Saturday, June 23, 2018

PINDUODUO IS FAST BECOMING A FORMIDABLE RIVAL TO ALIBABA

While Alibaba has enjoyed long years of being number one in the Chinese online shopping industry, another rival seems to have loomed over the giant and takes the second spot of top eCommerce apps in China.
For those who don’t know about Pinduoduo yet, it is an eCommerce platform that was founded by former Google staff Colin Huang. Huang formed the platform back in 2015 when he returned to China. From 2015 till the end of 2017, the startup was already able to garner a total of 156.5 million users, which was a 724% increase. This was a record breaker that no other giant was able to accomplish. This is why Pinduoduo and Alibaba were immediately put together under the spotlight.
What Pinduoduo Does
What makes Pinduoduo (PDD for short) very successful is its unique way for buyers to scout for extremely cheap buys. The platform allows its users to buy in groups by letting the users bring in friends to make a joint purchase. When there are enough friends shopping on the platform, everyone in the circle gets a discount.
What makes the platform even more amazing is that it connects the buyers directly to the manufacturers, thus allowing them to get products even cheaper— cheaper than in Alibaba.
It’s also really easy to use as it’s already a part of Wechat’s existing system. The platform allows you easy access to discounts of up to 20% or more. Consumers will also have the chance to get a lot of extra freebies and coupons for certain purchases. Another cool thing about PDD is that even if it is driven by Wechat, it is separate from Wechat and may function independently. This means that if Wechat were to pull out, PDD would still run.
Overall, the Pinduoduo business model combines the social ecosystem of Wechat and the eCommerce concept that powers Alibaba. This gives customers an amazing shopping experience as a whole.
Pinduoduo’s Entrance In the Market
Although Huang already founded the app in the start of 2014, it was only in 2015 that it was officially launched to the public. During this time, the first round of investors was able to raise a total of $8 million from investors that included people from OPPO, Vivo, and S.F. Express. This amount was already able to get them started on a successful launch.
In 2016, it was able to get another round of investments which reached up to $110 million with Tencent and Banyan Capital as two of the main investors. In mid 2016, PDD was already able to garner 100 million with more than 1 million transactions daily. This allowed them at least $159 million monthly.
Today, the value of the company is now at $6.3 billion, which shots the Pinduoduo stock price up and makes it one of the fastest growing companies in China.
Pinduoduo Versus Alibaba
With Pinduoduo growing to such heights, it’s clear as day that there will be a huge competition between PDD and Alibaba, especially since Alibaba’s other big competitor Tencent has backed up PDD. What’s even worse for Alibaba is that Pinduoduo and Taobao have been forming some sort of relationship wherein consumers of Taobao and Pinduoduo have been interchanging app usage from time to time. A small partnership between the two could mean big trouble for Alibaba.
Other than that, social media aspects have never been a strong point of Alibaba. Even when Alibaba released Ali WangWang as an instant messaging tool or Dingtalk, they still haven’t able to make a mark as a good social platform, unlike Wechat or QQ. Of course, Wechat is heavily backing PDD, so this doubles the competition Alibaba is going to get.
Since PDD has been growing like crazy, they show strong potential to overcome even the revolution that Alibaba started. An increase in monthly active users reaching 153 million in just two years is much more of a record than the several years it took for Alibaba to reach 515 million. That said, PDD could already match Alibaba’s user count in a few years time if Alibaba doesn’t beef things up.
Conclusion
With PDD being a very strong competitor, Alibaba will definitely have its hands full. In order for Alibaba to still carry their edge, they’re going to need more innovations and definitely more investments. They also have to start adapting to the newer needs of the consumers in order to still stay ahead of PDD.

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