When consumers think PDD, they think “cheap.”
The general consensus is that the same product seen on Taobao is usually cheaper on PDD. Sometimes PDD ships out a lower quality product, despite having the same pictures as Taobao. Other times, it’s the exact same seller just listing a lower price on PDD.
But what’s really special about PDD is the way people get discounts. Shoppers are incentivized to bring in more people. When you bring in enough buyers, everyone gets a further discount. This is what propelled PDD’s user acquisition. More on this soon…
From the seller’s point of view.. PDD is a much friendlier environment.
Taobao has huge consequences for negative or neutral reviews. As a seller, you’re guilty until you’re proven innocent in any dispute case. With so many malicious shoppers, Taobao is a very tough place for small sellers to survive. PDD is much more forgiving because it doesn’t have negative/neutral reviews on each product page. Naturally, this leads to PDD carrying far more fakes.
Taobao also has much higher overhead costs due to its strict rules and standards. It’s much more complicated to operate – events, search optimization, paid traffic, affiliate marketing, retention marketing, customer service etc. But PDD is a much simpler game. It’s all about low price & high volume. Sellers are willing to accept lower margins for the bigger traffic.
Many sellers claim that it’s easier to get traffic on PDD. It is in large part due to the fact that Taobao’s search algorithms and events all heavily favor Tmall.
The Platform’s POV
PDD very specifically started off targeting rural cities, towns and villages instead of larger cities. They knew that this demographic was much more sensitive to lower prices. And it was very representative of how people band together in the community to get better deals as a group.
PDD was able put that effect on steroids by leveraging WeChat. Shoppers actively bring in their friends and family to secure a better deal. This was something that Alibaba didn’t have access to. Because of their rivalry with Tencent, links to Tmall & Taobao don’t work on WeChat. People would need to manually copy the URL and switch apps to be able to access them.
PDD also used some aggressive tactics for getting traffic into the platform. They used lots of platform subsidies and encouraged their users to promote ridiculously low prices.
But the problem of fakes circles back to the problems in Taobao in its early days.
In the end…
Is PDD bad for brands? Not necessarily. It would depend very much on the brand itself. You’d need to look at the numbers and in some cases, it may just be worth going for higher volume and lower margins.
But for most foreign brands, the price war is probably not a favorable game.