Is Pinduoduo an actual threat to China’s biggest e-commerce players ?

More people are now buying from Pinduoduo than from JD. The platform which initially started as a marketplace for discounted goods is turning towards branded products. Pinduoduo wants to cater to lower-tier city consumers and rural areas, which represent a massive market. Could their strategy threaten the current market dominance of established e-commerce giants?

What is Pinduoduo ?

Pinduoduo (拼多多) is a Shanghai-based e-commerce platform founded in 2015 by Colin Huang, a former Google engineer. When asked about Pinduoduo’s business model, Huang has compared it to Costco and Disneyland, because the app combines elements of entertainment and discounts. In 21 months, Huang built a $1.5 billion startup, making it the largest IPO of 2018 with an innovative business model that combines group-buying, social networking, and gamified user experiences.

The company uses what is called the “Social+” model, or “Social selling”, relying on social media to drive engagement and growth. In this case, Pinduoduo leverages social networking to grow its user base and includes social features to attract users and keep them engaged. On Pinduoduo, products are already available to users at a discounted price, but they get further discounts on products if they participate in group buying, by sharing the deals with their friends on WeChat and purchasing them together.

Pinduoduo vs Other e-commerce platforms

Although Pinduoduo only accounted for 6% market shares in the first half of 2018, the company is experiencing rapid growth and could benefit from the increasing price sensitivity of consumers, especially in lower-tier cities.

Its innovative business model has allowed a faster customer acquisition than and The Alibaba Group Holding, as existing customers were incentivized to invite their friends to get further discounts.

Traditional e-commerce players are facing increasing competition from smaller players. Similarly to Pinduoduo, Xiaohongshu is also a rising social commerce app, which combines entertainment and e-commerce. The app is described as an equivalent of Instagram and Amazon, as it encourages users to post pictures featuring products and tagging them with links redirecting to the e-commerce platform where the product is available.

Pinduoduo has successfully leveraged the Chinese digital ecosystem to achieve rapid growth in a short amount of time, by leveraging social media platforms and their active users to acquire customers, and creates incentives to return to their app through entertaining and gamified experiences.

What about Pinduoduo’s sustainability?

On one side we notice an increasing engagement of buyers and users of the platform and on the other a firm which is buying its growth thanks to heavy expenses.

Pinduoduo’s sales exploded on the fourth quarter of 2018, and marketing costs as well, overtaking the revenues generated. Despite this fact, investors made the value of the shares on the stock rise by 60% since the company’s IPO. Now the trendiest question that arises for investors is related to Pinduoduo’s growth sustainability.

Some analysts maintain that the sustained growth of the company’s revenues would be linked to the fact that the dispatched coupons offering discounts on future purchases would only be recorded as expenses once the buyer cashes them. This is what would make the company’s revenues artificially high.

On the other hand, the sustainability of its business model in the long run might be questionable as the platform generates revenues mainly from publicity but not from the products.

Some data also show that the penetration rate of third-tier and fourth-tier cities are saturated. So in order to sustain its growth, it seems that Pinduoduo will have to escalate its efforts to reach buyers from first and second-tier cities.

Even if investors seem to be quite enthusiastic towards the firm for questionable reasons, who knows what Pinduoduo’s future will be made of?

Business China Digital Business Fashion Gaming Luxury Mobile Retail WeChat

Why Gamification Is A Necessity For Luxury Brands To “Level-Up”

Luxury brands don’t play when it comes to their marketing strategies

“Dior Eyes” VR headset by Digitas LBI (2015)

With China now being the largest market for gaming and luxury, they need to consider the environmental factors that could help them better understand their target customers and increase their performance benefits.

Gamification consists in using game elements to engage and motivate in non-game contexts, by using game-based aesthetics, mechanics and thinking. The only similarities between gamification and actual video-games are the elements used (storytelling, avatars, rewards). Gamification only uses parts of games to engage with users, collect data, and create cooperation with the brand. In the context in which luxury brands operate, gamification is essential for them to tackle the challenges they are dealing with.

Re-humanizing Legacy brands

The biggest competitors of Legacy brands aren’t just other luxury brands, but brands that succeed at positioning themselves as more relatable to their target audience. The challenge now is to innovate across every dimension of the brands, not just in terms of products and design, but also in the delivery and the story built around it.

To tackle this issue, gamification can be used to immerse the customer in the brand’s universe, making them a participant in the product development (customization), or giving them a sense of belonging to the brands’ universe (matching a product to a personality). Wether customers go on a treasure hunt with Dior or toss horseshoes with Hermès, they need to form social connections, get more than just a product from their experience with the brand.

Hermès “H-pitchhh” Wechat Minigame (2018)

Technology as a means and not an obstacle

Luxury brands’ main audience is younger, more impatient, more aware and more demanding. Thanks to the rapid development of technology in China, Millenial and Gen Z consumers have access to more touchpoints, to information faster and in greater volume. This influences the customer journey and their expectations, which impacts the success of a brand’s marketing strategy. Increasing the connection with the target audience and engagement would allow brands to understand their customers’ needs faster.

In previous cases, Wechat has proven to be the best tool to engage with customers, and served as an essential touchpoint in omnichannel strategies. Consequently, many

brands have created Wechat miniprograms to create immersive digital experiences for their customers, to offer exclusive access to the brand, or practice the “drop” retail model, by releasing limited edition clothing and accessory. Gucci, Burberry, Louis Vuitton and the other brands who have experimented with Wechat miniprograms were successful because they understood that the younger generation of consumers want to showcase their individuality, engage and be entertained by their favourite brands.

It is paramount for brands to create user-centered digital experiences to get closer to their consumers and to be more adaptive to their demands.

Gamification can serve as a tool to find the intersection between user goals and business goals. If leveraged efficiently, it can help companies integrate their O2O retail channels, improve loyalty, customer retention and the user experience.

The key success factor for brands is to provide desirable experiences as well as desirable products. To get to the next level, brands must transition from Omni-Channel to Omni-Personal luxury experiences. They need to focus on real time mobilization of data and leveraging devices and platforms to deploy responsive solutions to their customers’ needs.

The sophistication of Millennial and Gen Z consumers leaves no choice for luxury brands but to step up their game in their design of customer experiences to achieve sustained growth and develop long-term client relationship. Brands who are successful in doing so are the ones who can incorporate technology and emotion in their brand DNA to get closer to their target and their aspirations.


Sources :

LVMH Reports Strong Growth But Remains Cautious about the Global Economy

3 Trends Shaping the Future of Retail for Fashion, Lifestyle and Beauty Brands in China

How China’s Love For Gaming Can Boost Brand Engagement

How are luxury brands leveraging gamification in China?


Business China Strategy Success in China

Is the Trade War between China and the US also happening at the box-office?

China’s influence on Hollywood has been significantly increasing over the years, as well on screen as behind the scenes.

The country is set to become the largest market for the film industry, but only allows 34 foreign films per year. The challenge with this massive market lies in resonating with international audiences and the Chinese audience at the same time.

Before the 1990’s, the Chinese film market was closed to foreign film entries, and the only movies available to the public were produced by the government, with the objective to convey specific messages. However, movie sales started to plunge, and in 1994, the government permitted the release of ‘The Fugitive’, which was a turning point in history. The public acclaimed it and 10 other American films were released, so the US government kept pushing for higher quotas each year.

“In 2016, 27 new cinemas opened everyday in China.”

American film studios and entertainment companies can no longer ignore the growth and revenues potential on this market, hence the necessity to have their motion pictures approved by the Chinese government. Satisfying the Chinese opinion is critical for this matter, so much that it can change companies’ entire strategy for a film release, or even the film itself.

Companies can adopt 3 strategies to have their movies approved by the Chinese government.

Revenue sharing

This is the most common strategy adopted by American companies. In this scenario, Chinese theatres and distribution companies would receive the majority of the returns generated from the movie sales. Even though this seems like the most convenient methods, companies still need to incorporate positive Chinese story elements in their movies and are not immune to having their motion pictures rejected in the end.

Paying a “flat fee”

The second possibility for companies to have their movies played in Chinese theaters is to buy-out from them, by paying a flat fee and allowing Chinese companies to get 100% of the sales. This is however the least popular option.


The third option offers both Chinese and American companies to find a middle ground, by co-producing the entire movie. This procedure has strict guidelines that the American company has to follow (like having one third of the cast represented by Chinese actors, changing the script according to the Chinese film board’s demands and working with them through the whole production process) but ensures higher profits on the market. There have been many cases in which movies have been altered to meet censorship demands.

For instance, the science-ficition film ‘Looper’ was partially filmed in Shanghai instead of Paris, and the Chinese Renminbi was used as the currency of the future. ‘Red Dawn’ was shelved for two years after receiving criticism about a ‘Chinese invasion of the United States’. For the movie to be released, the producers had to change the villain from China to North Korea, by re-editing the entire film.

Sometimes American companies ultimately chose to release separate versions for China and for the international public, like for Iron Man 3.

Having all these options does not simplify the market entry of American movies on the Chinese market, as they are faced with another challenge, which is the domestic competition. In 2017, the Qingdao Oriental Movie Metropolis was opened, a studio facility built by the Dalian Wanda Group, with the objective of outplaying foreign competitors. The company already announced that 30 foreign films will be produced there in the upcoming years.

If Chinese entertainment giants were not enough competition, other companies want to play a bigger role on the movie scene.

Alibaba, which is worth as much as Disney and Time Warner combined, already produces movies and sells tickets on one of its many service platforms. Baidu has the power to dominate the marketing and promotion activities of movies in China by being the owner of two third of the video companies in the country. As for Tencent, the social media giant is also involved in producing entertainment content.

Without giving any spoilers, it is safe to say that the competition between Chinese and American movie producers and entertainment companies will become more intense. Now the question lies in whether the film industry will go under the same transformation other competitive sectors have gone through, through the implementation of new regulations, and who knows, the inquiry for foreign entrants to sign into a joint-venture for market access one day.


Sources :

Massive movie metropolis launched in Qingdao, China by billionaire

Foreign Films in China: How Does It Work?