On the world business stage, one company has risen at an astonishing rate, and it is Pinduoduo.
The company was successfully listed in the United States just three years after its founding, and in a short period of time, it became the fastest company in the world to exceed $100 billion in market capitalization. And behind all this, there is a legendary figure named Huang Zheng.
Back in 2006, when Huang Zheng had just turned 26 years old, he shared a lunch with his mentor Duan Yongping and legendary investor Warren Buffett. For Huang Zheng, this lunch is like sowing a seed, and that seed is called "duty". Since then, this word has become the motto of his entrepreneurial road, which has been on his lips all the time, and even written on the wall of the company. That exchange with Warren Buffett made him deeply understand the "power of simplicity and common sense", which also became an important part of his entrepreneurial philosophy in the future.
Huang Zheng is a young man who grew up in an ordinary family, but he has embarked on an extraordinary road. His academic performance has been outstanding since childhood, and he has won many good results in mathematics Olympiads, so he was escorted to Hangzhou Foreign Chinese School, and then to Zhu Kezhen College of Zhejiang University to further his computer studies.
His talent and opportunities come with him. At the age of 20, he became friends with Ding Lei, the founder of NetEase, at the age of 22, he was admitted to the University of Wisconsin, which is ranked eighth in the world, and after graduating with a master's degree, he worked at Google for three years and accumulated valuable experience. He then embarked on the path of entrepreneurship, and although his first attempt was unsuccessful, he never gave up.
In 2015, e-commerce platforms are booming, Taobao, Jingdong and other giants are numerous, and the competition is becoming increasingly fierce. It is in this context that Huang Zheng launched Pinduoduo. In the face of fierce competition in the market, he found another way and innovated a user-centered group buying model, allowing consumers to buy the same goods at a lower price. This model quickly attracted a large number of users, and Pinduoduo came to prominence.
However, success is never easy. Pinduoduo also faced problems such as quality control in the initial stage, but Huang Zheng relied on his keen insight into the market and strong execution to constantly adjust and optimize, and finally made Pinduoduo emerge in just a few years, successfully listed in the United States, and its market value rose rapidly.
Just when Pinduoduo was in the limelight, Huang Zheng made an astonishing decision. On March 18, 2021, he announced his resignation as chairman of Pinduoduo and gave up his super voting rights. After allocating shares and transferring power, he returned to scientific research, donated $100 million to his alma mater, Zhejiang University, and established three laboratories in biomedicine, agri-food and advanced computers, dedicated to improving human health.
Many people know that Pinduoduo's zero-to-one stems from social attributes. While using the game to improve user stickiness, we also use cash red envelopes to urge users to attract new users independently. Interestingly, the ability of Huang Zheng, the founder of Pinduoduo, to get ahead is also closely related to his "social cow" personality. Huang Zheng in college used his excellent computer skills to be active in various forums, solving problems for bigwigs and solving problems for Xiaobai, and it was this brush that he relied on to meet Ding Lei, the founder of NetEase. Ding Lei later recalled that when he first met Huang Zheng, he thought that the other party was a liar, and it was a long time before he was moved by the sincerity and sincerity of this young man.
To some extent, Huang Zheng may indeed have an indescribable personal charm, and Ding Lei introduced his friend Duan Yongping to him after he went to the United States to study. Duan Yongping spent $620,000 to get the opportunity to have dinner with Warren Buffett, the world's richest man, and he brought Huang Zheng, who was just a small programmer at Google at the time, and started Huang Zheng's entrepreneurial career.
In July 2018, Pinduoduo was listed, and when it was once questioned about infringement, inferior quality, and low price, and the external pressure doubled, it was Ding Lei who pulled Huang Zheng and quickly let NetEase, which is known for its "strict product selection", enter the Pinduoduo platform, and then there were big names such as Armani, Givenchy, and Godevan to join, so that Pinduoduo has grown from a place where small and medium-sized merchants ship and clear warehouses to a mainstream e-commerce platform.
The stock price fell short of expectations
Recently, Pinduoduo's financial report was released, and revenue and net profit rose by more than 100% in the fourth quarter, but at the same time, there were different voices in the investment market.
On the one hand, more and more business voices have begun to appear, believing that Pinduoduo's business model is not conducive to brand development, and on the other hand, some investors believe that although Pinduoduo's data is good, its growth is not good, and high-speed growth does not conform to business laws after all.
The two sides of the debate began to exchange fiercely, and Pinduoduo, which was placed at the center of the storm, made people can't help but wonder, what is its charm?
According to the latest financial report released by Pinduoduo, in the fourth quarter of 2023, Pinduoduo achieved revenue of 88.9 billion yuan, a year-on-year increase of 123%, and a net profit of 23.28 billion yuan, a year-on-year increase of 146%. In the whole year of 2023, Pinduoduo's revenue reached 247.6 billion yuan, almost doubling on the basis of 130.558 billion yuan last year, and the net profit attributable to ordinary shareholders was 60.027 billion yuan, a year-on-year increase of 90%.
In terms of market expectations, Pinduoduo has shown more strength than many people imagined. Taking earnings per share as an example, analysts surveyed by FactSet had expected Pinduoduo's Q4 earnings per share to be 11.28 yuan, but Pinduoduo's real performance was 17.32 yuan per share, and the total revenue exceeded FactSet's estimate of 79.5 billion yuan by nearly 10 billion yuan.
The brilliant performance directly drove Pinduoduo's stock price to soar, and the next trading day after the earnings announcement, Pinduoduo's stock price rose as much as 16%, and finally closed at $132.17 with a 3.52% increase.
Such a rise may mean that the market is still waiting to see Pinduoduo, and investors are calming down quickly in the face of a Pinduoduo that far exceeds expectations. According to media statistics, Pinduoduo's share price is down 9.66% year-to-date, while the S&P 500 and Nasdaq are up 9.53% and 9.05% respectively during the same period.
What is the reason? The reaction of the merchants can explain at least part of it.
Shortly before the announcement of the financial report, Wuliangye suddenly issued an announcement to "defend its rights" to Pinduoduo, saying that it had recently received reports from many consumers that Wuliangye purchased on Pinduoduo was a counterfeit and shoddy product. Wuliangye's announcement also clearly pointed out that it has never listed a flagship store on Pinduoduo, nor has it authorized a store to use the keyword "Wuliangye" in its name.
As for the e-commerce sales channels officially announced by Wuliangye, Tmall, Douyin, JD.com, Kuaishou, and Suning are all involved in mainstream e-commerce platforms of all sizes, with the exception of Pinduoduo.
In other words, the brand of Wuliangye sold from Pinduoduo channels cannot guarantee the authenticity of the brand, and it is difficult to control its circulation.
This reveals two problems, one is that merchants with sufficient brand power are still "arrogant" in the face of Pinduoduo, they do not pay attention to online sales, but think that the damage to the reputation of the product caused by listing products on Pinduoduo may outweigh the benefits.
The second is that Pinduoduo's control over platform products is insufficient, in the face of Wuliangye's brand, Pinduoduo must have a perception of its non-opening of stores and non-authorization, combined with Pinduoduo's previous strong moves such as "bombing stores" and mandating refunds without reason, allowing retail merchants to play a side game on the matter of Wuliangye, or a proof of ambiguous attitude.
On March 12, Goldman Sachs downgraded Pinduoduo stock to "neutral" from "buy" and lowered its price target to $136 from $196. The reason is that Goldman Sachs believes that the policies used by cross-border e-commerce business are changing, and until measures such as protecting user privacy, protecting the interests of merchants, and maintaining local supply chain production are further clarified, investors' interest in Pinduoduo will continue to be suppressed.
Liquor companies collectively "rebelled"
Wuliangye is not the only one that has accused Pinduoduo, before that, Moutai and Shanxi Fenjiu have sued Pinduoduo and many merchants on the platform for allegedly selling products in violation of regulations.
However, a careful analysis of Wuliangye's statement will find that it can be regarded as a bit of "thin noodles" for Pinduoduo.
First, Wuliangye only mentioned that it did not have an official store, and that "the Wuliangye products sold in many stores were counterfeit" on the Pinduoduo platform, but it did not kill all the Wuliangye products sold on the Pinduoduo platform with a stick.
As a representative of high-end liquor, Wuliangye has always been a frequent visitor to Pinduoduo's 10 billion subsidy channel, and the 10 billion subsidy has a flag of fake one and 10 compensation, and Pinduoduo customer service also responded that the platform will intervene to deal with counterfeit and shoddy Wuliangye products bought in the 10 billion subsidy, indicating that at least some of Wuliangye products are endorsed by the platform.
Second, Wuliangye claimed that it did not authorize merchants to use the word "Wuliangye" in the name of the store, but did not make specific restrictions on the sale of Wuliangye products by merchants, nor did it force Pinduoduo to remove all Wuliangye-related products from the shelves.
This may mean that Wuliangye also needs Pinduoduo as a shipping channel, so who sells Wuliangye products in Pinduoduo? There are two answers, one is the distributor, and the other is the terminal store. There is a delicate balance between the various participants in the liquor industry chain and Pinduoduo.
Combined with the information reported by previous media, the main force that provides Pinduoduo with "explosive" products is actually the former. The business model of traditional dealers is to get goods from upstream manufacturers such as Wuliangye and send them to first-line stores through their own sales networks, but with the shrinking of offline consumption formats, dealers at all levels such as provinces, cities and counties who originally controlled a large number of exclusive resources are becoming more and more difficult to operate.
The practice of collecting tail goods processing needs and diluting costs with scale has won room for Pinduoduo to "develop", but this business model has exposed more shortcomings in recent years.
For example, when the power of Pinduoduo grows, it gradually washes away the role of dealers, but has the possibility of replacing small dealers and becoming a large national agent, which is difficult for dealers to accept.
Even at the moment when Pinduoduo is only providing a platform, the revenue created for Pinduoduo is exaggerated enough, according to Dolphin Investment Research calculations, the overall revenue of Pinduoduo's main station is about 57 billion yuan, of which advertising revenue is 48.7 billion yuan. With the increase in the proportion of GMV of branded products, the proportion of payment fees and commission income contributed by Pinduoduo's main station and tens of billions of subsidized channels has also increased, and the estimated year-on-year increase is close to that of advertising business, both of which are about 60%.
Another example is from the perspective of the brand, the previous stable distribution channels have been broken, Pinduoduo has boosted the courage of dealers to flee goods across the country, and the price reduction makes the price system more fragile.
The final way to win - go to sea
Perhaps also aware of the risk of "involution" in China, Pinduoduo's business will shift from domestic to overseas in 2023.
In the fourth quarter, the revenue of Pinduoduo's online marketing services and other services was about 48.7 billion yuan, a year-on-year increase of 57%, and the revenue from transaction services was about 40.2 billion yuan, accounting for a further increase in the proportion of total revenue, while the growth rate also came to 357%, which is included in Temu's revenue.
According to public data, Temu has appeared on the annual hot search list in the UK, with a search volume increase of more than 2850%, which is higher than ChatGPT (an increase of 2700%).
According to official information, Temu's "Black Friday" promotion season has reached 42 days, and the move is based on Pinduoduo's long-term accumulation of deep supply chains, and also because a large number of manufacturing companies that can only do OEM business in the past have begun to focus on brand building, and Pinduoduo has seized their pain points.
Overseas, Pinduoduo is also fighting with Douyin's TikTok e-commerce and Shein, a treasure website for international students. The difference is that TikTok's main position in e-commerce is in Southeast Asia, Pinduoduo aimed at the United States at the beginning, and Shein's initial position was in the clothing category, and it has been nearly two years since turning to full-category e-commerce to seize the market.
There is no doubt that overseas has become a must for domestic enterprises, and statistics from the Ministry of Commerce show that the scale of the cross-border e-commerce industry has expanded nearly 10 times in the past five years, and there are only a lot more people who want to enter this market in the future. Is Pinduoduo ready?
Compared with Tiktok e-commerce, Pinduoduo has the advantages of e-commerce infrastructure, merchant resources, and consumer shopping cognition. The process of moving from content to trading requires continuous user education, and it will take some time for TikTok to take at the moment.
Correspondingly, the domestic live broadcast e-commerce that is in the limelight does not work for Pinduoduo. In March this year, Dongfang Selection quietly settled in the Pinduoduo platform to open an official flagship store, and in August last year, some media also discovered that Douyin's head anchor "Crazy Brother Yang" entered Duoduo Video.
But compared with ByteDance, the investment made by both sides in Pinduoduo is still in the testing stage. Crazy Brother Yang is still mainly carrying Douyin videos, while Dongfang Selection responds through customer service, and the Pinduoduo platform has no live broadcast plans in the near future.
It can also be seen that Pinduoduo's current focus is on overseas, so compliance is an issue they must consider. Some consumers who have lived overseas for a long time revealed that e-commerce platforms such as Temu will split and package goods exceeding 150 euros after customers place orders, which is suspected of tax evasion in Europe, and the European government has been aware of it, and corresponding policies and review regulations may be introduced in 2024.
However, for Pinduoduo, domestic and overseas double-line operations have ushered in a harvest period.
According to data released by SimilarWeb, as of December 2023, Temu has reached 467 million unique visitors, ranking second in the world.
On the supply side, Pinduoduo's long-term accumulation in the domestic market has allowed it to have more accumulation in supporting businesses and small and medium-sized manufacturers in the industrial belt, and serving consumers' needs for price, quality, and logistics speed.
On the demand side, Temu has aimed at the most consumer power of North American users at the beginning, three pieces of free shipping, good quality and price, Pinduoduo's efficient supply chain and innovative hosting model quickly hit the old e-commerce Amazon market, it is understood that Amazon is studying Temu's expansion as a necessary measure before the implementation of strategic goals.
In March this year, Temu launched a semi-custodian model in the United States, Europe, Canada and other countries and regions, compared with the previous fully managed model, semi-custodian can allow merchants to sell more categories, fulfill contracts faster, and lower the online threshold for large goods, charged products and other products with high customer unit prices. According to public information, the unit price of goods under the "semi-custodial mode" is 30% or more higher than that of the "fully custodial mode", and the further widening of the price band on the Temu platform will undoubtedly help it continue to expand its ammunition reserves.
On the other hand, in China, Pinduoduo under the leadership of Zhao Jiazhen has made more efforts in high-quality growth. In 2023, Pinduoduo's annual R&D expenses will reach 11 billion yuan, and through the support of a number of key projects such as "10 billion agricultural research" and "10 billion subsidies", more than 40 sub-categories such as Pinduoduo's agricultural goods, domestic products and global good products will double during the Double 11 period. "In 2024, promoting high-quality ecological construction will still be the 'No. 1 project' that Pinduoduo focuses on. ”
The next thing that needs to be thought about by Pinduoduo is sustainability. How to balance the interests of merchants and platforms, how to make the local government accept foreign things more quickly, and where to seek high enough efficiency and flexibility...... There are still many things that Pinduoduo can do and must do, but after a good start, the follow-up is worth looking forward to.
Author | You Glass