Pinduoduo has a proven effective commercial system.
Author | Xing Fu Editor | Zheng Xuan
In the just-passed first quarter of 2024, Pinduoduo's performance once again amazed people.
In this quarter, Pinduoduo Group's revenue reached 868.1 billion yuan, achieving triple-digit growth once again, higher than the analysts' average expectation of 756.6 billion yuan. At the same time, net profit increased by 246% to reach 28 billion yuan.
Among the two major components of its revenue, transaction service revenue (444 billion yuan) surpassed online marketing revenue (425 billion yuan) for the first time.
On the night of the financial report release, Pinduoduo's US stocks rose by over 7% to $155 per share, with a total market value of $215 billion.
During the subsequent financial report conference call, the core management of Pinduoduo Group advised not to focus excessively on short-term financial data, but to focus on the company's "intrinsic value." We noticed that this concept has been central to Pinduoduo's development.
In the first shareholder letter in 2018, the Pinduoduo founding team described the core logic of the company's development as follows: "Pinduoduo is not a traditional company. It was born at a time when everyone thought the e-commerce landscape was set and the history books were already written. In just three years, it has gathered over 300 million users, over a million sellers, and together established a new shopping model... It is all based on a simple consistent logic, which is to focus on the intrinsic value of this institution."
From the rise of Pinduoduo's main site to Duo Duo Cross-Border, the concept of "intrinsic value" has been consistent throughout the nine years since the establishment of Pinduoduo Group. So what is Pinduoduo's "intrinsic value"? This may be the key to understanding Pinduoduo beyond surface-level financial data and short-term fluctuations.
01
Using "Costco" + "Disney",
Meeting the goal of "user first"
Placing user experience first is the unchanging "intrinsic value" of Pinduoduo's e-commerce platform.
Firstly, affordability is a fundamental human need, especially for users beyond the hundreds of millions in first-tier cities in China. In an interview with Geek Park in 2019, the Pinduoduo founding team stated that their growth experiences influenced their business thinking, as growing up in a "comparatively tight" family environment allowed them to better understand the "diversity of the real world."
In the early days of Pinduoduo, users mainly bought the most affordable items such as tissues, fresh fruits, and other daily necessities. After Pinduoduo launched the billion-yuan subsidy in 2019, users could purchase the most competitively priced 3C electronic products. Now, Pinduoduo has expanded to include clothing, beauty products, and other categories. The concept of "affordability" on this e-commerce platform has deeply resonated with users.
Furthermore, Pinduoduo deeply understands all aspects of user demands during the purchasing process. There are no complex calculations for discounts; by placing an order through group buying, users can directly benefit from affordability. There is no shopping cart; with a single click for password-free payment, users can even experience a dopamine rush. Users don't need to worry about the quality of products; if there are issues, they can request returns, refunds, or even partial refunds.
People share shopping links on WeChat to participate in group purchases. They also play mini-games within the platform, watering plants to receive red envelopes and coupons.
In the first shareholder letter, the founding team described Pinduoduo as a combination of "Costco" and "Disney" (offering high-value products combined with entertainment). Here, users can buy what they want at the most cost-effective price and also gain a lot of happiness.
This sets Pinduoduo apart from traditional shelf e-commerce. If the latter focuses more on search, essentially people finding products, addressing the efficiency of matching users with specific purchase goals, Pinduoduo's logic is more like a recommendation engine, essentially products finding people, allowing users to easily buy affordable and high-quality goods.
Image Source: Visual China
The cross-border e-commerce platform TEMU, launched in 2022, follows the same strategy as the main site of Pinduoduo.
TEMU focuses on affordability, with the slogan "Shop like a billionaire." On Temu, foreign consumers can buy shirts, shoes for a few dollars, wireless headphones for $8, headbands, socks for less than $1... still offering extreme value for money. According to media reports, when TEMU conducts promotions on similar products, prices can be as low as 10% of other platforms.
Image Source: Visual China
At the same time, TEMU also makes it easier and more secure for users to make purchases. Whether it's the guarantee of "unconditional returns within 90 days," the service of "free shipping on orders over xx dollars," or other gamified features... all make users unable to resist placing an order.
Since the launch of "semi-fulfillment" on TEMU in March this year, allowing merchants to independently stock and ship goods overseas - for consumers, this means significantly shorter delivery times and the ability to receive more large items that were difficult to transport across borders in the past.
During this conference call, when asked about key issues such as competition and growth, the management of Pinduoduo emphasized the point of "putting consumers first." Pinduoduo's Chairman and Co-CEO, Chen Lei, stated that consumers' real needs are constantly changing, so the platform must keep pace with the times.
"At this stage, consumers' demands are showing a trend of rationality and hierarchy, which requires us to better meet consumers' needs for higher-quality products and richer consumption scenarios on the basis of affordability," he said.
Why has Pinduoduo been able to achieve "user first" in the past?
As a platform that matches merchants and consumers, why has Pinduoduo insisted on putting users first?
Some traditional e-commerce platforms, starting with B2B business, enable domestic merchants to reach overseas consumers, essentially solving the problem of information asymmetry and achieving efficient circulation of goods. This also determines that the business logic naturally leans towards merchants rather than users.
The term "user" refers to whether it is the merchant or the consumer, and the operating logic of each platform in the past is different.
Pinduoduo's starting point has always been consumer-oriented, even working together with merchants to accomplish this.
On the main site of Pinduoduo, the threshold for merchants to join and the overall operating costs have always remained relatively low. If white-label merchants have the supply chain capability to provide products with the ultimate quality-price ratio, they can receive higher recommendations and sell more products. Additionally, when there are transaction disputes between merchants and users, platform customer service will intervene immediately to assist merchants with insufficient service capabilities, improving the user's consumption experience.
At the same time, in 2019, Pinduoduo upgraded its billion-dollar subsidy to a long-term strategy, following the path of "subsidizing what consumers like," continuously subsidizing hot products in the market. This not only helps consumers save money but also boosts merchants' sales and enhances profitability.
Image Source: Visual China
However, subsidies are just one aspect. The fundamental key lies in platforms improving the efficiency of product circulation and ultimately benefiting users. For example, by aggregating user orders through group buying, it actually provides certainty to the production end of sales. At the same time, this explosive product model can also increase merchants' profit margins—using consumer feedback to drive production, this is the classic C2M (Customer to Manufactory) model.
And this is exactly what TEMU is doing.
On TEMU, if merchants can offer competitive differentiated products and services, they also have the possibility of gaining more market share and profit potential. If this competitiveness changes, the traffic of merchants on the platform will also be affected.
Fundamentally, TEMU innovates with a "fully managed" model—meaning merchants only need to focus on production, while platform handles advertising, operations, logistics, and the entire process, opening up a new channel for factories and merchants in the domestic industry. This model not only frees merchants from the tedious work they were not good at in the past but also integrates the key links of advertising, operations, and logistics that were originally fought separately by small and medium-sized merchants, thereby creating economies of scale to reduce costs and increase efficiency, ultimately making the entire system operate more efficiently than other e-commerce platforms.
This platform provides insights into popular trends and the "quick response to small orders" model for merchants, making it easier to create explosive products, thereby increasing merchants' revenue and profits, essentially benefiting consumers better.
Looking further ahead, as stated in the 2021 shareholder letter, in an increasingly competitive environment, traditional competition focused on scale and efficiency faces "inevitable problems." To make a change, action must be taken at a more fundamental level, such as finding answers in core technology and its underlying theories. This may also be the reason why Pinduoduo is heavily investing in agriculture, scientific research, and other areas.
The core essence of strategy is knowing what to do and what not to do. In its nine years of existence, Pinduoduo Group has done a lot, all centered around user experience. It has also refrained from many things, such as the new trend of live streaming e-commerce, where Pinduoduo has not invested heavily like other platforms.
As a platform that matches bilateral transactions, e-commerce companies have struggled to achieve the extreme focus and single-minded goal of Pinduoduo in the past. Perhaps their concern is that leaning towards one side may affect the experience of the other. However, the world often shows that when you simplify things, many aspects become more efficient. Pinduoduo's performance today validates the accuracy of this inherent value: when you satisfy consumers, you can achieve commercial success.
Over nine years, Pinduoduo has steadfastly implemented a consumer-oriented company strategy. Starting last year, more competitors in the e-commerce industry have begun to follow suit, emphasizing prices and making "user-first" their core strategy. Whether it's appointing a management team that values user experience more or implementing measures to improve user experience, such as implementing "refund only" policies and canceling pre-sale events like 618. It can be said that Pinduoduo's inherent value has become the consensus of the e-commerce industry.
*Cover image source: Visual China
This article is an original piece by Geek Park. For reprints, please contact Geek Park on WeChat at geekparkGO.
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