---
title: "From 'Search' to 'Group Buying' in the New E-commerce Era: What Has Pinduoduo Taught Us?"
description: "Pinduoduo's success cannot be replicated, but as the era shifts, every entrepreneur must consider how to center their model on people. This article analyzes the underlying logic of Pinduoduo's rise, from its focus on cost-performance to its social and algorithm-driven group-buying model, and what it means for the future of e-commerce."
author: "曹瑞"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2020-11-13"
language: "en"
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---

# From 'Search' to 'Group Buying' in the New E-commerce Era: What Has Pinduoduo Taught Us?

> Pinduoduo's success cannot be replicated, but as the era shifts, every entrepreneur must consider how to center their model on people. This article analyzes the underlying logic of Pinduoduo's rise, from its focus on cost-performance to its social and algorithm-driven group-buying model, and what it means for the future of e-commerce.

****Click "Read Original" for details****
**Pinduoduo's success cannot be replicated, but as the era shifts, every entrepreneur must consider how to center their model on people.**
Recently, an article analyzing how Jinglin (Greenwoods) invests became popular.
It's not hard to understand why: managing over 100 billion yuan with a team of 30, and staying at the top of the industry for 16 years, in today's market full of concepts, buzzwords, and methodologies, a success story built on fundamental research is indeed the stabilizer this era needs.
**"Enterprise value is ultimately determined by fundamentals, not short-term fluctuations."** Under this belief, Jinglin's most classic investment case is Pinduoduo.
In 2018, Jinglin sent 15 research teams to visit Pinduoduo's users and upstream and downstream industry chains. After covering nearly half of China, they finally took a heavy position in Pinduoduo amid widespread skepticism.
Today, Pinduoduo's market value has more than quadrupled, and more people are affirming it, but few truly understand the core of its rise.
**Although it did initially benefit from a demographic dividend of price-sensitive consumers, we must ask: can simply selling at low prices make you Pinduoduo?** Posing this question to Taobao's aggressively promoted Taobao Deals (Taobao Tejia Ban) yields an obvious answer.
According to the latest quarterly report, Pinduoduo's MAU grew by over 80 million in a single quarter, with net new monthly active users equivalent to two Taobao Deals.
**The difference in growth rates proves that the decisive factor in e-commerce competition today is no longer price but model:** traditional search-based e-commerce is being surpassed by new models like group buying rooted in social scenarios.
This is also the underlying logic behind Pinduoduo's market value exceeding $100 billion while still maintaining strong growth. **The consumption shift from 'search' to 'group buying' in e-commerce fundamentally concerns the future of all participants in the entire consumer industry, including retail and brands.**
**Pinduoduo, in its rapid growth, is undoubtedly an excellent research sample.**
**-01-**
**What is Pinduoduo's true foothold?**
Many people label Pinduoduo as "low price" and attribute its success to discovering a so-called "sinking market." When Pinduoduo first went public, Liang Ning also analyzed what dividend actually supported Pinduoduo.
She mentioned two points: **First, Pinduoduo took in the small and medium merchants that overflowed from Taobao during its consumption upgrade; second, it matched these overflow goods to the "sinking population."**
**This judgment has become the consensus of most people, but it only tells half the story. If it were only these two points, Pinduoduo's business would just be picking up Taobao's leftovers, but the Pinduoduo we see today clearly has far more imagination space than that.**
So what is the other half of the truth? It's called "cost-performance." Costco has a philosophy: "low price and quality," which is the best interpretation of cost-performance.
**It's easy to understand: pure low quality and low price has no barrier itself, can only move a group extremely sensitive to price, and can hardly support a platform's existence.**
For Pinduoduo, the same applies; the keyword "cost-performance" runs through the entire process of the company's rise.
In fact, before Pinduoduo, this inventory always existed, but it originally flowed into markets at all levels through offline retail systems. **In the traditional supply and marketing system, after layers of circulation, goods reaching consumers, regardless of quality, had already passed through countless levels, and prices were severely distorted.**
**Early Pinduoduo essentially achieved a thorough transformation of the supply and marketing system by compressing circulation links.**
**-02-**
**Has cost-performance become the main theme?**
It's undeniable that Pinduoduo has indeed entered the lives of more and more people in so-called "first- and second-tier cities."
**On one hand, the GMV share of first- and second-tier city users has continued to rise, reaching 48% by June last year; on the other hand, "Generation Z" young people have gradually become the main force of consumption on Pinduoduo.**
**The change in user structure directly drove the annual average consumption per active user to multiply. This is naturally related to heavy subsidies, but seeing only this is not enough. It's not something that can be piled up with market budget alone.**
So how did Pinduoduo achieve this? It can be viewed from two dimensions:
**1. Rational return makes pursuing cost-performance the main theme**
**The first is related to external trends. Referencing Japan's consumption era changes, from homogeneous consumption in the 1950s, to consumption upgrade and personalized consumption awakening brought by economic prosperity in the 1970s, to the rationalization and stratification of consumption in the 1990s.**
**This evolution from mass consumption to consumption upgrade to rational return is also unfolding in China's consumer market.** Especially after the pandemic, uncertainty about the future has accelerated the rational return of first- and second-tier city users.
The recent "fake socialite group buying" incident is controversial, but these "fake socialites" are precisely the most typical group of this era, wandering in the gap between consumption upgrade and rational return.
**In essence, it's about: how to obtain the so-called good life with higher cost-performance.**
**So saving money crazily to buy big brands while hunting for discounts in live streams has become the most real state of contemporary young people. As Huang Zheng said, dividing users by city income is a traditional mindset. The current reality of Chinese consumption is that the same user has different consumption capabilities in different scenarios and roles.**
**If the demographic dividend Pinduoduo enjoyed in the past was catching the submerged population, then today, when cost-performance becomes the main theme of the whole society and everyone's rational side is gradually amplified, the opportunity and scale of this business will also be multiplied.**
**So after going out of the circle, how does Pinduoduo's cost-performance logic hold? The answer is group buying. This is also the second dimension we want to discuss: internal model innovation.**
**2. How does group buying create cost-performance?**
**Group buying creating cost-performance can also be divided into two aspects:** On one hand, the "group" model has social attributes. **Based on the spread of users' social relationships, it determines that Pinduoduo acquires users much more easily than traditional centralized e-commerce, thereby reducing platform traffic costs;**
On the other hand, the essence of group buying is the aggregation of crowd demand. **Huang Zheng wrote an interesting article early on called "Turning 'Capitalism' Upside Down," where he gave an example:**
If 1,000 people want to buy a certain down jacket in summer for winter, and they send a joint order to a manufacturer, willing to pay a 10% deposit at last year's price, would the factory be willing to give them a 30% discount? It's likely yes.
**Strengthening the planning of the circulation side through group buying is, to a certain extent, a practice of this deterministic demand value.** It also solves the problem of high operating costs for merchants caused by the high uncertainty of front-end demand in traditional e-commerce.
In fact, we described the differences in supply and circulation models between Pinduoduo and Taobao long ago, and these two diagrams have been widely circulated in the industry.
**But looking at it today, we see that the cost-performance this difference brings to Pinduoduo is completely different from the way traditional e-commerce like Taobao and JD.com force suppliers to lower prices through channel and traffic monopoly.**
**-03-**
**In the new e-commerce era, what is the underlying logic of the shift from 'search' to 'group buying'?**
**1. Social + algorithm: filling the gap in traditional e-commerce scenarios**
**Group buying was not invented by Pinduoduo. Why did the thousand-group-buying wars of the past disappear, but Pinduoduo can still succeed with "group" as its core model? Because past group buying was purely price-oriented, while Pinduoduo's "group" has two new engines: social and algorithm.**
To understand how these two engines drive Pinduoduo's growth, we need to start with consumption scenarios. Human consumption is divided into two types: **one is with clear purpose, which we call planned consumption; the other is without purpose, where you didn't intend to buy, but after shopping or friend recommendations, a consumption need arises.**
**These two scenarios have always existed offline. Online, purposeful consumption corresponds to search-based e-commerce like Taobao and JD.com, but the scenario of purposeless e-commerce consumption has always been missing.**
In other words, there has never been an e-commerce format online that can replace the shopping street scenario. Although people habitually say "browse Taobao," data shows that 93.1% of user behavior on Taobao is direct search.
**So Pinduoduo's first wave of dividends essentially filled the gap of purposeless consumption represented by "browsing" in traditional e-commerce scenarios.** A previous Tencent survey also showed that "having the feeling of shopping on the street" is an important reason users are willing to continue using Pinduoduo.
The core of creating this feeling is social + algorithm. Social corresponds to friend recommendations, and algorithm corresponds to browsing by oneself; both are indispensable. Although Taobao is also trying recommendations, the results show it's not as simple as imagined.
Today, Taobao and JD.com's recommendations are basically "recommend what you bought," but Pinduoduo is different. For example, if I search for self-heating hot pot, it will also recommend Xibei Kung Fu dishes. In fact, it's trying to understand the scenario and real needs behind the user's search.
**This gap is largely formed by user behavior feeding the algorithm in social scenarios.** So in the previous era, traditional e-commerce that succeeded with traffic and search logic will face significant obstacles in moving to the new era.
**2. People first: "recommendation" fully replacing "search"**
**There is a classic summary in the industry: shelf-based e-commerce like Taobao, which focuses on traffic and search logic, does "birds of a feather flock together" with goods as the core; Pinduoduo represents matching and recommendation, achieving "people of a kind gather together" through social + algorithm.**
People-centered has been shouted for many years, why can it hold today? **Just mentioned that Pinduoduo's first wave of dividends was a supplement to traditional e-commerce scenarios. Today, the bigger imagination space comes from "recommendation" fully replacing "search."**
**The logic of search requires massive SKUs to meet long-tail demand, and "long tail" has been Taobao's long-term core competitiveness. But today's era is characterized by material surplus, and users' core demand has shifted from "more" to "refined."**
**The more SKUs, the higher the user's decision cost. Past advantages become weaknesses, freeing up more space for Pinduoduo's growth.**
In September this year, Pinduoduo's monthly average usage time per user surpassed Taobao; in October, daily order volume peaked over 100 million... Continuous growth and surpassing also indicate that the new e-commerce "group buying" era has arrived.
Pinduoduo's success cannot be replicated, but as the era shifts, how to move from goods-first to people-first, truly thinking about your business model with people at the center, is a question every consumer entrepreneur should consider.
Source: Langchao New Consumption (ID: lcxinxiaofei) Author: Cao Rui


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