China’s regulatory authorities issued 18.2 billion yuan fine to Alibaba, calling a halt to its “choosing one out of two”. But it doesn’t make it much easier for Pinduoduo to enter the market.
Consumers can buy iPhones, Huawei mobile phones, Nike sports shoes, and Lancome skincare products on Pinduoduo. However, all these brands did not accept its proposal to open brand flagship stores.
Most brands still sell in the name of dealers, or refuse to participate in the “10 billion yuan subsidy”, or only provide low-end products. They keep a distance from Pinduoduo and regard it as an online factory outlet store.
An outlet store, factory outlet or factory shop is a brick and mortar or online store in which manufacturers sell their stock directly to the public.
Winning more brands has become one of the most important tasks of Pinduoduo this year. Pinduoduo has listed the proportion of brand GMV as the focus of this year’s work, according to LatePost.
Before the government agency issued the fine to Alibaba, Pinduoduo’s related brand investment promotion activities have been accelerated.
Pinduoduo provides traffic support to cooperative brands, including promotion activities such as “super brand day” and “ten thousand people group”. In addition, it also newly designed the “official” or “flagship store” gold logo to distinguish it from the “brand” black logo of the dealer store.
Relying on WeChat traffic bonus, low price goods, and good user experience, Pinduoduo enables users in low tier cities and those who did not use e-commerce before to buy things online. In this process, the 9.9 yuan box of fruit and the counterfeit products news placed the label “cheap” on Pinduoduo brand.
Taobao and JD have become the backbone of consumption in China today. In the past year, the number of Pinduoduo buyers has exceeded Taobao/Tmall and JD, but the people who grew up with Taobao and JD have not trusted it as much.
The “10 billion yuan subsidy” that went online in the second quarter of 2019 tried to alleviate the problem.
It also really drove the growth of platform sales and users very quickly. In 2020, the per capita consumption of its buyers has increased from 1551 yuan to 2115 yuan at the end of 2020, but this figure is less than 1/3 of JD and 1/4 of Alibaba.
The participation of 10 billion subsidies mainly included the second and third level distributors of the brand, which could not improve the trust of users on Pinduoduo. Pinduoduo marketing activities also focused on highlighting products rather than stores.
The available brand products categories are relatively limited, which restricts the frequency of consumers’ shopping and the average purchase order value.
This is why Pinduoduo has now accelerated the persuasion of the brand side to open official stores: not only to eliminate the doubts about the quality of goods, but also to have enough profit space to promote, and to sell advertisements to the brand merchants with abundant financial resources.
Internal Competition
By the middle of 2020, Pinduoduo’s total investment in merchant recruitment team had exceeded 400 people.
Based on product categories, they are divided into a brand merchant recruitment team and an industrial belt merchant recruitment team. At the beginning of 2020, Pinduoduo set up an industry-wide brand recruitment team with 30 people to attract large brands.
The 30 people team was divided into two groups to compete against each other. They do not share any data or resources with each, and team members are required to compete for brands everywhere.
The competition is extremely fierce. The performance of the two groups was assessed monthly, including the number of brand stores, GMV, and GMV growth rate.
“Two groups of people will not look up to say hello when they meet.”, according to LatePost. Sometimes the two groups approached the same brand to talk about store launch, and they didn’t know each other.
In addition to the internal competition, Pinduoduo also conducts a variety of A/B testing on the product end to observe which merchant presentation form is more attractive to consumers.
In Pinduoduo’s brand store suffix, there are “brand” black label, “official” and “flagship store” gold label, and “flagship store” label. Among them, the gold label is the official flagship store, while “brand” black label and “flagship store” label are usually dealer stores.
Showing or hiding different labels are part of Pinduoduo team’s A/B testing.
Brands’ concern on pricing control
Not all brands accept the sales strategy of trading more for lower price, especially those international brands which have built multi-level distribution system and stable profit sharing.
Pinduoduo’s discount may destroy their original pricing system and affect dealers who need to pay store rent and staff salary. Pinduoduo hoped that the brand side would also participate in the 10 billion subsidy, but some refused.
In this regard, Pinduoduo has made limited compromises and agreed not to label their listings with “10 billion subsidy” and to issue consumption vouchers instead to achieve a discount.
For those brands willing to participate, Pinduoduo also relaxed some restrictions.
Previously, it had asked businesses to make special packaging materials for “10 billion subsidy”, printing Pinduoduo’s logo and QR code on the package with brochures inside explaining “10 billion subsidy” to highlight Pinduoduo’s own brand.
Nowadays, the restriction of this kind of special packaging is no longer compulsory.
Adidas is the biggest brand in the recent round of official brands launch on Pinduoduo, and it is also the company that Pinduoduo gives the most resources; the banner of “Adidas official launch” is placed on not only the top of the “my order – to be received” page.
Adidas received a lot of support from Pinduoduo but it launched its presence as an outlet store on Pinduoduo. Its daily GMV is by far below expectation.
If Pinduoduo wants to attract brands to open stores and sell to consumers directly through its platform, so as to change consumers’ impression of this platform, for a period of time, it can only accept the positioning of the online version of outlet store – a special, low-cost, but limited variety of authentic shopping mall.