November 11 is a special date in the Chinese calendar. Not as a recognized holiday or date with any significant historical context, but for Alibaba’s annual shopping festival. China’s dominant e-commerce and internet giant has created, through elaborate PR and substantial discounting, a shopping festival with the inviting moniker “single’s day” that implores Chinese consumers to purchase products. Given the scale of China’s e-commerce user base, the inherent frugality and appreciation for discounts, and the country’s ever-increasing materialism, the shopping festival has become a national event. The nickname “single’s day” traces its history to an “anti-Valentine’s” event that originated at Nanjing University to celebrate students singledom.
If you compare the history of China’s annual e-commerce bonanza with the ethos of new industry entrant and rising star of the Chinese internet sector, Pinduoduo, the contrasts are stark. Pinduoduo has ascended onto the world stage in 2015, and just last year it became a publicly listed company on NASDAQ despite being only four years old. Following the IPO last July that raised $1.63 billion, Pinduoduo has gone on to aggregate over 480 million active buyers with 11 billion orders annually. Founder Colin Huang and his team have pioneered a social-buying experience that leverages much of the existing internet and logistic infrastructure in China.
However, on a day when their e-commerce rivals like Alibaba’s Taobao and JD.com were boasting about their inflated GMV numbers during the shopping festival, Pinduoduo took another approach. Pinduoduo’s team-purchase business model is directly anathema to the “single’s day” branding that the 11.11 shopping festival relies on. The inherently social nature of Pinduoduo’s business model consistently endows the platform with discounted prices, regardless of promotional hype. A spokesperson for the company said, “Pinduoduo focuses on providing maximum value for our users 24/7, 365 days a year. Double eleven is just another day for us.”
In a country where rising income levels have birthed a penchant for rampant materialism further fuelled by the convenience of e-commerce and mobile payments and developed logistical infrastructure, Pinduoduo is offering an alternative to satisfy the demand for more products at affordable prices. In 2013, market research firm IPSOS conducted a survey in 20 countries on materialism. In response, to the question “I measure my success by things I own” China far outpaced other countries with an extraordinary 71% of respondents agreeing with the statement.
Pinduoduo’s affordable pricing strategy enabled by its social purchasing method has enabled greater numbers of Chinese consumers to enjoy the reality of an e-commerce dominated marketplace. This directly correlates to one of Pinduoduo’s company mantras “Benefit All”. The prioritization of user acquisition is nothing new for Chinese internet companies, but Pinduoduo has found a revolutionary new way to allow their existing users to act as de-facto marketers, acquiring more users for the company with essentially no cost to the firm. Another facet of this “Benefit All” mentality exists in the accessibility of Pinduoduo on the merchant side, as the Shanghai-based company charges significantly less to onboard merchants than many of the other traditional e-commerce platforms. The removal of prohibitive entry costs for merchants entices the numerous SMEs in China, who leverage e-commerce to transform their businesses.
Alibaba may grab the headlines for the extravagance of their livestreams and the sales numbers to match, but for a Chinese consumer base hooked on materialism, 11.11 represents a period of indulgence that manifests in binge buying behavior driven by the dopamine inducing e-commerce obsession. Meanwhile, the consistency of Pinduoduo’s expansion will slowly metastasize to encompass a larger portion of the Chinese population. No longer is the company relying on the fringes of the consumership in lower tier cities. As the rest of China’s population in more affluent areas becomes more aware of the high end products Pinduoduo offers, like say the iPhone, the company’s influence will expand to rival the existing incumbents in the e-commerce space like Alibaba and JD.com. Pinduoduo’s accessibility to both merchants and consumers alike positions the company as the go-to platform for the average Chinese citizen who loves shopping online, but who also prioritizes value for money. These competitive differentiators, evidenced by the consistent growth in operational and financial metrics have powered Pinduoduo’s stock price to $41.57, from its IPO price of $24.60.