EYESHENZHEN  /   Opinion

Booming upstarts reveal innovative vitality

Writer: Wu Guangqiang  | Editor: Jane Chen  | From:  | Updated: 2019-01-28

Few countries in the world are more dynamic in innovation than China today. Even as a native Chinese who lives in Shenzhen, one of China’s innovation centers, I often feel dazzled by the rapid pace at which fresh business models and new business giants are emerging.

When people thought that the business territory had been carved up by such mammoth corporations like Alibaba, Tencent and JD, leaving no room for new comers, some unexpected challengers popped up and grew so fast that they have stolen much thunder from the previous hegemons.

Such upstarts include Pinduoduo, a Shanghai-based e-commerce platform that offers a wide range of products from daily groceries to home appliances. Its secret success recipe lies in its integration of social components into the traditional online shopping process, which the company describes as the “team purchase” model. The “new” bargaining way has a special appeal for housewives, my wife included, who has switched to Pinduoduo from Taobao ever since it first appeared in September 2015.

Homegrown companies know all about the needs and tastes of local customers, so they do better than foreign competitors in the Chinese market. Besides low prices, Pinduoduo’s trump cards also involve bulk-selling and sharing its product information on social networks such as WeChat and QQ.

The former strategy creates huge orders for the sellers, leaving them more room to cut prices. The latter allows users to invite their contacts to form a shopping team to get a lower price for the commodity. The mechanism keeps the users motivated and better hooked for a more interactive and dynamic shopping experience. As a result, Pinduoduo soon went viral in China.

Pinduoduo’s annual GMV (gross merchandise volume) surpassed 100 billion yuan (US$14.83 billion) in 2017, just nearly two years after its inception. To hit the same milestone, Taobao took five years, and JD 10 years. Pinduoduo now claims more than 343.6 million active buyers with an annual GMV of 262.1 billion yuan.

Pinduoduo didn’t invent the social e-commerce model. Groupon pioneered the group-buying concept years ago. Yet it is in China that the model is succeeding thanks to a new ecosystem consisting of super app WeChat, mobile payment infrastructure, and mobile-first users. On July 26, 2018, Pinduoduo was listed on the NASDAQ at an IPO price of US$19.

Another rising star is Douyin, China’s top short-video app at present. Created by Beijing-based startup Bytedance, Douyin has beaten its chief competitor and former market dominator Kuaishou by a wide margin, with its registered users exceeding 700 million and monthly active users exceeding 100 million, and more than 3.5 billion videos viewed every day. With its powerful editing capabilities, which enable users to add music and effects to their videos in order to make them more interesting and creative, it has become contagious among people, young ones in particular.

Encouraged by Douyin’s tremendous success, Bytedance launched its overseas version Tik Tok in October 2017. It had no sooner taken the world by storm than it hit the market. Since its launch, it has covered over 150 countries and regions and become the most popular short-video app in Japan, South Korea, Vietnam, India, Indonesia and Germany. In Japan, its users reached 20 million.

The app was downloaded more than 104 million times on Apple’s App store from January to June 2018, making it the world’s most downloaded app for that time period.

What makes Tik Tok’s success special is its international edge over China’s established social media platforms, such as Tencent’s WeChat, Sina’s Weibo and Alibaba’s Youku. It is eroding the territory of the social media category dominated by Facebook, Twitter and Snap — all Western companies.

Like most other online business models or apps, short video apps did not originate in China, but they took root and flourished in China, thanks to the ingenuity of Chinese people and the country’s massive market.

The huge number of users attracts a lot of advertising money. ByteDance declined to disclose how much revenue its apps generate, but a source familiar with the company said it is a billion-dollar business annually.

Video shows, with their sense of presence, are much more efficient and vivid than words or photos as mass media, so their economic value is beyond estimation.

With supportive policies and measures from the Chinese leadership, more great startups will emerge.

(The author is an English tutor and freelance writer.)