E-commerce app Pinduoduo gaining ground on Taobao

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An e-commerce platform popular in third- and fourth-tier cities has been one of China’s most downloaded apps this year, coming well ahead of big-name rivals Taobao and JD.com.

Pinduoduo, which claims to have more than 300 million users, has been the most downloaded online shopping app in China from Apple’s App Store in the past three months, as well as one of the most downloaded apps over the past month overall, according to data from analysis database App Annie.

On Tuesday, Pinduoduo was China’s second most downloaded free app on App Store. In comparison, Alibaba’s Taobao was the 17th most popular, and JD.com was ranked 44th.

Pinduoduo, mostly unknown outside of China and relatively unfamiliar to most first-tier city residents, surpassed JD.com in terms of daily active users in January, with 55.9 million as of last month.

JD.com had 34.3 million, while Taobao remained far ahead with 172 million daily active users, according to Chinese consultancy firm Jiguang.

So what makes Pinduoduo so popular, particularly outside of China’s biggest cities?

The concept is similar to Western app Groupon, with users encouraged to join forces with other buyers to purchase goods in bulk, receiving significant discounts as a result.

Pinduoduo has found particular success in China thanks to Tencent’s WeChat -- the country’s most downloaded app, with more than one billion active monthly users worldwide.

Acting as much more than a messaging app, WeChat incorporates many “mini-apps” within its digital ecosystem, with Pinduoduo’s mini-app the third most popular among WeChat users.

Pinduoduo encourages shoppers to share links with their friends on WeChat, building up a group of buyers big enough to make a bulk purchase.

Within three years, the e-commerce platform has grown so quickly that it was valued at 15 billion US dollars in April, before filing for an IPO in the US at the end of last month.

In April, Pinduoduo worked with the local government of Zhongmu County, Henan Province, to help local farmers sell garlic in bulk across the country. /VCG Photo‍

In its IPO filing to the US Securities and Exchange Commission, Pinduoduo’s parent company Walnut Street Group said revenue in 2017 hit 1.7 billion yuan (261 million US dollars.)

Data from Jiguang show 64.7 percent of Pinduoduo’s users are based in third- and fourth-tier cities, compared to only 51 percent of JD.com users. However, first-tier cities represent only 7.6 percent of Pinduoduo’s user base.

While Pinduoduo offers cheaper goods than its Tencent and Alibaba backed rivals, making it particularly popular in areas with lower incomes, it has also been praised for its ease of use. According to Bloomberg, Pinduoduo is easier to use than Taobao, a factor that pushed Alibaba to launch an easy-to-use version of its flagship shopping app in February.

The platform also works mainly with local Chinese companies and producers, rather than the big international brands present on Alibaba and JD.com’s platforms.

Talking to Tie Meiti, a Chinese media website, Pinduoduo founder Da Da said “our thought process right now isn’t to do first-tier international brands. Our thought process is to satisfy the broadest needs, good-enough-to-use, meet basic demands.”

Pinduoduo may have overtaken JD.com in terms of daily active users, but it still remains far behind Taobao. That being said, there are still more than 500 million people in China without Internet access, living mostly in rural areas, providing a huge potential market for Pinduoduo’s expansion in the next few years.

As it looks to catch up with Alibaba, Pinduoduo can also continue to exploit its relationship with WeChat. The messaging app, developed by Tencent, does not allow mini-apps operated by its biggest rival Alibaba, meaning Taobao cannot use social media in the same way as Pinduoduo to attract new users and buyers.