The market value of Pinduoduo is approaching Alibaba, and Ma Yun rarely speaks
All great companies are born in the winter.
Text: "Chinese Entrepreneur" reporter Zhao Dongshan
Editor|Li Wei
Header image source: Visual China
China's Internet e-commerce market is ushering in a historic moment.
On November 28, 2023, Pinduoduo released its performance report for the third quarter of 2023 as of September 30, because revenue and profit far exceeded market expectations, and the growth rate was strong, Pinduoduo's U.S. stock rose by more than 21% on the evening of the same day, and the total market value reached $185 billion at the peak, which was only less than $10 billion different from Alibaba at that time.
Pinduoduo's financial report is so amazing that even Jack Ma rarely speaks on Alibaba's intranet.
That night, an Ali employee posted on the intranet: "I can't sleep at the moment, and I don't dare to think that the market value of Pinduoduo has come directly to 185.5 billion US dollars, compared with our 194.3 billion, the gap is only 8 billion, which is really shocking." That inconspicuous slash is about to become a big brother. I didn't want to send out this post without content, but after thinking about it, I still left this post as a memo and as my own encouragement. I look forward to working hard with the group brothers to contribute bit by bit and surpass it back. ”
After seeing it, Ma Yun replied to the post and expressed his blessings to Pinduoduo: "I want to congratulate PDD on its decision-making, implementation and efforts in the past few years. ”
At the same time, he also encouraged Ali in the midst of change: "I firmly believe that Ali will change, Ali will change." All great companies are born in the winter. The era of AI e-commerce has just begun, and it is both an opportunity and a challenge for everyone. "No one has ever been a bull, but an organization that can reform for the sake of tomorrow and tomorrow, and who is willing to pay any price and sacrifice, is respectable. Back to our mission and vision, Ali people, come on!"
What kind of financial report can make the capital market and Jack Ma so excited?
Pinduoduo's third-quarter financial report shows that in the quarter, Pinduoduo Group's revenue was 68.84 billion yuan, a year-on-year increase of 93.9%, and the net profit of US generally accepted accounting principles was 15.54 billion yuan, with a net profit margin of 22.6%. Both revenue and profit exceeded market expectations. Among them, the revenue alone was nearly 15 billion yuan higher than market expectations, and Pinduoduo's online advertising revenue in the revenue also reached 39.7 billion yuan in the quarter, a year-on-year increase of 40%, exceeding market expectations by nearly 1 billion yuan.
More importantly, when all investors believe that Pinduoduo's new cross-border business will be held back by its financial report because it is in the expansion period, Pinduoduo has proved with two consecutive quarters of performance that Duoduo's new cross-border business is gradually growing into Pinduoduo's next growth engine - from 14.4 billion yuan in the second quarter of 2023 to 29.2 billion yuan in the third quarter, Pinduoduo doubled its transaction service revenue in a single quarter to let the outside world see that the cross-border business Temu has the potential to rebuild Pinduoduo.
What's more worth mentioning is that behind Pinduoduo's financial report is its extremely high human efficiency.
As of the end of June, Pinduoduo had 13,000 employees, compared to Alibaba's 229,000. Even in the entire Internet circle, compared with Tencent, ByteDance and other companies, Pinduoduo's human efficiency is still the highest, which has also caused Pinduoduo's stock price to rise by 69% year-to-date.
Cross-border, the new growth engine
Duoduo cross-border is a new business that Pinduoduo officially launched in September 2022, mainly through the application of Temu, which sells the daily necessities of domestic manufacturing enterprises overseas, and the first stop is in the United States.
"So far, Pinduoduo has experienced two start-ups: one is the main station, and the other is Duoduo to buy groceries. Chen Lei, chairman and co-CEO of Pinduoduo, once said in an interview with "Chinese Entrepreneur". Duoduo cross-border is regarded as the third venture of Pinduoduo after the main station and Duoduo Food, and it is also an extension of the main station.
As of the end of September this year, Duoduo Cross-border has penetrated into more than 100 manufacturing industrial belts in Guangdong, Zhejiang, Shandong, Anhui and other places, and promoted high-quality manufacturing products into more than 40 countries and regions such as North America, Australia, Europe and Asia. According to the financial report, at present, the daily export volume of Duoduo cross-border parcels exceeds 400,000, and the average daily cargo weight is about 600 tons.
The core of the reason why Duoduo cross-border can rapidly expand so many regional markets is that compared with the previous cross-border e-commerce platforms, the biggest feature is the mechanism of "full custody mode" and "flexible supply", which greatly reduces the threshold for products to go overseas and broadens the order channels at the same time.
Source: China Attempt Library
Under the "full custody model", merchants on the Temu platform only need to do their own work in R&D and production, and they can easily go overseas. The platform provides merchants with one-stop services including website drainage, store operation, cross-border logistics, legal intellectual property rights, etc. On the side of overseas consumers, the "full custody model" requires the platform to be responsible for ensuring the quality of goods and the timeliness of fulfillment to ensure the user's shopping experience.
The so-called "flexible supply" model is to identify and aggregate consumer demand in different countries through a small number of rapid responses across borders, and provide long-term and stable orders for platform merchants.
Previously, the reporter of "Chinese Entrepreneur" found that Duoduo cross-border merchants often burst their Guangzhou warehouses because they actively settled in the Temu platform, so merchants had to grab the delivery table before delivery, which also became a "sweet trouble" for merchants and platforms.
Since March this year, Duoduo Cross-border has continued to expand its warehouse layout, enhance its receiving capacity, and increase the number of days of stocking to improve its supply capacity. At the same time, Duoduo cross-border began to expand more shipping companies, and has cooperated with shipping companies such as Matson, ZIM, CMA CGM, Maersk, and COSCO Shipping to reduce logistics costs.
On the earnings call, Chen Lei said, "Although our business outside of China is still very new, it has also made considerable progress in the past year. It is based on our accumulation and understanding of the supply chain over the past years, and hopes to provide consumers in different parts of the world with a direct purchase channel from the factory, providing a more flexible, personalized supply chain and a more cost-effective integrated shopping experience. ”
However, Chen Lei also said that Pinduoduo's cross-border business is still in the early stage, "Although our reach is relatively wide, it is still in a very basic early stage, and there will be many changes." However, the early stage also means that Duoduo cross-border has more room for imagination.
The main station, the base of Pinduoduo
If Duoduo cross-border is the new engine of Pinduoduo, the main station of Pinduoduo is its base.
According to Zhao Jiazhen, co-CEO of Pinduoduo, such results in this quarter are mainly due to the continuous improvement of the macro consumption environment, and the common results of the implementation of the company's "high-quality development" strategy.
At the beginning of this year, Pinduoduo's management put forward the strategy of "high-quality development with quality first". In the past, Pinduoduo has gained insight from the purchase behavior of platform users, "Consumption upgrading is not only about quality, but also about price, it is the optimization of the 'quality-price ratio', and it is the ultimate pursuit of consumers for high-quality products at good prices." Chen Lei said.
Pinduoduo also continued the previous "10 billion subsidy" strategy. "In the past Double 11 promotion, the number of users of Pinduoduo's '10 billion subsidy' has exceeded 620 million. Zhao Jiazhen said.
In fact, the year of Pinduoduo's rapid development is also a year of gradual intensification of e-commerce competition. When asked about competition, Zhao said: "Pinduoduo's approach to competition has always been very clear – don't look at what competitors are doing, but look at what consumers want. The current consumer 'upgrade demand' on the Pinduoduo platform is obvious. And this is also the strategy of 'high-quality development'. ”
On the premise of achieving such performance, Pinduoduo's R&D expenses are increasing. In the third quarter of 2023, Pinduoduo continued to increase its investment in science and technology, and its platform R&D expenses reached a new high, reaching 2.85 billion yuan, a year-on-year increase of 5.5%.
However, the reporter of "Chinese Entrepreneur" found that while Pinduoduo's R&D expenditure increased by 150 million yuan compared with the same period last year, its administrative and management expenses decreased by 150 million yuan, which is equivalent to no additional investment within Pinduoduo, and the reuse of its technology, personnel and experience has played a key role.
E-commerce, a revolution
With the release of Pinduoduo's financial report, the third quarter results of the three e-commerce giants have been announced.
According to the financial report, as of the third quarter of September 30, 2023, Alibaba's revenue was 224.79 billion yuan, a year-on-year increase of 8.5%, and the net profit was 26.696 billion yuan, a year-on-year turnaround, according to JD.com's financial report, JD.com's revenue in the third quarter was 247.7 billion yuan, a year-on-year increase of 1.7%, and the net profit attributable to ordinary shareholders of JD.com Group under non-US GAAP was 10.6 billion yuan, compared with 10 billion yuan in the same period last year.
In this comparison, Pinduoduo's 93.9% growth rate will indeed shock the capital market and Jack Ma.
Ali's 2023 has been adjusting. On March 28, an all-staff letter stirred up the entire Alibaba - Daniel Zhang, chairman and CEO of Alibaba Group, announced the official start of the "1+6+N" organizational reform, and qualified business groups and companies have the possibility of independent financing and listing in the future.
Photo: Deng Pan
However, in this uneventful financial report, the latest process of Ali's spin-off was revealed - no longer promoting the complete spin-off of Alibaba Cloud, and the IPO plan of Hema has also been suspended.
Alibaba attributed the suspension and shelving of the two plans to changes in the external environment: "The United States has recently expanded restrictions on the export of advanced computing chips, and a complete spin-off of Alibaba Cloud may not achieve the expected effect of increasing shareholder value", while Hema needs to "assess the market situation". "Chinese Entrepreneur" previously learned that due to the cold of the new retail market, Hema financing was not smooth, and the valuation shrank significantly.
At the same time as the announcement, the market also revealed that the Jack Ma family trust JC Properties Limited (a British Virgin Islands company) and JSP Investment Limited (a British Virgin Islands company) planned to reduce their holdings of 5 million shares of Alibaba's founder, involving an amount of 870.7 million US dollars. A series of combination punches directly triggered the recent shock in Ali's stock price, and the market value declined.
After the founder Liu Qiangdong made a strong "comeback", JD.com regained its low price and returned to users. The subsequent series of high-level adjustments and business "moving knives" depict 2023 when JD is not far behind. The latest news is that Xin Lijun no longer holds the position of CEO of JD Retail, which is concurrently held by Xu Ran, who was just promoted to CEO of JD Group half a year ago.
In terms of revenue and market capitalization, the three companies are already on the same starting line. A new competition has officially begun.
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