recent figures available that include PDD are below – courtesy of the China eCommerce Research Centre.

Market Share H1, 2018 Alibaba, Tmall, Taobao,, Pinduoduo, Suning,

Key Challenges Facing the Giant

While PDD provides a wealth of opportunity and potential, the platform is not without limitations. In tier-one cities, many consumers view Pinduoduo as a platform for Ayis (i.e. aunties, slang for housekeepers) living in tier-four cities. PDD’s goods are generalised to be low-value, low-quality and low risk items such as tissues, slippers etc. In other words, PDD is not the first port of call for tier-one mothers seeking high-grade infant formula.

Challenge 1. Spam-Like Model

On the female-oriented social-eCommerce hybrid Little Red Book: users share product listings as an extension of their own esteem. By contrast, PDD’s “social” group-buy invitations can verge dangerously close to the line of spam. In tier-one cities, these invitations are widely stigmatised (particularly by younger audiences); driving many to use PDD in ‘secret’. This rings true for several of my co-workers here in the China Skinny Shanghai office. Some even impose standing rules on their friends and families (including their own mothers) not to send them group-buy invitations.

Secret Users

“Why doesn’t anyone around me use PDD? Are they using it secretly?”

“Actually yes, I am using it secretly”

T1 Pretenders

“Users from tier-one cities are just pretending that they are not using PDD”

[Note: The attitudes of tier-one consumers are not necessarily reflective of China’s broader population. Tier-three and four respondents presumably welcome group invitations with greater warmth and enjoyment.]

Challenge 2. Cheap, Low Quality and Non-Authentic Perceptions

Pinduoduo’s highly publicised counterfeit and IP issues deepen their low-cost and quality reputation. PDD is widely seen as a haven for tens of thousands of daigou and counterfeiters operating unchecked as merchants. The prevalence of the issue was punctuated in April, with the USTR adding Pinduoduo to their list of notorious markets.

Mr Muscle Counterfeit

[Screengrab of a counterfeit Mr. Muscle kitchen spray found on PDD]


Challenge 3. Alibaba Enforcing Mutual Exclusivity

Further to PDD’s list of challenges is Alibaba’s attitude of mutual exclusivity with Tencent-affiliated brands and merchants. We’re encountering a growing number of brands having their Tmall visibility cut for little reason other than their JD presence. This is a real point of contention for PDD. In April, Pinduoduo CEO Colin Huang even called Alibaba out and requested a more level playing field.

A Promising New Structure and eCommerce Strategy

In spite of these challenges, PDD appears serious about addressing their issues and enhancing their legitimacy. In 2018, Pinduoduo raised their investment in R&D (covering talent acquisition, algorithm design, systems etc.) by 764% to ¥1.12 billion. This is allowing their technical engineers to develop algorithms aimed to identify marketplace irregularities. In 2018, these initiatives led to the closure of 60 thousand counterfeit/illegitimate shops and more than 30 million suspicious links. Such initiatives reportedly shut down over 10 million product listings and over 95% of the platforms’ counterfeiters. Furthermore, PDD now utilises a ¥150 million fund to help settle such disputes.

As 2020 approaches, we may begin to see a new, safer, legitimate, engaging and slightly more premium side of Pinduoduo. This year alone, PDD is on track to double the size of their technical engineering team from 2,000 to 4,000. This includes 1,000 solely focused on algorithm development.

In parallel to this, PDD is cutting ties with Daigou traders and bringing their foreign supply of goods above-board. They are aggressively expanding their Cross-Border eCommerce (CBEC) channel, with plans to recruit 500K overseas SME merchants by 2022. Though only accounting for a fraction of sales currently, their CBEC platform already provides noticeably more premium offerings, with an average order value of roughly ¥150. This is reflective of a new and additional strategic focus of PDD to begin to tap into China’s more contested, but wealthier tier-one and two cities.

Currently, Pinduoduo is seeking out foreign FMCG brands with decent local sales (i.e. in their home countries), with marketing and sales capabilities for China and whom are working with KOLs. If you’re looking to enhance your strategy for Pinduoduo or China’s broader digital market, feel free to reach out to China Skinny.