Iris Publishers - Open access journal of Textile Science & Fashion Technology | Consumer-Feedback Driven- Chain Powers China’s E-Commerce

Authored by Fuyi Li

Recently, the incredible rise of a Chinese e-commerce start-up, Pinduoduo (PDD), has attracted the attention of global capital. PDD, the Shanghai-based social e-commerce company providing daily groceries and home appliances, went public raising $1.6 billion in July, which is more expensive than Facebook’s IPO and one of the largest deals of the year. Nasdaq evaluated PDD as “it polishes New York’s tech IPO crown”. Surpassing JD.com and competing against Alibaba, the biggest two e-commerce companies in China, PDD just takes 3 years to crack the highly consolidated China’s e-commerce market. How young PDD accomplish this? What’s the crucial force lead to the achievement? Is the force a common thing during Chinese e-commerce tycoon’s development? [1].

What’s the Consumer-Feedback Driven?

Before the discussion about the reason why PDD successes during such short time, it’s necessary to examine how the e-commerce industry in China is organized by taking a look at the dynamics of key actors, and understanding how the value-added processes, namely value chains, in the industry is controlled by the actors and how the power relationship among the actors determine the chains [2].
Generally speaking, the typical power relationship in an industry is either “buyer-driven”, which means buyers have absolute dominance, or “producer- drive”, signifying producer own governing powers. “Buyer-driven” chains are common in non-durable consumer goods industry, for example, apparel and shoes, with network integration forms, the “buyer” here refers to organizational purchasers like Walmart; while “producer-driven” chains can be observed frequently in natural resources industry, for instance oil and mining, with a vertical integration form. In the China e-commerce era, however, the driving force of the chain is no longer pure “buyer” or “producer”, but a more complex concept. Platform companies, Internet-engaged consumers and e-commerce focused producers are the economic roles in the e-commerce value chain, evolving what we call “consumer-feedback driven” chain.


The “consumer-feedback driven” chain shows a brand-new platform integration form. The activities conducted by Internet-engaged consumers and e-commerce focused producers both rely on platform companies; the platform works as a bridge bringing together the two actors in high value exchange and enabling vast bilateral interactions. During the exchange and interactions process, consumers’ involvement undertakes part value-added activities that was originally assumed by producers, meanwhile, the online individuals get more power via platforms from producers as well as retailers (organizational buyers) and challenge the producers’ responsibilities for determining non-production activities, like design, marketing and pricing. For example, on Taobao, which is a subsidiary of Alibaba Group, producers can get a large amount of consumer feedback as ratings and comments about the items sold in real time through online live streaming on social media, which in turns pushes manufacturers to improve the item development and adjust the price. Chinese e-commerce companies, especially those leading platforms as Alibaba, JD.com and PDD focusing on nondurable goods, are not only promoting the emergence of consumerfeedback value chain, but also benefit from the chain [3].

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