Pinduoduo is a Chinese social eCommerce platform founded in 2015. Only 3 years later, in 2018, it raised $1.6 in a NASDAQ IPO, and is now said to be the third largest eCommerce platform in China by number of users.
The Pinduoduo marketplace offers a wide range of products, similar to other marketplaces. But it is also known for offering buying incentives and super-cheap goods like nowhere else. This appeals to many of China’s budget shoppers in smaller cities and rural areas.
Pinduoduo has built a “team purchase” model, allowing users to participate in group buying deals. This means that a merchant goes on the platform and offers a product, indicating a minimum group size. Users can then share Pinduoduo’s product information on social networks, such as WeChat, invite their contacts to form a purchasing group, and together get a better deal. This model can potentially offer more profits for manufacturers who do not have to go through distributors.
The social eCommerce model keeps users more engaged and motivated. In the words of the company: “TOGETHER, MORE savings, MORE fun”.
How Pinduoduo does it
Combining social eCommerce, shopping experience, steep discounts, and mobile payments enabled Pinduoduo to achieve meteoric success in China.
This extremely cheap marketplace has different ways to lower product prices. One way is choosing products of “no name” brands. Another way may be counterfeit products. This raises a host of other issues, such as poor quality and intellectual property protection.
Fighting fake goods
As a publicly listed company traded in the U.S., Pinduoduo has taken steps to prevent the sale of fake goods on its platform. It also announced other initiatives to fights counterfeits.
However, in April 2019 the US Trade Representative (USTR) put the company on its “notorious markets” blacklist for violations of intellectual property rights due to the issue of counterfeits being sold on the platform.
In its report, the USTR said that many of the company’s “price-conscious shoppers are reportedly aware of the proliferation of counterfeit products on pinduoduo.com but are nevertheless attracted to the low-priced goods on the platform.”
According to the USTR report: “A particularly common and pernicious form of counterfeit products on pinduoduo.com is so-called “Shanzhai” products, also known as “parasite brands.” These are products whose brand name and trademark imitate a legitimate brand in a bid to fool consumers into thinking that they are buying from the better-known brand, taking advantage of loopholes in Chinese trademark law.”
Recognizing Pinduoduo’s efforts to address the problem, the report concludes that “these measures fell short of fully addressing the problem.”
In response to the report, Pinduoduo assured it will be proactive about taking down fake goods.
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