For many outside China the successful IPO on Nasdaq of group purchasing platform Pinduoduo, mildly comparable to the less successful Groupon, came as a surprise. Shanghai-based business analyst Ben Cavender tries to explain the success at Inkstone. It uses the popular Tencent platforms WeChat and QQ.
Pinduoduo has a mini-game called “Duo Duo Orchard,” in which players plant a tree of their choosing on the app and collect points by logging in daily, making purchases and inviting friends. After collecting a certain number of points, users will receive a box of fresh fruit.
Pinduoduo’s social media features give it “more stickiness” than Groupon, according to Ben Cavender, a senior analyst with the Shanghai-based China Market Research Group.
“It generates a lot more interest and there’s an entertainment value to the shopping process,” Cavender told Inkstone…
China’s online shopping market has long been dominated by two giants, Taobao of Alibaba (which also owns Inkstone) and JD.com.
Pingduoduo had 168 million monthly active users in May, behind Alibaba’s 502 million and JD.com’s 273 million, according to data compiled by consulting firm Jiguang.
“I think increasingly what we are going to see is more space for different kinds of models,” Cavender says. “It may take some share away from Taobao and some of the low-end market share away from [Taobao-owned] Tmall and JD.com. But Pinduoduo’s not going to replace them.”
Currently, the majority of Pinduoduo’s users live in cities with populations of fewer than three million people – small cities with users who are more price-sensitive.
In the more affluent cities, Taobao and JD.com still dominate…
“If Alibaba decides that’s a market they want to own, they are going to spend a lot of money, and Tencent has to decide how much they want to support Pinduoduo’s long-term growth,” Cavender says.
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