Pursuing Interactive Commerce – The Pinduoduo Way – Part 2
In this edition of Outside In, we continue our study on the Pinduoduo Way of pursuing Interactive Commerce. Without any small talk, let’s straight jump into more details about we have learnt so far…
Pinduoduo is one of the largest and most prominent commerce companies to build its business model purposefully around the notion of interactive commerce: combining community, entertainment, and recommendation to provide more value for money to the end-user
An Enabling Ecosystem
Obviously an enabling ecosystem led to a perfect growth path for Pinduoduo’s Interactive Commerce proposition. Here the big ones, which have similarities even in the India market:
Rise in Smartphone penetration and use of the Mobile internet
Digitally-blended lives
E-commerce-led Logistics infrastructure
Digital payments (a plenty)
WeChat & Social media
Mature recommendation technology (machine learning and deep learning)
We are more like Facebook than Google in the e-commerce world. We push our product recommendation feeds to the consumers rather than wait for them to search on our platform. – Lei Chen, Pinduoduo Co-founder & CEO
The Big Picture Recap – The Pinduoduo Offering
Interactive = (Personalization) Recommendations + Live Stream + Games + Coupons + Team Purchases
Pinduoduo team envisioned what they described as a “combination of Costco and Disneyland” in its compounding of value-for-money and entertainment, driven by a distributed network which not only matches information efficiently but also integrates social interaction, making the entire experience more enjoyable. Through the pursuit of this vision within its context, Pinduoduo has developed a platform and suite of features which illustrate the effectiveness of the interactive commerce model
1) Recommendation Feed
A way to conceptualize the core difference between traditional search driven e-commerce and the new interactive model is one of “people looking for products” vs. “products looking for people.” interactive commerce model follows the logic of “products looking for people,” which is a more suitable model for the small screen and fragmented time of mobile internet users. It learns from behavior of its users, which reveals their preferences & facilitates personalization of commerce experience
The technology empowering this recommendation process follows 2 principles: “item to item filtering” and “collaborative filtering.” An item to item filtering system will recommend products to a user similar to that which they already like to purchase. A collaborative filtering system will base their recommendations on finding groups of users who enjoy similar products. These systems have increased in sophistication greatly over the past decade and use sophisticated, constantly updated algorithms to determine the optimal mix of personalized products to surface to each user
3) Livestream
Duo Duo Live, platform’s live streaming feature, integrates both entertainment and community components of the interactive commerce model. Users can follow live streamers selling goods, interact with them through a chat feature, receive special offers and discounts and share them with friends. With Pinduoduo the live-stream experience is altogether more down to earth. It is more similar to a typical interaction with an offline store’s customer service associate than watching a stand-up comedy special. Lower on glamour but higher on engagement and authenticity, a typical live stream consists of store owners displaying products and answering questions from shoppers
4) Team Purchase
The single feature most frequently credited with Pinduoduo’s early-stage success is team purchase, a group-buying feature that quickly became synonymous with the company’s brand itself, as Pinduoduo’s official slogan emphasizes, “Together, More Savings, More Fun.”
The team purchase process is as follows:
A user is offered 2 prices for an item on the platform – one for an individual purchase, and a second discounted price for a team purchase
The user can choose to join an existing team purchase or start a new one themselves
The user then invites friends and family to join, via social networks, or waits for a team formation for the next 24 hours
The team formation is confirmed, the product is shipped and the user can review their purchase
The team purchase function succeeded by understanding and addressing the needs of the often-ignored down-market Chinese consumer. Team purchase deals centered on low-cost necessities such as household staples and food, which contain universal appeal across age and income demographics
By using the team purchase feature, Pinduoduo created for itself a gateway into a user base the size of which was over twice that of China’s total e-commerce users at the time. Team purchase information also offered valuable insights as to the online shopping habits of users and their social networks, thereby enhancing Pinduoduo’s recommendation algorithm. This growth strategy created efficiencies of scale, which enabled Pinduoduo to present a consistently improving value proposition
In Conclusion
In India's context, the companies involved in social/ video commerce have a value proposition focus with commerce/advertisement first approach. The players are venturing into the space through either in-house applications or integration with e-commerce giants. For instance, Flipkart is tying up with short video-platform Moj to take the video/ social commerce offerings to the next 200 million customers, whereas its fashion subsidiary Myntra is testing influencer-led live commerce model
Already digital first brands in India generate more revenue than legacy brands with the size of the opportunity expected to increase significantly over the next decade. This presents an enormous opportunity for digital-first companies to tap into the country's digital-first population, expanding internet-usage and growing digital-first economy
While aspects of the interactive commerce model have been applied in a number of ways throughout the digital economy, Pinduoduo’s rise provides perhaps the clearest case of a company whose success is directly tied with the application of interactive commerce… Hence Proved (as we wrote so often in our school Geometry exams)!
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