China’s No. 4 Pinduoduo (PDD) Is Already a Social Commerce Giant

China's No. 4 Pinduoduo (PDD) Is Already a Social Commerce Giant

China has a new e-commerce startup ‘unicorn’ that is putting social commerce back on the map, in a big way. Pinduoduo, or PDD, raised $100 million in February, bringing the valuation of the company to $1.5 billion. (PDD raised its first round in 2015.)

Business of Fashion / Bloomberg has a long portrait of the founder (a former Google manager) and the company:

Pinduoduo, or PDD, is a kind of Facebook-Groupon mashup that Huang believes could revolutionise e-commerce. PDD just raised more than $100 million, according to people familiar with the matter, valuing the company at more than 10 billion yuan ($1.5 billion) less than two years after its founding.

​PDD is using WeChat to bring Tencent’s (WeChat owner) social world and Alibaba’s marketplace approach together. And PDD seems to have found a working formula, putting the company only behind Vipshop in GMV. (Vipshop is China’s no. 3 behind Alibaba and JD.)

The total amount of goods sold on the platform, or gross merchandise value, went from 100 million yuan a month in early 2016 to 4 billion yuan a month now, Huang says. That puts PDD just behind Vipshop, a flash sale website that trades on the New York Stock Exchange with a market value of more than $8 billion. “We think we will pass them in the next 12 to 18 months,” Huang says, his PR handler shifting nervously nearby.

​Here’s how it works:​

Most people use the PDD app within WeChat. You open up the messaging service on your phone, then click on PDD. The home screen has tabs for categories like food, clothes and bedding. Once you choose a category, you get a vertical list of products you can scroll through, say lychee or apples in fruits.

The app has the feel of a game, with colorful photos and hidden bargains. Deals change every day and, as you scroll through a category, the discounted price is shown below the image. You click on an image of mangos at 34.8 yuan for eight and find the price is 39.9 yuan if you buy alone. To get the discount, you have to find a friend to join in the purchase. Because you’re already on WeChat, you can instantly pitch others.

​To get sense of the percentage distribution on the Chinese market, this tale of Blue Moon is illuminating:

Blue Moon, one of China’s biggest producers of laundry detergent, said sales have surged on PDD since it began working with the app in September. They now total 10 percent of the company’s online revenue, about the same as on JD.com. Xu Hongyuan, a Blue Moon manager, forecasts that will rise to about 15 percent by the end of the year with more promotions, though still short of the 60 percent on Tmall.

​On the back of a platform like WeChat, companies like PDD may very well challenge Alibaba in several years; and they almost certainly will challenge JD.com. Imagine half a dozen different ‘PDD’s tackling different use cases on top of WeChat. That’s why WeChat and WeChat Pay are a big deal long-term.

​One of the investors in PDD is Tencent Holdings.

​More on this topic:

​* Alibaba’s Alipay Is Under Fire from Tencent’s WeChat Pay in China
​* How China Became the First True Mobile-First Commerce Nation
​* How China Post’s Ule Is Building the World’s Largest Retail Network
​* Taobao Villages: Alibaba Is Deeply Entrenched in More and More Rural Regions in China

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