The global "poor" + Chinese factories support Pinduoduo

Unexpectedly, the market value of Alibaba, which has been established for 20 years, has caught up with Pinduoduo. Although the market value of Pinduoduo exceeded 10 billion in 18 months, climbing to the position reached by Ali Jingdong in 7-8 years, I did not expect that the 8-year-old Pinduoduo is currently sitting on the top spot of Chinese concept stocks.

On the evening of November 28, Pinduoduo Group released its third-quarter financial report. According to the financial report, Pinduoduo's revenue was 68.84 billion yuan, a year-on-year increase of 93.9%, while Taotian recorded a revenue of 97.654 billion yuan, a year-on-year increase of 4%, Jingdong's revenue was 247.69 billion yuan, a year-on-year increase of 1.71%, and Vipshop's revenue was 22.7659 billion yuan, a year-on-year increase of 5.32%.

The growth rate is higher than that of peers, which impresses capital. On December 1, as of the close of the U.S. stock market, Pinduoduo closed up 4.03% at $147.44, with a market value of $195.9 billion, and Alibaba edged up 0.25% at $74.86, with a market value of $190.7 billion. Pinduoduo's market capitalization officially surpassed Alibaba's, becoming an important moment for the Internet this year.

With such a rapid growth rate, Mr. Ma couldn't help but come out and send a congratulatory message: "Congratulations to Pinduoduo on its decision-making, implementation and efforts in the past few years." "You must know that every intranet speech of Jack Ma is an important node in a critical development period for Alibaba.

So, how did Pinduoduo counterattack? Is Ali really "old" as a veteran e-commerce company?

Temu has become the second growth curve of Pinduoduo

From its establishment in 2015, to its listing in 2018, and now to catch up with Ali in terms of market value, Pinduoduo can be said to have staged a miracle in the history of Chinese e-commerce.

At a time when the growth of Internet platform users is gradually peaking, Pinduoduo has grown at an astonishing rate for three consecutive quarters, and its stock price has also risen. The stock price rose nearly 19% after the first quarter earnings report, Pinduoduo's share price soared by more than 18% after the second quarter earnings report, and Pinduoduo's stock price soared 18% after the third quarter earnings report.

In the third quarter, Pinduoduo's financial report showed that the total revenue in the third quarter was 68.84 billion yuan, a year-on-year increase of 94%, the net profit attributable to the parent company was 15.537 billion yuan, a year-on-year increase of 47%, and the adjusted net profit reached 17.027 billion yuan, a year-on-year increase of 37%, far exceeding market expectations.

What exactly is pushing Pinduoduo to continue to grow?

First of all, to stabilize the domestic fundamentals, Pinduoduo's revenue mainly comes from two pieces, the first is the advertising fee collected from merchants, and the advertising revenue in the third quarter was 39.7 billion yuan, a year-on-year increase of 39%.

The second piece comes from the revenue of transaction service commissions, which mainly includes the commission income of Duoduo grocery shopping and the income of Duoduo cross-border Temu, the transaction service revenue of Pinduoduo in the third quarter reached 29.153 billion yuan, compared with 7.022 billion yuan in the same period last year, an increase of 22.131 billion yuan, a growth rate of 315%, which greatly exceeded market expectations. The main force driving its growth rate is Temu, a cross-border business from Pinduoduo.

Temu has only been available in the US market for 14 months and has become the fourth most visited retail website in the US, behind Amazon, Walmart and eBay. Goldman Sachs' valuation of Temu has nearly doubled from $20 billion to $37 billion.

According to 36Kr, Temu's sales in the third quarter of this year have exceeded $5 billion, or exceed the annual GMV (gross merchandise volume) target of $15 billion.

Temu's style of play is the same as Pinduoduo's early in China, through the "slash" type of social fission to attract new users, real money to users cashback to the account, at the same time, Pinduoduo is also Facebook, YouTube and other mainstream social media platforms to place advertisements and sponsor the United States Super Bowl prime advertising time to broadcast "brainwashing" advertisements to strengthen user awareness.

In the context of inflation opportunities and soaring prices in the United States, those cost-effective goods on the Temu platform that cost only one or two dollars are super attractive to American users.

It is worth mentioning that the high growth of performance has a lot to do with Temu's adoption of a "quasi-self-operated" model.

Since its launch in September last year, Temu has been adopting a model in which merchants are only responsible for supply, while pricing, sales, fulfillment, and after-sales are all responsible for the platform. In fact, it is a fully managed model, where the back-end merchant only plays the role of a supplier and makes products well, while the front-end operator deals with users every day and delves into user preferences. The overseas proprietary model will undoubtedly increase the revenue of financial transaction services.

In China, Pinduoduo has also achieved comprehensive growth in performance. In the traditional off-season period of the third quarter of "618 has passed, 11.11 has not yet arrived", Pinduoduo still achieved growth with the help of a series of activities such as the platform harvest festival, domestic goods festival, Duoduo reading month, and National Day promotion.

Especially in the next four quarters, due to the coverage of domestic Double 11 and overseas Black Friday, Christmas promotion and other nodes, Pinduoduo's financial performance growth is still widely optimistic.

Management efficiency + China's supply chain dividends

In addition to the low-price strategy, Pinduoduo can have today, but also because of its management efficiency and C2M (factory direct supply) model.

Zhao Jiazhen, executive director and co-CEO of Pinduoduo Group, once said that those colleagues who stand out, are young, dare to make decisions, and at the same time get good results, will become the reserve force of the entire Pinduoduo talent echelon.

Unlike Alibaba and JD.com, Pinduoduo's overall department structure is the flattest, and there is no overly complicated department system, such as business groups, business lines and business divisions, so the human efficiency is much higher than that of the other two. The data shows that #Pinduoduo's per capita income is 12.22 million# on the top of the hot search, which is 7.07 times that of JD.com and 4.17 times that of Ali in the same period.

And Pinduoduo is also very innovative. Within Pinduoduo, new businesses such as Duoduo and Temu are regarded as entrepreneurial projects, which adhere to the principle of efficiency first and have strong flexibility.

In an interview, Chen Lei once called the cross-border e-commerce business represented by Temu the "third venture" of Pinduoduo, and explained the commercial value of Temu in this way. "We hope to leverage the foundation of the supply chain we have accumulated over the years to provide consumers in different parts of the world with direct access to the factory, providing a more flexible and personalized supply chain and a more cost-effective integrated shopping experience. ”

Chen Lei

Temu has penetrated into more than 100 industrial belts in China, covering and helping more than 10,000 factories to successfully go overseas, reaching consumers in more than 40 countries and regions such as North America, Europe, Australia, and Asia, and more than 100 million users in the United States alone.

Behind this is half the credit of China's cost-effective supply chain or factories, and Pinduoduo has amplified this dividend effect through overseas markets.

New business is a mixed bag

Although the development is rapid, it has also burned a lot of money in Pinduoduo. It can be seen from the third quarter financial report that Pinduoduo's total revenue cost in the third quarter was 26.83 billion yuan, a year-on-year increase of 262%. In this regard, Pinduoduo explained in its financial report that the increase was mainly due to the increase in fulfillment fees, payment processing fees, maintenance costs and call center fees.

In addition, the overall operating expenses in the third quarter were 25.354 billion yuan, a year-on-year increase of 44%, of which sales and marketing expenses were 21.749 billion yuan, a year-on-year increase of 55%, mainly due to the increase in promotional and advertising activity expenses.

Some domestic merchants of Temu have reported that it is becoming more and more difficult to supply to Pinduoduo, because more merchants have joined, and the price comparison has become more and more intense, and whether they can continue to ensure the enthusiasm and product quality of merchants in the future is a challenge.

At the same time, Duoduo Food, which Chen Lei called "the second venture", has also achieved some development this year. According to public information, Duoduo Grocery directly connects more than 1,000 agricultural production areas and 16 million farmers across the country, and nearly 60% of the commodities are directly purchased and supplied by the production area, making it the largest uplink platform for agricultural and sideline products in China.

Today, Duoduo has covered all provinces except Tibet, with a market share of 45% in 2022 and a GMV of 180 billion yuan, ranking first in the industry in 2022. According to the research data of Guojin Securities, the market share of Duoduo and Meituan is almost the same.

Industry insiders said that Duoduo has not yet gotten rid of the current situation of losses, and the losses are still continuing under the fierce competition with platforms such as Meituan.

Can Pinduoduo, which has a low-cost mentality, really do it better than Ali, which is "blessed by AI"?

Although the success of Pinduoduo has made the capital market a little excited, it also reflects the difficulty of most consumers around the world.

"After being optimistic on other platforms, go to Pinduoduo to place an order" has become a proficient operation for consumers now, and consumers have also established a new traffic password to share the ultra-low-priced good things they bought on Pinduoduo.

Pinduoduo's business development model mainly revolves around the "low price" mentality and C2M model, and now the performance explosion also happens to stand on the cusp of the economic downturn caused by the epidemic black swan, consumers no longer pay for meaningless premiums, but pursue real and acceptable commodity prices.

However, in the face of extremely involuted competition in China's e-commerce market, it may not be easy for Pinduoduo to achieve a level of performance like this year. Now that we have seen the power of the C2M model, I am afraid that there will be more e-commerce platforms to develop Chinese factories in the future.

On the consumer side, Taobao and Tmall put forward the strategic goal of "price power" at the beginning of the year, JD.com re-proposed "how fast and good the province" and launched a subsidy of 10 billion yuan, and Kuaishou e-commerce took "low prices and good things" as the business vane of Kuaishou.

The other side of Pinduoduo's brilliance is Ali's obvious loneliness. Alibaba, whose market capitalization hovers at $190 billion, has fallen by three-quarters of its high.

At present, many people feel that Alibaba is really too big, and too many business sectors such as cloud intelligence, Taobao Tmall, and local life will distract Ali's resources and energy, and some recent public opinion has added a layer of haze to Ali's development.

However, Alibaba also has plans to use AI as a new growth curve. Since the beginning of this year, Alibaba has attached great importance to the strategy of AI e-commerce, and before the start of "Double 11", the CEO of Taotian Group mentioned AI 20 times in his 20-minute speech.

At the recent Q3 earnings conference, Alibaba Group CEO Wu Yongming also once again emphasized that Alibaba Group's core strategy for the next three years is "user first, AI-driven".

But how much AI can empower Ali e-commerce, and when we will see the returns, it is still unclear. After Pinduoduo's performance came out, an Ali employee confided in the intranet, "I can't sleep at the moment, and I don't dare to think that the inconspicuous one will soon become a big brother with a knife." ”

Subsequently, Ma Yun replied to the post, "I firmly believe that Ali will change, Ali will change, and all great companies are born in winter... Anyone has been bullish, but people who can reform for the sake of tomorrow and the day after tomorrow. And organizations that are willing to pay any price and sacrifice are respectable."

So, are you optimistic that Pinduoduo will continue to grow?

Resources:

1. "After Consumption Downgrade, the "New Poor" Prop Up Pinduoduo

2, "Pinduoduo, Three Punches Down the Master" Spiral Laboratory

3, "Pinduoduo's market value once surpassed Alibaba, and people all over the world are really similar" negative review

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