Pinduoduo is the new charm in the already humongous e-commerce space in China. While Alibaba and continue to dominate the sector with 50.1% and 26.51% respectively of the total market share, recently Pinduoduo has been making significant inroads in the market with its current market share lying at 12.8% (according to

In this post we are going to look more closely at Pinduoduo which is seen as a major rival to Alibaba's and's dominance in the Chinese e-commerce market.


Colin Huang Zheng, by South China Morning Post
Colin Huang Zheng, by South China Morning Post

Founded in September 2015 by former Google engineer Colin Huang Zheng in Shanghai, China, Pinduoduo is the largest interactive e-commerce platform in China and the world. It is a third-party social commerce platform which covers almost all major product categories like apparel, fresh produce, electronic appliances, sports and fitness equipment among many other. According to Pinduoduo, it focuses on selling off-season products of brands and retailers, and non-branded products at a flexible price and as well as focus on a few popular products which can allow them to gather a large amount of orders in a relatively shorter time.

Pinduoduo has raised a total of $3.8B in funding over the course of 6 funding rounds. The following table summarises the various funding rounds taken by Pinduoduo. It is noteworthy that Tencent Holdings has been a principal shareholder of Pinduoduo currently owning 16.9% of Pinduoduo.

Funding Rounds of Pinduoduo
Date Funding Round Money Raised Lead Investors
September, 2015 A $8 M Gaorong Capital
20 July, 2016 B $110 M Sequoia Capital China
1 February, 2017 C $213.7 M Tencent Holdings, Sequoia Capital China
11 April, 2018 D $1.4 B Tencent Holdings, Sequoia Capital China
29 September, 2019 Post-IPO Debt $1 B -
30 March, 2020 Post-IPO Equity $1.1 B -

Pinduoduo became public on 26 July, 2018 and made its debut on the NASDAQ Stock Exchange raising $1.63B. The stock opened with $19.00 in its IPO. The following interactive chart, courtesy of TradingView, shows the variations of the stock over the years.

Some Numbers

Pinduoduo has been on a roll over the years and the numbers do the justice to this very point. Let us look at the highlights of the third quarter 2020 to get a feel for the rise of Pinduoduo.

  • Gross Merchandise Value (GMV) in the 12 month period ended September 30, 2020 was RMB1,457.6 billion, an increase of 73% from RMB840.2 billion in the last 12 month period ended September 30, 2019.
  • Total Revenues in the quarter were RMB14.2098 billion, an increase of 89% from RMB7.513 billion in the same quarter of 2019. This is almost 3X the growth of Alibaba (30%) and (29.2%).
  • Average monthly active users in the quarter were 643.4 million, an increase of 50% from 429.6 million in the same quarter of 2019.
  • Active buyers in the twelve-month period ended September 30, 2020 were 731.3 million, an increase of 36% from 536.3 million in the twelve-month period ended September 30, 2019. Comparing this with those of Alibaba and, Pinduoduo is only behind Alibaba (757 million) and followed by (441.6 million).
  • Annual spending per active buyer in the twelve-month period ended September 30, 2020 was RMB1,993.1, an increase of 27% from RMB1,566.7 in the twelve-month period ended September 30, 2019.

As is evident by the numbers, Pinduoduo is growing at a much faster rate than the industry leaders Alibaba and, directly challenging the incumbents that had taken more than 20 years to get to that position.

An Overview of Key Financials of Pinduoduo
An Overview of Key Financials of Pinduoduo

Business Model

Founder Colin Huang has mentioned that their strategy is the Costco+Disney model. Pinduoduo is a mobile-first e-commerce marketplace whose main attractions are viral marketing and value-for-money merchandise. Pinduoduo has an app and a WeChat Mini Program (courtesy of Tencent Holdings being one of its key shareholders).

Let us understand the business model of Pinduoduo by breaking it down into different parts.

Merchant Side

Chinese women selling Bananas
Chinese women selling Bananas

The early stage of the establishment and development of Pinduoduo was in 2015-16 when the e-commerce field began to emerge as a dominant sector (e-commerce sales reached RMB3.8773 trillion, a 33.3% growth YoY) and advocacy of consumption upgrading was taking place. The impact of this consumption hike resulted in a lot of participation coming from tier-3, tier-4 and other lower tier cities in China. However, the B2C model of Tmall and has limited support for small and medium sized merchants and the benefits provided by Taobao are increasingly encroached upon. These suffering small and medium sized merchants became the first merchants on the Pinduoduo platform.

How does Pinduoduo help these merchants?

As these merchants are small manufacturers or low-end sellers that directly cooperate with small manufacturers, most of the products sold are non-branded or white-brand goods. Less intermediate circulation and no brand premium allows these goods to have a low price. Pinduoduo being a new platform allowed for less competition to the merchants, allowing merchants to become head merchants on the platform. Also the platform's low priced strategy was bound to tilt the consumer traffic to these merchants.

Another major difficulty, with small and medium sized merchants is the inadequate knowledge of the market and the market conditions. Pinduoduo gathers consumer and market data and provides these to the merchants. This information enables the merchants to make effective planning of the resources and commodities. In turn, the reduction in production costs can further reduce prices, thus forming a positive cycle.

User Side

Pinduoduo User Distribution in June 2020, by Statista
Pinduoduo User Distribution in June 2020, by Statista

Huang Zheng’s understanding of Pinduoduo users is price-sensitive users. The first lot of the users on the platform came from third-tier and fourth-tier user groups. This was primarily because of the rapid spread of smartphones in tier-3, tier-4 and other lower tier cities in China. This is a group of people who have low spending powers which allowed the low price strategy of Pinduoduo to fit in quite nicely with them. However with the growth of Pinduoduo as a platform, the user base was not only limited to the lower tier cities and user groups from first and second-tier cities also joined in. In some scenarios, low priced goods have a great appeal and if you can continuously provide good value for money, consumers from tier-1 and tier-2 can also become loyal users.

How does Pinduoduo provide low priced goods?

As previously noted in the above section, most of the merchants on the platform are small and medium sized merchants selling non-branded goods. Apart from these, for each product on the Pinduoduo platform, the shopper can either buy the product individually or initiate or form a group purchase. The concept of group purchase is very unique to the platform allowing users to purchase goods at a much lower price. We will look at this concept at a later part in this post. The whole package of products also defaults to free shipping which further reduces the cost for the user.

Platform Side

E-commerce is essentially to solve the problem of connecting people with goods which Pinduoduo does a little unconventionally. Unlike other e-commerce platforms which rely heavily on search-based inventory index model Pinduoduo's platform, as Pinduoduo likes to say, is designed to resemble a virtual bazaar which aims to help people discover the goods rather than search for them. Pinduoduo also does not rely on heavily personalised recommendations to users and rather it relies on low-cost explosion to guide users to buy goods.

The basic shopping guide on Pinduoduo is more or less along these lines : category tab along with basic product recommendation, simple user demand screening through category tab and then promotion of users' purchasing desire through low-priced products.

Pinduoduo Platform, by Sekkei Studio
Pinduoduo Platform, by Sekkei Studio

The uniqueness in the platform design eliminates distraction to minimise the steps towards buying. The user can simply swipe to switch tabs in the always fixed top category navigation bar which serves as a replacement for the traditional search boxes. Each category tab lists the product recommendations and with no filter option present, all the user can keep scrolling the screen to reach to a desirable product. Scrolling to reach to desired products allows the users to spend more time on the platform giving the platform more time to recommend low-cost products, making people buy initially unintended products along the way. The platform also eliminates the shopping cart feature shortening the decision path significantly and improving sales, as usually a lot of users used to drop out during the checkout process.

Duo Duo Orchard, a game in the Pinduoduo Platform
Duo Duo Orchard, a game in the Pinduoduo Platform

Pinduoduo also takes e-commerce to a new level by bringing up the concept of social-commerce. Social commerce and the various social fission gamification technique allows Pinduoduo, by using discounts and cash stimuli, to induce users to continuously share and spread the platform to the user's social circle, so as to achieve the purpose of activation old users and acquiring new users.

Pinduoduo brought up and popularised the concept of group buying function in which when a user selects an item on Pinduoduo, they can choose to participate in group buying. The more the people that join in the group, the lower the price of the item goes. This encourages buyers to share links to the items they are buying with friends and family over social media. Each item has a minimum number of buyers that are required to join in the group for a successful group buy. Games on the platform allows users to randomly get cash awards and products. Duo Duo Orchard, one of the games on the Pinduoduo platform, gives users a free box of fruits upon the full growth of the virtual tree.

Agricultural Initiative

A Chinese lady on the farm with her child
A Chinese lady on the farm with her child

Pinduoduo is the biggest online marketplace for agricultural produce in China. Consumers placed RMB136.4 billion worth of agricultural product orders on the platform in 2019, a growth of 109% YoY. Taking initiative in the agricultural sector, Pinduoduo launched the Duo Duo Farms initiative in April, 2019 to help farmers in impoverished places of China to increase their productivity and also help them sell their produce on the platform. The company aims to launch 1000 Duo Duo Farms in 8 provinces in China's western provinces in the next five years, with them setting their first ever in Baoshan, Yunan. Pinduoduo, through its Duo Duo University programs, trains merchants in e-commerce related skills and helping to fill the rural talent gap. Pinduoduo recently held a competition to attract new ideas and technology to the whole agricultural process.

Challenges and Opportunities Ahead

Pinduoduo's new logistics is looking to compete with Alibaba's Cainiao
Pinduoduo's new logistics is looking to compete with Alibaba's Cainiao

While the company has made a space and name in the industry, future for Pinduoduo can be very challenging and exciting as well. The Consumer to Manufacturer (C2M) concept which is actively promoted by Pinduoduo is still pretty new and needs a lot of effort to be developed. The supply chain of small and medium-sized manufacturers is the foundation of Pinduoduo but it can also drag it down if it is not worked upon. Unlike its rivals Alibaba and, Pinduoduo currently does not own a logistic data network, however last year founder and then CEO Huang Zheng announced its plan to develop its own logistic data network to better compete with the other giants in the industry.

Pinduoduo has its share of controversies as well. Many of this is attributed with the quality and legality of the product. Pinduoduo has come under the scrutiny, often by press calling the company out for inferior and imitation products. To counter this, Pinduoduo launched an online Intellectual Property Protection Portal to communicate with owners. The portal allows brand owners and other right holders to make takedown requests against false products. This year, Pinduoduo also introduced mini programs that enable the users to verify the authenticity of branded products. However still more work needs to be done to efficiently penetrate into tier-1 and tier-2 cities where Alibaba and already have a stronghold.

Pinduoduo launched its Duo Duo Live streaming service in January 2020. This allows creators and makers to showcase their own products and services. If nurtured well this service could help in enabling trust between the consumer and the maker and also allow them to reach to a larger audience, just like what Taobao Live does for its respective platform.

In  April 2020, Pinduoduo made its first strategic investment by investing in Gome Retail Holding, a major household appliances and electronic retailer in China. Pinduoduo could use this investment as an opportunity to boost the sales of household appliances and electronic items on the platform.

The road ahead for Pinduoduo is definitely not going to be an easy ride with Alibaba and upping the ante but with new CEO Lei Chen in the office things are surely going to be exciting. The Chinese e-commerce sector is definitely a thing to keep an eye on in the near future to come.