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A Glimpse Of Retail’s Future

Pinduoduo leveraged social commerce tactics to reach nearly 300 mn users within three years

by Retail Touchpoints

For a preview of where retail is headed, retail companies in the U.S. and other Western countries can look to China’s booming market.

Pervasive social media platform WeChat has attracted an astounding 1 billion daily active users. The platform signifies seamless, unified and convenient omnichannel retail service. That’s because it integrates product search, influencers, social commerce and mobile pay, plus WeChat is growing its e-Commerce ambitions with the booming Mini Program.

Learn how WeChat represents the future of retail — and how foreign retailers and brands can win by using it.

On June 29, after just three years of operations, upstart e-Commerce platform Pinduoduo submitted an SEC filing to go public on the NASDAQ stock exchange. A relative newcomer to the Chinese e-Commerce industry, Pinduoduo now boasts nearly 300 million registered users and generated more than US$30 billion in GMV in 2017. Its meteoric rise has stunned industry insiders and forced traditional players such as Alibaba and JD.com to reexamine their own business models.

Core to Pinduoduo’s success is its social commerce approach and its leverage of WeChat’s mini-program function, which Internet giant Tencent rolled out at the beginning of last year.

What Is Social Commerce?

Social commerce is an evolved form of e-Commerce, in which platforms rely on current users to “activate” potential users by sharing promotions and items with them, essentially decentralizing the user acquisition process. Users are incentivized by steep group-buying discounts and game-like campaigns that make sharing fun and interactive. In the U.S., brands may give discounts to customers who share via email, Facebook or Instagram, but the single-function nature of Facebook News Feed, Facebook Messenger, and Instagram makes the process less interactive, so social-based commerce still hasn’t taken off in the U.S. like it has in China.

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A prime facilitator of social commerce in China is WeChat, specifically its WeChat mini-program function. Approximately 65% of Pinduoduo’s transactions are completed through its WeChat mini-program, which enables users to share products and make purchases without having to switch to another app. Mini-program pages are limited to a size of 1mb each and integrate with WeChat Pay so users can carry out transactions quickly. Users in smaller cities tend to use cheaper phones, so mini-programs are better suited for this user base.

For example, on Pinduoduo, a merchant may offer two prices for, say, a rice cooker. It could be priced at 300 RMB ($45 USD) for individual customers, or at 200 RMB ($30 USD) for customers that pull in another user to make a purchase, also for 200 RMB ($30 USD). This promotion can be shared on WeChat with another friend or family member, thus reaching a potential customer who didn’t intend to purchase a rice cooker in the first place. This strategy has proven to be especially effective in smaller Tier 3 and 4 Chinese cities, where users are more price-sensitive and make less frequent purchases.

Social Commerce Resolves Pain Points For Merchants In A Saturated Market

Social commerce has provided a solution to bottlenecks that have arisen from slowing e-Commerce growth in China. With traditional e-Commerce, users generally log on to a platform with an existing intent to purchase a certain product or brand. The search function plays the core role in connecting users with products, and merchants pay to access user traffic through ads or discount promotions. However, as more and more brands sell products through marketplace platforms, the market becomes increasingly saturated and traffic becomes more expensive to access as brands bid up advertising costs.

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Social commerce provides a remedy to this problem by opening up a new, decentralized avenue in which customers can discover products through trusted friends and family. Since China e-Commerce is rife with cases of fraudulent and shoddy goods, many consumers have grown to suspect the authenticity of online products. Customers are much more likely to purchase goods recommended by family and friends, and WeChat is instrumental in facilitating the sharing process. 50% of Chinese customers are willing to purchase products recommended by friends and family, according to a report on cross-border e-Commerce by Frost & Sullivan and Azoya Consulting.

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In addition, international brands and retailers also can set up their own WeChat mini-programs and create unique campaigns and promotions with which they can build customer loyalty. This may finally even the playing field between brands and marketplace platforms, which raise the bar higher and higher for brands who want to list their products on them.

Why U.S. Retailers Should Care

Pinduoduo is a prime example of how social commerce, facilitated by WeChat mini-programs, is revolutionizing the traditional e-Commerce industry by changing the way brands and consumers interact with each other. Going forward, e-Commerce will become more interactive and an ever-present aspect of Chinese social media. As U.S. retailers continue to struggle in the face of falling foot traffic and increased online competition from the likes of Amazon, they need to devise new ways of connecting with their end customers. Infusing a social element into one’s e-Commerce strategy could be just what they need to revitalize their online business, and the way Pinduoduo has been able to do this in the China market provides a useful example of how retailers can do this.


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