What made Pinduoduo so big? - Ben Cavender

Ben Cavender

For many outside China the successful IPO on Nasdaq of group purchasing platform Pinduoduo, mildly comparable to the less successful Groupon, came as a surprise. Shanghai-based business analyst Ben Cavender tries to explain the success at Inkstone. It uses the popular Tencent platforms WeChat and QQ.

Inkstone:

Pinduoduo has a mini-game called “Duo Duo Orchard,” in which players plant a tree of their choosing on the app and collect points by logging in daily, making purchases and inviting friends. After collecting a certain number of points, users will receive a box of fresh fruit.

Pinduoduo’s social media features give it “more stickiness” than Groupon, according to Ben Cavender, a senior analyst with the Shanghai-based China Market Research Group.

“It generates a lot more interest and there’s an entertainment value to the shopping process,” Cavender told Inkstone...

China’s online shopping market has long been dominated by two giants, Taobao of Alibaba (which also owns Inkstone) and JD.com.

Pingduoduo had 168 million monthly active users in May, behind Alibaba's 502 million and JD.com’s 273 million, according to data compiled by consulting firm Jiguang.

“I think increasingly what we are going to see is more space for different kinds of models,” Cavender says. “It may take some share away from Taobao and some of the low-end market share away from [Taobao-owned] Tmall and JD.com. But Pinduoduo’s not going to replace them.”

Currently, the majority of Pinduoduo’s users live in cities with populations of fewer than three million people – small cities with users who are more price-sensitive.

In the more affluent cities, Taobao and JD.com still dominate... “If Alibaba decides that’s a market they want to own, they are going to spend a lot of money, and Tencent has to decide how much they want to support Pinduoduo’s long-term growth,” Cavender says.

More at Inkstone.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on e-commerce at the China Speakers Bureau? Do check out this list.  

The booming group buying market - Helen Wang

Helen Wang

The group buying market in China is steaming hot, but without Groupon as a major player for the time being. Helen Wang analyzes in Forbes the chances of the US company in the world's largest internet market.

When a bellman in a Shanghai hotel advised me to get a breakfast coupon from Lashou.com, a Chinese group-buying site, for less than half the price, I knew that social commerce had gotten into the hearts and minds of Chinese consumers. It’s not surprising that thousands of group-buying websites sprung up in less than a year in China’s chaotic cyberspace. According to JP Morgan, the group buying market grew from zero to more than $150 million in 2010, and is expect to reach half a billion dollars in 2013...

Gaopeng [the Chinese name of Groupon] also faces tough competition from Lashou.com and other group-buying sites. Lashou is founded by a seasoned Chinese entrepreneur and backed by U.S. venture capital firms SGR and Milestones – both are experienced in Chinese technology ventures.  Its momentum is strong after raising $110 million in series C funding in April. So far, Lashou seems to have done everything right. It is expanding rapidly to 2^nd and 3^rd tier cities, setting up call centers and logistics, and enhancing customer services.

Gaopeng certainly has an uphill battle in China. Some analysts have already written it off to a fate similar to eBay, Yahoo, and Google (not in bad company, all world class organizations  ).

However, China’s Internet market is too significant to give up. In less than a decade, China’s Internet users could reach as many as 750 million and China’s consumer market could reach $16 trillion. A burgeoning middle class has fueled a consumption boom. Retail marketplaces are spreading in urban areas like wildfire. E-commerce has been growing 60 percent per year in recent years.

More advises for Groupon  in Forbes.

Helen Wang is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch.

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Defining the mess Groupon finds itself in - Jeremy Goldkorn

Media watcher Jeremy Goldkorn tries to analyze for TechCrunch the mess Groupon it getting itself in, now the US firm is teaming up with China's internet giant Tencent. Sending inexperienced expats to China, might just be only one of its problems.

Jeremy Goldkorn:

But, based on my personal experience since 1997, every foreign-funded company I have ever encountered in China talking about making money from local vendors based on a “lifestyle” proposition has about a year or so before bankrupting itself or being run out of town.

And on the support from research firm iResearch:

I don’t know if Groupon is paying iResearch, but iResearch has a reputation in China for doing “research” for companies who pay them. Somehow, the companies always end up looking very good in their research reports.

It’s all pre-IPO spin. Groupon China is simply a way to bleed cash.

More in TechCrunch

Jeremy Goldkorn is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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If I were Groupon - Marc van der Chijs

Image via Wikipedia

China Internet veteran Marc van der Chijs has a thorough look at the already sorrow state of Groupon's effort to enter the China market, together with the domestic giant Tencent. Things go from bad to worse. After Van der Chijs describes what has happened till now, he concludes:

If I were Groupon, I would seriously reconsider their current China market entry. If they want to enter fast they need Tencent, there is no way around it. But if they give themselves a bit more time there are other ways. They made the mistake of mainly hiring foreign managers and focusing in their recruitment drive on consultants and investment bankers with MBAs. That may work in the US, but that’s not what you need to be successful in China.

Marc van der Chijs by Fantake via Flickr

The article was original written for the Silcon Valley Insider. Last night Van der Chijs wrote is last update, and things look even worse now:

Last night an article on the Marbridge Daily named the 2 managing directors for Groupon in Beijing and Shanghai. From their LinkedIn resumes (see here for Mads Faurholt and Raphael Strauch) it looks like they both got their first real jobs in 2007 and have zero operations or China experience. They seem to be very smart, ambitious and aggressive guys, which is perfect for the European or US market, but less so for cooperation with a leading Chinese Internet company. 

More background in his original article.

Marc van der Chijs is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference, do get in touch.

Related articles

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Is Groupon conquering China? No way - Paul Denlinger

Paul Denlinger

"From the perspective of those who have experience with the brutally competitive Chinese market where virtually no non-Chinese companies have succeeded, Groupon's management seemed to make all the wrong moves." Paul Denlinger tells in the Business Insider why Groupon is on the wrong track in China.

Instead of hiring local Chinese who had rich experience in the local Chinese market, it instead went to Harvard recruiting MBA graduates. From what everyone had seen, Groupon was setting itself up for a fall in China. 

But then, Groupon announced that it would partner with Tencent to develop the social buying market. Tencent, based in Shenzhen, has long been the instant messaging and virtual currency leader in China, with more than 600M registered users in China.

The not-yet closed deal is an effort to let Groupon look nice for a possible IPO, focuses on the US market, rather than on a good China strategy. Tencent is a huge company, but has a bad reputation on e-commerce.

Another unmentioned player is Alibaba/Taobao, led by Jack Ma, which is the undisputed leader in e-commerce in China. For many in China, Jack Ma is a marketing genius, regularly inviting former US presidents and business leaders to major marketing events in China at the company's headquarters in Hangzhou. In addition, he has a close and cordial relationship with China's premier Wen Jiabao. For the Chinese government, Taobao's business platform has the advantage of being able to provide important leading information about the state of China's exports, in a way which is even more accurate and reliable than the government's own Bureau of Statistics. Without a doubt, Taobao/Alibaba would take a dim view of Groupon and Tencent's attempt to elbow in on their e-commerce space. Jack Ma has a famously long memory, and while he may not seek to hit back at Tencent and Groupon immediately, he may well wait for the right opportunity.

More in Business Insider.

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Paul Denlinger is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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Groupon might have a chance in China - Sam Flemming

Image via Wikipedia

The group buying company Groupon from Chicago has set its eyes on China, after successes in 29 countries, including Europe and Japan. Groupon might actually have a chance to win, says CIC founder Sam Flemming in CNBC, although IT companies from the US have mostly failed in China and group buying was actually invented in China as tuangou.
In CNBC:

Tuangou flourished in China partly because haggling is part of Chinese culture, and partly because of scale: there were 420 million Chinese online as of June, 2010, up by 36 million from the end of 2009, according to the China Internet Network Information Center. Chinese netizens also spend a lot of time on internet forums, chatting with others who are interested in the same issues or products. There are, for example, 700,000 people talking about cars in online car-related communities; they post 13 million comments about cars each month, according to CIC Data, an Internet consulting firm that tracks China’s blogs, online bulletin board sites and social media for companies. In North America, you just don’t have the same size or scale of pre-existing online communities, says CIC founder, Sam Flemming.

“In China, this grew out of something customers were already doing. Chinese Netizens had already organized themselves online around brands, products and services – then they recognized they have the collective power to do different things: complain a brand not offering good service, or get 55 people together and get a discount,” says Flemming.

What American companies do better than Chinese is making money on the internet, says Flemming in CNBC.

Still, there appears to be a huge demand for Americanized version of tuangou; at least 50 Groupon clones have popped up in the last few months. Shtuango.com may be making money, but it’s nowhere as successful as Groupon.

“We’ve seen this both with tuangou and with online social games, like Happy Farm; both were developed in China, but made a lot more money in the U.S., because American companies figured out how to monetize it effectively,” says Flemming.

Commercial

Sam Flemming by Fantake via Flickr

Sam Flemming is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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