He became a fierce rival of JD.com and Ali

Giants Battle Double 11 Feature:

On Singles' Day in 2023, Ali, JD.com, Pinduoduo, Douyin, Kuaishou, Xiaohongshu..., almost all e-commerce giants in China have joined the ranks of low-price competition. Such a fight is a scene that has never been seen in China's Internet rivers and lakes. All-weather technology will present the facets of multiple companies in this battlefield, observe and predict the development and direction of the industry.

Author | HUANG Yu

Edit | Zhang Xiaoling

In 2023, the situation in China's e-commerce market has changed. Liu Qiangdong and Ma Yun, two bigwigs who have returned to China one after another, bumped into a fierce rival at the same time, Pinduoduo.

Although founder Huang Zheng has retired, the rising e-commerce giant's GMV (total sales) this year may have surpassed JD.com and approached Taobao.

The growth of performance drove Pinduoduo's stock price to hit new highs one after another, which also caused Huang Zheng's value to skyrocket. On October 24, the 2023 Hurun China Rich List was announced, 43-year-old Huang Zheng entered the top three for the first time with a value of 270 billion yuan, the once richest man Ma Yun has fallen to tenth, and Liu Qiangdong and his wife have slipped to 66.

As the two giants in the domestic e-commerce field, Ali and JD.com have been shining for many years, and almost no one can really threaten their status. Until the rise of Pinduoduo, it gradually evolved into a three-legged pattern.

On this Double 11, although there was no direct shout, Taobao and Jingdong both regarded Pinduoduo as the "biggest enemy", and returned to the "price killer", sacrificed "tens of billions of subsidies", and joined the array of robbing users' minds.

Pinduoduo set up a signboard of "11.11 every day, naïve low price", and seemed to respond to this annual promotion with a more relaxed attitude; Those fried shop turmoil, fake goods suspicion, become a hidden B-side, but also this upstart must resolve the hidden worry.

Pinduoduo, a dark horse born 8 years ago, tore a crack in the e-commerce market dominated by Ali and JD.com, and achieved a miraculous counterattack.

And this is also a symbol of the eternal opportunity of the vast e-commerce rivers and lakes, the fight continues, and miracles will still be staged.

Counterattack

"Liu Qiangdong will also slowly grow old. I find it hard to believe that thirty years later, the entire Chinese e-commerce industry is still these big guys now. In the second year of founding Pinduoduo, Huang Zheng was full of enthusiasm and released his ambition to subvert the industry.

Just 7 years later, the challenger who wants to break the old world pattern has become the one standing at the top of the pyramid. Huang Zheng surpassed Jack Ma and Liu Qiangdong at a surprising rate to become the richest tycoon in China's e-commerce industry.

According to the Hurun China Rich List, Huang Zheng ranks third, followed by Nongfu Spring founder Zhong Xiaoxi and 52-year-old Tencent founder Ma Huateng.

Ma Yun, once China's richest man, has now slipped to tenth place, and Liu Qiangdong, who was chased by Huang Zheng, fell to 66th, worth only a fraction of Huang Zheng, about 60 billion yuan.

Huang Zheng's personal wealth has increased significantly, which is inseparable from the rise of Pinduoduo's stock price.

Although he has retired from Pinduoduo, Huang Zheng is still the largest shareholder, holding about 26.5% of the shares as of the end of February 2023.

In the past year, Pinduoduo's stock price has performed brilliantly, rising by more than 45%, which is the "light of China" in the mouths of many investors. As of the close of trading on October 25, 2023, Pinduoduo's share price was about $107.49 per share, with a total market value of about $142.8 billion, equivalent to three JD.com, nearly two-thirds of Alibaba's.

During the same period, the growth of domestic e-commerce performance and the success of going overseas promoted the strong growth of Pinduoduo's stock price.

According to the financial report, Pinduoduo's revenue in the second quarter of this year was about 52.3 billion yuan, a year-on-year increase of 66%, and the growth rate was the highest in nearly eight quarters. This high growth rate is not only out of reach of rivals Ali and JD.com, but also the fastest growth rate among large Chinese technology stocks.

While the revenue is growing rapidly, Pinduoduo has also really earned real money. In the second quarter of this year, Pinduoduo achieved an operating profit of about 12.7 billion yuan, a year-on-year increase of 46%; Net profit attributable to owners was approximately RMB13.1 billion, a year-on-year increase of 47%.

With the domestic e-commerce industry peaking, Pinduoduo has also begun to seek a second growth curve from overseas markets.

A year ago, Pinduoduo's overseas version of "Temu" rushed into the blue ocean of cross-border e-commerce like a catfish, relying on the full hosting model and low-price strategy, it was quickly launched in 47 countries around the world, ranking among the top ten global app downloads and becoming one of the most downloaded apps in the United States.

The strong momentum of TEMU's development also makes the capital market optimistic about the future growth space of Pinduoduo, driving the growth of stock prices.

Internet analyst Yu Bin also said that the decision of Pinduoduo's senior management is accurate, and core projects such as tens of billions of subsidies, Duoduo grocery shopping, and overseas TEMU have almost never missed, and have always been in the leading position in the industry. After the previous core project enters a stable period, the next business flashpoint can always be found in time. This is the reason why its share price has repeatedly reached new highs.

From the perspective of business model, since its establishment in 2015, Pinduoduo has risen rapidly by relying on the sinking market, white-label merchants, and low-price strategies ignored by Ali and JD.com. Three years after its founding, Pinduoduo was listed on NASDAQ, while Alibaba took five years to go public and JD.com ten years.

Under the wave of consumption downgrade, Pinduoduo, with its stable low-price mentality built over the years, has not only gained consumers from the four wireless networks, but also attracted many middle-class consumers.

On the other hand, Ma Yun's Taotian and Liu Qiangdong's JD.com failed to stop the adverse current of consumption downgrade, and the stock price fell sharply, resulting in a sharp decline in personal wealth.

Guard

The rise of e-commerce upstart Pinduoduo has made Ali and JD.com, two e-commerce giants, feel a strong threat.

According to third-party estimates, the GMV of Taobao Tmall will reach 8.2 trillion yuan in 2022, JD.com will be about 3.47 trillion yuan, and Pinduoduo will reach 3.2 trillion yuan.

Of course, Ali and JD.com will not watch Pinduoduo kill halfway and seize their position. They have also lowered their posture to learn from Pinduoduo, set more attention on the sinking market, and this year began to resolutely implement the "low price strategy".

It can be seen that at the end of last year, Liu Qiangdong shouted internally that "low price is the only basic weapon"; Jack Ma, who returned to China this year, also proposed at an internal exchange meeting in May that "Ali returns to Taobao" to reverse the Tmall-based consumption upgrade strategy of the past decade.

This year's Singles' Day is the moment when the Big Three are directly fighting. Jingdong and Li Jiaqi caused a dispute over the pricing of an oven, which opened the curtain of fierce competition in this "Double 11 war".

Whether for Taotian or JD.com, this year's "Double 11" is particularly important, this is an exam to test the effectiveness of their new round of organizational structure adjustment, and it is the best window to show the outside world who the "lowest price on the whole network" is spent.

Taotian clearly took "the lowest price on the whole network" as the core KPI of this year's Double 11, while JD.com shouted the slogan of "really cheap", and both also launched the trump weapon "tens of billions of subsidies" that once belonged to Pinduoduo.

Pinduoduo must also show more sincerity in this big battle to maintain the core advantage of the king of low prices. According to Wall Street news, Pinduoduo's tens of billions of subsidies also launched the "single piece discount" game for the first time on October 23, and on the basis of subsidies, the joint subsidiary Duoduo paid additional superimposed price to drop directly.

Pinduoduo emphasized that there is no upper limit on the investment of additional official subsidies; In addition, the person in charge of Pinduoduo's 10 billion subsidy also told Wall Street that compared with last year's promotion, the brand commodity pool of this year's 10 billion subsidy is expected to increase by 110% year-on-year.

Zhongtai Securities analyst Huangfu Xiaohan believes that although Ali, Jingdong and other platforms have gradually begun to emphasize "price power", behind the low price is a platform's ecological model, including the relationship between internal and external merchants and customers, which is relatively difficult to adjust.

Therefore, Huangfu Xiaohan expects that in the future, the growth rate of Pinduoduo will still be higher than the industry average, especially in the period of weak economic cycle.

However, although it is difficult to shake Pinduoduo's position in the "outside the five rings" market in a short period of time, even if it is pure consumption, the low-price strategy of Ali and JD.com will have a certain impact on Pinduoduo; In the face of the encirclement of the two traditional e-commerce giants, Pinduoduo's discounts on some items are inevitably somewhat inadequate.

Pinduoduo also has its own limitations and hidden worries. This year, some merchants launched a "fried store" because they were dissatisfied with the platform's "refund-only" mechanism that favored users; Under the low-price strategy, how to find a balance between protecting the rights and interests of consumers and merchants is a difficult problem that Pinduoduo needs to overcome.

In the year of listing, Huang Zheng once said that "Pinduoduo surpassed Jingdong in three years, and fought Ali in ten years", which was regarded as a nonsense at the time, and now it is almost half fulfilled.

With the solid low-price mentality created over the years, Pinduoduo has occupied a certain dominant position in the current economic environment, but the stock competition in the e-commerce industry has intensified, and Pinduoduo still faces considerable challenges. With JD.com and Ali in the past, and live streaming e-commerce such as Douyin and Kuaishou in the future, how the new e-commerce pattern will evolve is still full of variables.