Price secret of DNA price ago

He made an unusual entry into the global landscape of electronic trade, quickly becoming the fifth largest internet market in France. Critics say that ultra -scanning prices are based on unfair practices. However, his success is due to the powerful and proven – model of your home company company, Pinduoduo, which began as an online market for fresh fruit …

In just two years, the Chinese e-commerce platform has become a key claimant on the global market. In France, in October 2024, he deals with the fifth most frequently visited trading platform. Dropping, aggressive marketing and disingenuous trade tactics. Despite the universal skepticism in relation to its long-term profitability, he still investing strongly in advertising and market penetration, questioning the e-commerce sector in which No new player has made a significant breakthrough over the past decade. While other Internet, such as AliExpress and Shein’s fashion giant, disturbed Western markets into similar cut price strategies, only what few considered possible to do: exceeding Amazon, for a long time the golden standard for competitive prices.

From the factory to the global store

This price policy is not revolutionary in China. The platform strictly adheres to the business model of its home company, PinduDuo (or PDD Holdings). As an international Pinduoduo arm, he represents China’s ambition to go from being a world factory on a world shop. Its low prices are not short-lived tactics of startups, but the basic pillar of his long -term strategy.

Founded in Boston in September 2022, this is a branch of the Chinese giant e-commerce Pinduoduo, founded in 2015 after the success of Pinhaohuo. Introduced by Colin Huang in April this year, Pinhaohuo used the Wechat group buying model to sell mass orders of fresh fruit. His rapid growth led to the creation of Pinduoduo, which disrupted the Chinese e-commerce-long market dominated by JD.com and Alibaba-Przed with enlargement all over the world by this. Today it operates in 79 countries.

Reverse auctions and sent supplies: price reduction

The heart of the price strategy is the consumer model to the manufacturer (C2M), introduced by Pinduoduo in March 2023. This approach uses the opposite auctions in which he asks producers, forcing suppliers to compete through the lowest possible prices. PDD Holdings establishes the final prices of products and margins of profits, and manufacturers provide products directly to PinduDuo magazines in China, eliminating the need to buy or store inventory. Instead, manufacturers incur storage costs and must recover unsaid items. Payments are usually made quarterly, which further relieves the financial burden to this. Basically, PinduDuo works Disabled inventory model.

The opposite auctions allow this to ensure the lowest possible prices from the very beginning, and the Pinduoduo logistics knowledge enables quick consolidation of orders, creating economics of scale, which particularly benefit smaller producers who would fight without Pinduoduo to achieve such a level of demand. In addition, by combining shipping logistics, PinduDuo further reduces the total product costs compared to the manufacturer’s direct sales.

Creating noise in social media

On the side of the consumer, PinduDuo implements his group of buying a group to drive sales through social media trends. The name Pinduoduo is roughly explained as “together, more savings, more fun”, reflecting its basic strategy: the more buyers in buying a group, the lower the price. This tactic prompted Pinduoduo to become a leading world Social trade The platform according to the numbers of user, with 694 million users in China alone from June 2024, according to Xquestmobile China.

In addition to buying a group, Pinduoduo used gamifid (Gamification) Purchasing functions – due in Chinese business culture – encouraging to buy impulse, challenges for most online sellers.

The company entered the market, strategically focused on overlooked consumer segments, focusing on buyers with lower income in smaller cities and rural areas, instead of competing about richer urban customers dominated by JD.com and Alibaba. This approach led to rapid growth and profitability by 2021 to 2023. PinduDuodo, including this, reported $ 34.879 billion in USD and net income in the amount of USD 8.267 billion.

Revenue model without commission

How does Pinduoduo generate revenues? Producers’ fee for logistics and marketing services, such as product promotion, visibility and platform. Logistic revenues account for 38% of the platform’s total earnings, while marketing services bring 62%.

Unlike Amazon and other internet markets, PinduDuo does not accept sales commissions. Instead, it works as a supplier of logistics and marketing services, facilitating distribution for producers and managing logistics flows.

These proven revenue framework is the key to highly competitive Pinduoduo prices. In addition, the company uses a favorable tax rate in China – 15% compared to the standard 25% for classic companies. Using mass purchases, optimized marketing and logistics, and a commission-free structure, Pinduoduo can maintain its economical price strategy-like a Chinese rival e-commerce, Shein.

Favorable customs regulations

This is reproduced by the Pinduoduo model abroad. In this part, he uses American customs tariffs (Section 321 of the Smoot-Hawley Tariff Act from 1930), which releases goods worth 800 USD from customs duties. The EU provides a similar exemption for items below 150 € (Article 23 of Regulation 1186/2009). Most of the products ago fall below these thresholds, which allows them to send free from service.

Within two years ago, over 200,000 retail sellers beat 4 million packages per day from 60 warehouses in China and attracted 467 million users around the world, offering an offer products 40% to 60% cheaper than Amazon. To quickly develop a customer base and achieve a self -sufficient critical mass in Europe and the United States, it intensively invests in product subsidies.

His online advertising strategy is equally aggressive, and significant investments in social media advertising on platforms such as Tiktok, Instagram and Snapchat, as well as in the search engine ranking. While the exact data on these campaigns remain undisclosed, annual reports from PDD Holdings, show their marketing expenses – including 34% to around 10.7 billion euros in 2023, and about 4 to 5 billion dollars assigned to this yourself .

The marketing strategy ago and its slogan “Buy like a billionaire”, follow the textbook of the main digital platforms, in which indefinite subsidies drive the demand and viral fuel involvement. In such models of economics, scale are directly related to the demand of consumer-conception known as the economy of demand.

High logistics costs

The extension of the PinduDuo model on the international arena is associated with logistics challenges, especially due to the higher costs of shipping air freight from China, which makes the current international model to potential losses.

To solve this problem, he began to move to the fresh operating model in March 2024, gradually moving from the initial fully managed approach to half managed. As part of this model, buyers, represented by this, send products via ocean freight to American warehouses for local distribution.

In addition, he engaged this Chinese diaspora in the USA to serve “family warehouses” From their homes, including apartments and garages, providing storage, labeling and shipping services at competitive rates. This strategy attracts smaller merchants who cannot afford vast warehouse facilities. It also shows how retailers adapt to the evolving logistics model ago, and the platform manages primarily purchases and prices.

However, this was introduced by a classic model in which sellers set their own prices, as did Ebay, Alixpress and Amazon. Already in several European countries, including in Great Britain, Germany, Spain and France, the model can challenge the ability to maintain ultra-Niske.

If it goes to a more conventional market, how will his inexpensive offers go against Amazon? This was disturbed by the online retail landscapeBut can his aggressive price strategy survive the test of time?