screen-shot-2020-12-28-at-111425-am-1609172079466.png
Source: Pinduoduo

Pinduoduo Gives Investors Access to China's E-Commerce Market

By

Updated

Pinduoduo (PDD) is an e-commerce platform that offers a wide range of products. The company sells everything from groceries and home appliances to iPhones. The app has quickly grown since it was founded in 2015 with 195 million monthly users, according to Tech Crunch. Pinduoduo is China's second-largest e-commerce platform. 

Article continues below advertisement

Based in Shanghai, Pinduoduo allows users to share what they want to buy on social media platforms like WeChat to form "shopping teams," which helps them get lower prices. According to a video on the company's English website, Pinduoduo is meant to be a "virtual bazaar" to combine the experience of discovering new things and sharing with friends.

pinduoduo-stock-e-commerce-1609177441009.jpg
Source: Pinduoduo Facebook
Article continues below advertisement

How Pinduoduo started

Pinduoduo was founded in September 2015 by entrepreneur Colin Huang. He worked at Google before leaving the company in 2007. Since then, Huang has been creating his own companies. 

According to Business Insider, because of his background, Huang knew that he could create something unique in the e-commerce space. In 2015, according to Tech Crunch, he founded Pinhaohuo — an e-commerce platform for fruits. Pinhaohuo and work in the gaming space gave way for the beginnings of Pinduoduo.  

Article continues below advertisement

"If you close your eyes and visualize the next stage for Pinduoduo, it would be an exemplification of a multi-dimensional space, seamlessly integrating cyberspace and the physical space," Huang wrote in the company's IPO prospectus. "It would be a combination of 'Costco' and 'Disneyland.'" 

Only three years after it was founded, Pinduoduo stock was public on NASDAQ in 2018. Since the beginning of November 2020, the company's stock has consistently been worth over $100 a share. 

Article continues below advertisement

Shoppers get lower prices on Pinduoduo

According to the video below, shoppers are shown the standard price of an item alongside the discounted price. To "unlock" the discount, they have to form "shopping teams" of two or more people. They can join an existing team of friends or strangers or create their own team. The more people there are on a team, the bigger the discount. 

Another video on the company's website says that instead of using a search bar function, Pinduoduo gives its users a personalized feed of products. The company combines products the user may need, like toiletries, with other things they may want to buy. A Pinduoduo blog post says that sharing products with friends helps users customize recommendations. 

Article continues below advertisement
Source: Pinduoduo's YouTube

How Pinduoduo makes money

According to Business Insider, even though Pinduoduo sells products at low prices, the platform really makes money through its sellers. They pay for the advertising that's featured and allows the app to keep prices so low. This makes more money for the company than purchases on the platform. 

Through the social aspect of the platform, users can also play games, which helps them save money. In particular, one game offers users cash rewards for inviting others to the platform, which helps Pinduoduo bring in more users. The platform retains the users with games that encourage them to play and see more products every day. 

Advertisement

More From Market Realist