China's e-commerce market is forecast to hit $3 trillion in 2021. In comparison, the US market is worth $800 billion and the UK $169 billion. The difference is huge, so what's driving it?
Bulk discounting is nothing new to Western markets. It's a simple concept - the more you buy, the lower the price per item. It's been a staple of B2B commerce for years, and Costco and other big-box retailers have used the technique successfully in consumer markets to drive higher consumption levels through incentives such as "buy one get one free".
A similar technique is used in e-commerce through subscription mechanisms. If you commit to buying X amount over a period of time, a discount per item is applied.
Chinese e-commerce companies have taken the concept one step further...
Social group buying
Traditional bulk discounting is based upon a single customer's order. The more I buy as a single customer, the larger the discount I will receive.
The innovation we see in China is that the discount is based on the amount that a group is buying in aggregate, and the discount is applied to everyone in that group. Social channels are used as the mechanism to curate that group and coordinate purchases.
The leader in the space is Pinduoduo. "Together, More Savings, More Fun" is their tagline and well describes the model. It seems to be catching on; they've $0 to $100 billion in the last 5 years...
Products on Pinduoduo.com have two prices: the official price and the discount group price. Customers "unlock" the discounted price by sharing the product with a friend who also commits to purchase it at the discounted price. The more friends you get to commit to the purchase, the bigger the discount becomes for everyone in the group.
The net effect is that the retailer shifts more products and acquires new customers.
Why haven't we seen it in the West?
This, I do not know, but it's certainly an opportunity that any innovative e-commerce or DTC brands should be exploring.
At Neu we've been spending a lot of time working with brands on their e-com platforms over the last 18 months and concepts like this are the types of innovations that we look to integrate.