Pursuing Interactive Commerce – The Pinduoduo Way – Part 1
Earlier this year, there was a news update by Business Today about how the Social Video Commerce industry is evolving in India and it seems to be on a decent growth trajectory here at: https://www.businesstoday.in/latest/story/indias-social-video-commerce-industry-raised-over-1-billion-in-2021-323389-2022-02-21
Multiple players in the social/live commerce sector are piloting various business models as the sector tries to break out of the infancy stage. The RedSeer research stated that India's video/live commerce is taking a leaf out of China's successful business model in this particular industry where some of the individual players have even touched $100 billion in gross merchandise value (GMV). Reading it, I was reminded of a classic read on doing interactive commerce right, modeled on the pioneer Pinduoduo in China. In this edition of Outside In (and possibly even the next one), we study what makes ‘Interactive Commerce’ work and how do it well… the Pinduoduo Way…
Interactive Commerce – the Pinduoduo Way – can be understood and defined as:
an integration of consumer-facing elements of user experience: recommendation, community and entertainment – enabling supply-side optimization to offer increased value to the consumer
humanization of the online shopping experience
an approach that recreates the enjoyable experience of shopping in the physical world for the digital age
an extension of the popular “Disney AND Costco” characterization: Disney – as it provides an entertaining, engaging, and socially connected user experience. Costco – in that it can leverage insights drawn from users and direct relationships with manufacturers to achieve efficient economies of scale, and thus superior value for money
The Pinduoduo Big Picture
Interactive = Value + Community + Entertainment + Recommendation (Personalization)
1) Value
Price is always the best vector of competition and the most direct method to delight consumers. Value for money is a central element of the interactive commerce approach. It is less a direct interactive aspect of user experience and refers more to a principle core user need. The mechanisms for delivering value are various, including the consumer to manufacturer model, lower priced team purchases, and limited time promotional coupons. The consumer to manufacturer (C2M) model, outlined below, delivers exceptional price value to the end consumer by simplifying the value chain. Middlemen distributors, retail outlets and other channels are removed facilitating a D2C relationship
2) Community
The characteristics of community interactions are as follows –
Seamless experience across social platforms & native app
Sharing activity is incentivized
Sharing of purchase history with friends is promoted
Livestream interaction with buyers is facilitated
Team purchases are available for a lower price
They leverage social networks as an effective and efficient tool for buyer acquisition and engagement. This feature provides Pinduoduo with low-cost organic traffic, rapid growth of buyer base, and active social interaction; as their buyers share their purchase experience and product information with their friends, family and other social contacts. Buyers on their platform actively introduce Pinduoduo and share products offered on the platform; through social networks in order to take advantage of attractive lower product prices available under the "team purchase" option. New buyers in turn refer the platform to their broader networks of friends and families. This interactive feature also transforms online shopping into a fun and interactive experience
3) Entertainment
The characteristics of interactive entertainment are as follows –
Build dynamic, lively UI
Foster daily usage habit
Launch constant new features and games
Deliver delight and engagement
Foster a sense of achievement
Entertainment helps build daily habits. Whether in the form of live streaming, games, flash sales, or countless other methods, the second component of interactive commerce prioritizes fun and stimulation for the user, attracting them to the platform, lengthening the duration of their visits, and incentivizing regular and active involvement
4) Recommendation (Personalization)
Recommendation in the interactive commerce model draws not only from insights based on a user’s browsing or shopping history, but also those based on the trends and preferences of the user’s social network. In case of Pinduoduo interactive commerce, its recommendation algorithm centers on each user as a distributed node and includes similar user activities and their interactions with friends
“People often shop without a clear idea but browse for fun online. Every consumer is an independent individual. Those with similar needs are likely to form a group. That means our algorithm values localized information very much with a distributed nature,” CTO Chen Lei in a 2019 HBR article
Compared to the search-based model, Pinduoduo finds that the product recommendations were timelier and more relevant, even to inactive users. The large amount of information on user-to-platform and user-to-user engagement created a virtuous cycle, in which more significant insights could be gathered, and the experience tailored further. With a more granular understanding of users’ preferences, better-personalized recommendations can be delivered
In Conclusion
Consumers are increasingly turning to video to learn about new products compare products and share experiences. Video commerce enables brands to tell their stories in a whole new way that is engaging, entertaining besides building a relationship with the customer. The research noted that with the addition of new online retail channels, the digital-first brands have a 250 billion market opportunity by 2030. The direct-to-consumer (D2C) brands are expected to grow at a CAGR of 34.2 per cent during 2018-2030
Although the approaches and features characteristic of the interactive commerce model have achieved widespread adoption among myriad players in the digital economy worldwide, there is perhaps no one firm whose philosophy, growth story, and impact is more tightly intertwined with interactive commerce than Pinduoduo
However, Interactive Commerce will not stand still, and its progressive growth and success stand testament to the continual evolution of online interactivity. Learning about their model can help organizations estimate the direction of their efforts… More in the next edition…
References and Sources
1) China Channel Presentation: Defining Interactive Commerce
2) Business Today article on India Social Commerce: https://www.businesstoday.in/latest/story/indias-social-video-commerce-industry-raised-over-1-billion-in-2021-323389-2022-02-21