As of May 15, 2020, the market capitalization of Pinduoduo has exceeded 70 billion US dollars, making it the fourth largest Internet company in China after BABA, Tencent and Meituan. Obviously, there is little power to stop Pinduoduo from moving forward until he surpasses JD.com on GMV, approaches Taobao, and makes a profit around 2021. The question now is no longer whether Pinduoduo can be "mainstreamed", but how fast can be "mainstreamed" and "conquer new territories" and how high the ceiling can be.
However, the market has not fully understood the logic of Pinduoduo's rise. Even in the Internet industry, with the exception of e-commerce professionals, many people do not understand. Most people's attribution to Pinduoduo's rise is limited to "low price", "low threshold" or even "consumption downgrade".Others simply and rudely think that Pinduoduo's low prices are entirely due to platform subsidies. The above views are not only wrong, but also harmful-they will prevent us from correctly understanding new things and trends and form incorrect patterns of thinking.
In my opinion, Pinduoduo's rise so far is a battle worth studying, and its importance and interest are comparable to those of the largest combined battles of various arms in human history: operation Barbarossa, Operation Uranus, Operation Overlord, Operation Bagration, and so on. We must first understand the background of the campaign from a higher level before we can understand the causes and consequences of the campaign and the tactical implementation of the belligerent parties in the process. Such an analysis is very difficult, but I can try to do it here, waiting for correction and supplement from more experienced people.
Cause: retail e-commerce market profile in 2016
By 2016, on the eve of the rapid rise of Pinduoduo, China's retail e-commerce market had basically fallen into the hands of two giants BABA (Taobi) and JD.com. Traditional retail giants, such as SUNING and Gome, have basically failed to build large-scale independent e-commerce platforms; Vipshop Holdings Limited, Dangdang, NetEase, Inc koala, XIAOMI and others can only succumb to vertical platforms. In the eyes of ordinary people, the competition of BABA VS JD.com will be the main theme of the retail e-commerce market in the next five years and even longer.
BABA and JD.com have gained control of the whole market for many reasons, but the most important one is that they both attach great importance to the trend of mobile Internet and invest heavily in mobile (wireless) early. And actively guide users to the mobile end. The saddest thing for traditional retail giants is that they have not yet had time to adapt to the trend of "Internet" and are forced to deal with the more terrible trend of "mobile Internet". In fact, in 2013-17, all Internet companies that have adapted to the mobile trend have ushered in a wave of huge development opportunities, those who adapt slowly have faced a decline in status, and Internet companies that have not adapted have been marginalized or perished.
Under the situation that the two powers stand side by side, JD.com believes that his strategic advantage is more obvious and that he will be able to surpass Taobao sooner or later, mainly for the following reasons:
JD.com 's self-supporting model can more efficiently eliminate fake goods and parallel imports, and is more attractive to the high-end market.
The proprietary model naturally has operating leverage, and as long as it forms a scale effect, the growth since then will be like a snowball.
Through the self-built logistics system, JD.com has a stronger ability to perform the contract.
JD.com can take advantage of Wechat's traffic resources, but Taobao can't.
Of the above four reasons, the fourth (Wechat traffic) JD.com has never really made good use of it; the third (self-built logistics) has proved to be less important; and the second (proprietary mode) also has its advantages and disadvantages. However, the first item (better quality control, higher-end positioning) has a certain degree of truth. Taobao started as a C-store-based market, and then gradually expanded to small and medium-sized B stores, but the coverage for high-end brands and high-end consumers is still not enough. In this regard, BABA's answer is: give Tmall (formerly Taobao Mall) higher status, more resources; Taobao e-commerce "brand" and "high-end", in fact, "Tmall".
In 2013-17, BABA's greatest business success was the development and growth of Mobile Taobao and Tmall. Since 2019, Tmall's GMV growth rate has been higher than that of Taos as a whole (Note: estimated, BABA has no longer disclosed Taos's overall GMV); in the past 2015-20 fiscal yearTmall GMV is probably on a par with or even surpassed Taobao.. The "Tmall" of Taobao e-commerce is not only a response to JD.com 's challenge, but also has a strong practical financial significance:
Taobao has no commission, while Tmall has a commission income.
The high-end brands stationed in Tmall have higher customer unit prices and more adequate marketing budgets, thus achieving a higher overall monetization rate.
The enthusiasm and ability of Tmall flagship stores to participate in all kinds of promotional activities are also much higher than Taobao C stores and small and medium-sized B stores.
In a word, the core growth logic of Taosi e-commerce and JD.com is "consumption upgrading" around 2016. The core advantage of e-commerce over offline retailing is no longer price (although price still has an advantage), but a comprehensive "user experience". Consumers are willing to pay higher prices for higher-end brands and better experiences. Therefore, in the retail e-commerce market, Taos as a whole "move up". In this process, C stores, small and medium-sized B stores and vertical B stores located at the middle and grass-roots level have been sacrificed to a certain extent.
And this is the first reason for Pinduoduo's strong rise in 2016-19.
The Exodus of Middle and low-end Merchants: finally settled in Pinduoduo
Taobi was, and still is, the largest retail e-commerce platform in China, with a solid traffic foundation and sound infrastructure. However, within Taobao, all kinds of resources are quietly concentrated on the head-from C to B, from small and medium-sized B stores to brand flagship stores, from mid-and low-end brands to high-end brands, and from high-end brands to KA (core customers). Moreover, the process is gradual and is still in progress until 2019.
The traffic within Taobao system is divided into two categories: the first is "spending money", mainly advertising and through-train delivery, and the second is "free", that is, the traffic allocated by the platform through algorithms and concerns. It is obvious that middle-and low-end merchants can not be compared with high-end brands in terms of "spending money"; in terms of "free traffic", Taobi's algorithm is also increasingly inclined to "big stores first". Generally speaking, the traffic allocation of Taobao system follows the following priority chain:
The store type Tmall store is higher than the Tmall flagship store, the Tmall flagship store is higher than the Tmall store, the Tmall store is higher than the Tmall store, the Tmall store is higher than the enterprise C store, and the enterprise C store is higher than the individual C store.
The merchants of the whole Taobao system are divided into seven levels according to their size and brand. Level 7 (mainly KA) has the largest weight, followed by level 6, while level 1-5 can already allocate very little traffic.
As a result, the middle and low-end merchants of Taos have to find a new way out-not to give up Amoy, until today, not many people dare to give up Taobi completely, but to find the way of "cunning Rabbit three Grottoes" outside Taos. They have considered JD.com, but JD.com 's proprietary model, inefficient advertising delivery mechanism and DAU/ users who use it for much less than Taobao have reduced its attractiveness. They have considered WeChat business, but WeChat business, which lacks formal trading and regulatory mechanisms, is after all an expedient measure. They have also considered Wechat official account and Mini Program, but Wechat does neither centralized traffic distribution nor centralized operation; moreover, the real big development of Mini Program will not be ushered in until the end of 2017, when it is too late.
In this process, Pinduoduo gradually became the core choice of the middle and low-end merchants "Exodus". It has almost everything these businesses need:
Take SKU (item) as the core, no shopping cart, no store operation, focus on selling goods, reduce the pressure on merchants' operation and promotion.
In the early days, there were almost no high-end brands, focusing on standard products and white brands, and the total flow supply was equivalent to the merchants below Amoy level 5.
Wechat group purchase mode provides a huge single product shipment, which meets the needs of bid goods and white brand merchants for small profits and quick turnover, and to make single hot products as large as possible.
The wonderful thing is that Taobi merchants could not make effective use of the Wechat scene (only through Taobao password), while Pinduoduo's early 100% was Wechat scene, which did not conflict with the original Amoy shopping scene.
Businesses pursue lower flow acquisition costs and lower overall burden rates (monetization for the platform), just as water flows downwards, is an unchangeable trend. What's more, what Pinduoduo can provide is not a little bit of low-cost traffic, but huge low-cost traffic; not the hot-selling logic of one or two single hot products, but the hot-selling opportunities of many single hot products every day. As long as there is a substantial gap in customer acquisition cost and burden rate between Pinduoduo and Taobi, Pinduoduo's process of absorbing merchants will not end.
The key supporting role of Wechat infrastructure to Pinduo
There is no doubt that Pinduoduo could not have risen without Wechat. JD.com has never made good use of Wechat's traffic portal, as it was and still is, not only because JD.com is unwilling to rely too much on Wechat, but also because he is never familiar with the "social" and "fun" games of the Internet. After Tencent invested in Pinduoduo, Pinduoduo is no longer in danger of being blocked by Wechat (although there are still some restrictions on inducing sharing). The question is: why did Pinduoduo's rise begin in 2016, rather than earlier? After Pinduoduo himself became top APP, where is the role of Wechat reflected?
The crux of the problem lies in the two major infrastructure of Wechat-WeChat Pay and Mini Program. Mini Program played a very important role in the early days of Pinduoduo (before 2018), and although Pinduoduo now tries to induce users to use his official APP, most users still use both APP and Mini Program. WeChat Pay's role has been ignored by many people-its role is even bigger than Mini Program. Without WeChat Pay, Pinduoduo might not have developed in the first place.
In cities below the third tier, as well as the "Fifth Ring Road" in first-and second-tier cities, there are a large number of people who do not have Alipay accounts and WeChat Pay did not bind cards, mainly middle-aged and elderly people. Through acts such as snatching red envelopes, they deposited a certain amount of cash in their WeChat Pay account, but lacked the way to spend it. It was these seed users that Pinduoduo attracted in his early days-for them, snapping up a pair of discounted shoes in the group was the same thing as grabbing a red packet of more than ten yuan in the group. Of course, after these people buy things on Pinduoduo, they often become loyal e-commerce users, binding cards in Wechat and registering for Alipay.
As a result, Pinduoduo has expanded the entire e-commerce user plate rather than sucking away Taobian users. We have reason to believe that a large part of the new buyers on Taobao and JD.com after 2016 have been educated by Pinduoduo. Since then, some people have always thought that for consumers, Pinduoduo is a "primary school", Taobao is a "middle school", Tmall and JD.com are "universities"; they always "graduate" from primary school. There is some truth in this view, but it is extremely incomplete and has been falsified by the facts. The following will be discussed in more depth.
To this day, Wechat is still one of Pinduoduo's most important shopping scenes: seeing the group purchase information in the WeChat group or personal conversation, then evoking Pinduoduo APP after clicking and then completing the order may still account for 30-50% of Pinduoduo's total order volume. Pinduoduo's shopping logic is different from that of Taobao: the latter is "the desire to buy while shopping", while the former is "directly aroused by a certain SKU." "Shopping logic" applies to those stores with large scale and rich operational resources, while "direct logic" applies to small and medium-sized stores.
The logic of Pinduoduo's continuous growth: White card + repurchase
Short-sellers will insist that although Pinduoduo has advantages in all aspects, by early 2020, these advantages have been brought into full play, and the ceiling of growth has arrived. They often attribute Pinduoduo's price advantage to the "10 billion subsidy" and believe that once the subsidy is cancelled, Pinduoduo will be reduced to a "smaller Taobao". The above point of view does not clarify a basic fact: Pinduoduo's 10 billion subsidy is mainly applicable to "big brands", while most of the bargains above are "white cards", that is, goods that do not need subsidies.
The key question is: what is a "white card"? Please recall: when you enter any e-commerce platform and open the search box, you are likely to enter two keywords. The first isBrand wordsThat is, a definite brand (or sub-brand) name; the second isCategory wordsThat is, the name of a commodity category
If a brand has a high degree of occupation of consumers' minds, mainly throughBrand wordsSearch for sales, we call them "big brands"-such as Evian Mineral Water, Nintendo Switch, Guerlain small black dress perfume, Nike Inc Air Jordan sneakers, and so on.
If a brand does not directly occupy the minds of consumers, mainly throughCategory wordsSearch to get sales, we call it "white card"-for example, in the plug board, paper towels, ordinary socks and other items, white card accounts for the absolute majority. Most commodities such as agricultural products can also be classified as white cards.
The advantage of white brand is that it provides passable quality of goods at absolutely low prices. For the standard products, the quality and function are basically unified, and users do not expect any brand value. With the slowdown of economic growth, more and more users begin to return to the line of "performance-to-price ratio" instead of blindly pursuing "consumption upgrading". The rise of the white card, almost with Pinduoduo, Kuaishou Technology e-commerce rise time overlap, the two can be called a perfect match.
The logic of "white VS big brand" also provides an explanation for the situation in which Pinduoduo and Tmall's GMV grew and their market position rose at the same time during 2017-19: young consumers developed a divisive consumption habit, that is, "places in the province save desperately, places that should spend money spend desperately." They divide personal consumption into two parts: "self-pleasing consumption" (pursuing big brands, pursuing IP, pursuing freshness and design) and "basic consumption" (pursuing low price and cost performance). The more money the latter saves, the higher the budget the former will get.
However, Pinduoduo can not only have a white card-then it is really limited to the "enlarged version of the value for money" level. It must establish an integrated e-commerce platform from low-end to high-end, providing some users with one-stop choice. Therefore, it needs to invest huge subsidies for "big brands". Is this subsidy worth it? The key is to repurchase. Our previous grassroots research and crawler data show that the repurchase rate of users who bought Pinduoduo subsidized iPhone phones during the Singles' Day holiday is quite high.
The subsidy of 10 billion yuan plays an "inducing" role: at first, you bought the iPhone out of the consideration of absolutely low price, and you were still muttering "whether Pinduoduo is selling a fake or not." after receiving something, you found that it was not bad, and even if you wanted to return it, the customer service promised it very readily. In this way, a middle and high-end white-collar user who had disdained Pinduoduo was pulled into Pinduoduo and began to pursue all kinds of goods happily. Of course, there are many ways for white-collar users to be "pulled into". Low-cost fruit is one, and group shopping with parents is also one. The effect of tens of billions of subsidies is the most obvious, but even without tens of billions of subsidies, Pinduoduo's "white card" would still be just as cheap.
The counterattack of Taobao e-commerce: value for money, Taobao special edition, and so on.
Since 2017, BABA has been aware of Pinduoduo's long-term potential threat to Taobi and tried to contain it in all aspects, but the effect is not significant. The reasons are various, both subjective and objective:
Taobao e-commerce has been on the road of "branding" and "high-end" for a long time, and it is impossible to return to the state before 2013. Allocate more traffic to white cards and C stores, which means a lower monetization rate. As a listed company, BABA must strive to strike a balance: not only to retain low-end businesses, but also to ensure the sustained growth of profits.
BABA is a huge system, many new businesses are in the stage of spending money, and these businesses have to rely on the financial resources provided by Taobao e-commerce for a long time. If Taos sacrifices profits, there may be a shortage of ammunition for new business.
In any case, Amoy is unlikely to break into the Wechat ecosystem, which is one of the "strongholds" of Puduo. Even if Taos successfully reoccupies a large area of the middle and low-end market, it is impossible to completely eliminate Pinduoduo, but can only turn the offensive and defensive battle into a seesaw battle.
As the GMV of Taosi e-commerce is much larger than that of Pinduoduo, if you want to provide similar "big-name subsidies", you may have to pay several times the subsidy cost (calculated as a ratio of subsidy expenditure to GMV).
In any case, BABA has tried many countermeasures. Taobao special version + planner is a logical choice, Taobao special version of independent APP online is also a good choice. Of course, another option is to separate the Tmall platform and split the high-end and low-end e-commerce of Taobao-which is unlikely, because Taobao and Tmall are already inseparable.
For Pinduoduo, there should be no doubt that GMV will break through 1.5 trillion in 2020 and GMV in 2021; the real challenge will only begin after that. Because, at that time, the scale of Pinduoduo GMV will really be "comparable" to Taobao (the scale of users is comparable now). Pinduoduo is bound to face the trouble of growing up: like the Amoy system at that time, will he build his own "Tmall" and move upward, or will he continue to take the road of "giving priority to white brands and supplemented by big brands"? Perhaps, by that time, the breakthrough of new technologies and new scenarios will have some kind of new retail e-commerce format. All in all, the struggle of VS in Taobi has just begun, and the more it comes later, the more intense it will be. Now it seems that Amoy system can not contain Pinduoduo, but in the long run, it is also very difficult for Pinduoduo to break through the scale of Taos system.
A brief conclusion
According to my personal experience and impression, Pinduoduo is the most controversial of all Chinese Internet companies. Until two or three days ago, there were serious complaints to me that the Puduo business model was unsustainable or even harmful because it ran counter to the overall situation of "consumption upgrading", relying purely on subsidies for customers, and so on. It is still common to compare Pinduoduo with the likes of LUCKN COFFEE DRC.
Of course, questioning Pinduoduo can be raised, and it is also necessary. However, I would like to say to Pinduoduo's skeptics: they may not know enough about China, especially China, which has an increasingly complex economic environment and obvious consumer differentiation and sinking since 2017. and China, which is struggling to find the next phase of growth booster after the demographic dividend has been exhausted and the economic development model has entered a bottleneck period.
They do not see the tireless pursuit of the vast number of white-brand merchants for low-cost flow and single explosive products, and do not see the schizophrenia of the majority of consumers between "self-pleasing consumption" and "basic consumption." I don't see how important savings of a few dollars are to both the supply side and the demand side. They did not see how part of the huge excess capacity of China's manufacturing industry got back into operation because of Pinduoduo, did not see that the money saved by consumers on Pinduoduo could eventually be used in other areas of consumption, and did not see Pinduoduo's huge catfish effect on the retail e-commerce market, which had already formed a "steady state".
What's more, they did not see that China has never been the look of "everyone is pleasing to themselves and beautiful" embodied by Weibo Corp, not the appearance of "per capita 985, annual salary of one million, just getting off the plane" embodied by Zhihu Inc.. It's not the look that Douban shows that "everyone has read Kafka and all like Haruki Murakami". Nor is it the look that Little Red Book shows that "people who boast that they have bought a Ferrari within a year have more annual output than a Ferrari".
If they are even unwilling or even unable to understand the real China, I can't understand how they can adapt to such a China and do their own professional work.
Edit / kianzhang