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This past week, Pinduoduo officially announced that the company’s user base surpassed Alibaba. Their fourth quarter revenue increased by 146% to 26.5 billion yuan ($ 4.1 billion), exceeding the previous forecast of 19.3 billion yuan. This growth is many times that of Alibaba and JD.com as demand for vegetables and more consumers in less developed cities are starting to buy online.
Pinduoduo’s annual consumer count rose to 788 million in December, exceeding Alibaba’s 779 million. During this Spring Festival, Pinduoduo’s user base surpassed the Taobao mobile app at one point.
Pinduoduo’s 12-month total value of goods to the end of December rose 66% to 1.67 trillion yuan.
The above figures show that Pinduoduo’s remarkable growth has scared the giants like Alibaba and also JD.com. So what sets Pinduoduo apart from other competitors? The answer is probably their business model.
Pinduoduo adopts the same group-buying business model as America’s Groupon. What’s special is that the site allows shoppers to share products on Chinese social media platforms, like Tencent’s WeChat, for even more discounts.
For example, if people find what they want to buy on Pinduoduo and invite enough WeChat friends into a buying group, they can get a discount of up to 90%. This offer applies to everything from a $ 1 t-shirt to a $ 80 smartphone. To encourage users to share on social media, Pinduoduo even offers free cash deals and products to its most loyal customers.
While China’s tech giants compete fiercely in major metropolitan areas, Pinduoduo chooses a market that gets less attention: cities and towns where many low-income people live.
All of the aforementioned strategies were shaped by Colin Huang – the co-founder of the company, who just announced his departure as chairman.
Quit Google start a business, set up 12 successful startups
Huang was born in Hangzhou, home to online shopping giant Alibaba. His parents were both factory workers and he studied computer science at Zhejiang University before coming to the US in 2002.
He joined Google and worked at Google China before starting his own business, pursuing the goal of both “making money” and “making himself cooler”.
With the proceeds from selling shares of Google, he started Ouku – a website of consumer electronics and sold for $ 2.2 million in 2010. The next business, Leqee, was a toddler. of Chen and a trainee at Ouku. The company registered with the government in 2009. Pinduoduo later told the venture capitalist that Huang “successfully founded” Leqee in 2009.
Leqee has helped big brands run their shops on China’s largest internet shopping platforms, including those of Alibaba and JD.com. It also became the unorthodox company behind the success of a later series of businesses also in the Greenland building.
Two years later, the group set up another project called Lebbay – again owned on paper by Chen and now a former trainee. Use skills Huang learned from Google. Lebbay builds a series of online shopping websites aimed at providing top search items to customers.
“Building a website only takes 1 week” according to the former manager. This person added that the websites process orders from the same system. Chen operated operations, reporting to Huang.
Another profitable company started to populate a few floors downstairs of Lebbay’s offices. Under the name Shianghai Xunmeng, Huang’s team develops online games like Joyspade, Texas Holdem Poker aimed at players in Southeast Asia and Girls X Battle.
Later, Huang came up with the idea that Punduoduo would later be. In 2015, he asked his team to build a “social e-commerce” business. Called Punhaohuo, buyers get a better price if they can convince a friend to buy the same item. The website started selling fruit and at one point Huang took 100 employees from Leqee to help the new business.
A few months later, Huang’s gaming team created a second app that applies the true buy group model to an online platform where sellers can list their items. They were named Pinduoduo and 20 game staff moved to work here.
“There are two different avenues, Pinhaohua promotes warehouse construction and distribution, like JD.com with fresh produce but employees from the game company do not believe it can survive.”
Pinduoduo’s business model quickly outperformed Pinhaohuo. However, the Greenland building companies’ websites have a very complex relationship with each other. Lebbay used to register Pinhaohuo’s social media accounts – the main sales channel and brought in ¼ of the company’s gross revenue in 2016. Leqee is listed as the operator of Pinhaohua on its website. Meanwhile, Shanghai Xunmeng – game branch is the operating unit of Pinduoduo.
Decided to rest while at the peak of her career
As reported, this week Huang officially announced he would leave the position of Chairman Pinduoduo. Specifically, the position of chairman of founder Colin Huang will be replaced by Lei Chen, who holds the position of CEO of the company. Thus, Huang has almost completely withdrawn from the corporation – which makes him the third richest man in China. Last year, he also gave up his CEO position.
Huang’s decision is said to be quite unfortunate because Pinduoduo is currently in the most outstanding stage of development.
Huang has left a strong mark, exceeding the standards of the Internet industry in China, creating a personal fortune of 57 billion USD and a company with a market value of 180 billion USD. Pinduoduo shares more than quadrupled last year and hit a record on Feb. 17, though have since declined slightly.
For his part, Huang said he will focus on long-term initiatives including food research and life science. In 2017, the billionaire said that he did not want to spend the rest of his life in Pinduoduo. In a letter to his employees, he said he wanted to give responsibility to his younger colleagues to stay entrepreneurial.
“I hope that my departure as chairman of the board will help young people enter independent adulthood. Although I don’t become a scientist, I will feel lucky and be grateful for the opportunity to become a research assistant and possibly a scientist in the future. “
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