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on august 26, pinduoduo released its second quarter 2024 financial report ending june 30, and quickly became the focus of public opinion.

the financial report shows that the total revenue in the second quarter was 97.0595 billion yuan, an increase of 86% year-on-year, still in a high growth range; the adjusted operating profit was 34.99 billion yuan, an increase of 139% year-on-year; the adjusted net profit attributable to ordinary shareholders was 34.43 billion yuan, an increase of 125% year-on-year.

in terms of revenue and profit, pinduoduo still maintains a steady growth trend.

the main reason for the large amount of discussion came from the clear statement made by the management in the earnings call:in the future, pinduoduo will firmly follow the path of high-quality development and will inevitably pay the price of growth.

as chen lei, chairman and co-ceo of pinduoduo, pointed out, the management has reached a consensus and is willing to pay a huge price for long-term health. profits may fluctuate and rebound in the next few quarters, but the trend of long-term profit reduction is inevitable.

in the past few years, after experiencing structural challenges in the market, chinese internet companies have changed their mindsets, from pursuing growth at all costs to sacrificing short-term profits to making long-term and sustainable strategic investments.

since its establishment, pinduoduo has shown a side that is completely opposite to conservative enterprises. it dares to take risks, is full of adventurousness, and always adjusts the company's strategic direction with a proactive attitude.

as early as three years ago, pinduoduo had gradually promoted its high-quality development strategy. its explanation of its core business and future investment this quarter also revealed that the implementation of this strategy has directly promoted the quantitative change of the platform's core capabilities.

in the long run, pinduoduo must move forward firmly in the established direction, make its strategy clearer and more solid, and transform quantitative changes into qualitative changes.

1. launch a new round of investment, and prioritize “high-quality development” above all else

in the earnings call, pinduoduo executive director and co-ceo zhao jiazhen mentioned the "high-quality development strategy" several times. he said, "we have seen many new challenges, including changes in consumer demand, intensified competition, and uncertainty in the global environment. we will enter a new stage of high-quality development and need to increase investment."

from this sentence, we can see that there are opportunities hidden behind pressure. pinduoduo's new round of strategic changes is a strategic adjustment that must be made after insight into market changes.

looking back at pinduoduo's actions in recent years, changes and adjustments have actually begun three years ago:in 2021, pinduoduo began to promote a "research and development" strategy and increased investment in technological innovation. the following year, the platform's r&d expenses exceeded 10 billion for the first time, setting a record high.

by 2023, pinduoduo's high-quality development strategy, with consumption, supply, and ecology as the core, has been fully launched. the core is to focus on users and merchants, explore real needs, provide value feedback, and continuously improve its comprehensive strength to ensure a steady development momentum in the fierce competition in the e-commerce industry.

at the beginning of this year, zhao jiazhen once again emphasized that 2024 is a key year for the implementation of pinduoduo's high-quality development strategy.

based on this,pinduoduo has rebuilt the priority of its own goals - when the platform reaches a certain scale, the healthy development of the ecosystem will occupy a more important position.

science and technology courtyard project

looking back now, pinduoduo's strategic judgment was accurate.

zhao jiazhen said in a conference call, "in the first half of 2024, we remain committed to the high-quality development strategy and continue to invest in the platform ecosystem. we have received positive feedback on these efforts: consumer experience and our services continue to improve, and 1p new merchants and new products have grown significantly."

at present, pinduoduo's revenue and profits are still maintaining steady growth.pinduoduo's main revenue comes from online marketing services and other services, and transaction services. the former's revenue was 49.12 billion yuan, a year-on-year increase of 29%. the revenue from transaction services was 47.94 billion yuan, a year-on-year increase of 234%.

after rationally predicting the changes in the new cycle, pinduoduo must continue to invest in the future to prepare for long-term sustained growth.

"looking forward to the second half of the year and the mid- to long-term, we are very confident in china's consumer market," chen lei emphasized in a conference call.improving ecological construction is not an overnight task. the management has reached a consensus and is ready to sacrifice short-term profits and make long-term investments.

in a deeper sense, pinduoduo can more clearly view the performance changes in the new investment period as the price it must pay for long-term healthy development, and continue to maintain strategic focus to ensure the continuation of the new round of investment. the long-term implementation of the high-quality development strategy will surely bring pinduoduo longer-term returns.

2. after understanding consumption trends, where will pinduoduo spend its money?

in the first half of 2024, after realizing the shift in consumer demand, pinduoduo flexibly adjusted its strategy and proactively promoted product direction on the supply side.

over the past period of time, consumer preferences have become more diverse. people are focusing on consumption experience rather than material purchases, and are more concerned with the sense of gain brought by consumption. at the same time, rational consumption has become a general trend, and consumers are making more thoughtful consumption decisions, taking into account both quality and price requirements.

supporting high-quality brands and providing consumers with customized products that meet diverse needs is one of pinduoduo's key actions.

for example, during the 618 promotion this year, vvc, a sun protection accessory, provided three sun protection clothes specifically for pinduoduo users. logitech also co-created a wireless mouse with pinduoduo for 399 yuan in response to the needs of new customer groups.

a large number of brands have begun to try more diversified product strategies. xijiu, kelala, foshan lighting and others have targeted pinduoduo's user attributes and reverse customized products that are more popular with consumers.

the premise of this strategy is that pinduoduo has formed a complete supply chain operation model:the front end outputs consumption data in batches; the back end completes supply chain transformation and leverages the advantages of industrial clusters.this will encourage collaboration between high-quality brands and manufacturers to create differentiated products that meet new consumer demands.

in recent years, pinduoduo has also entered the fields of home appliance manufacturing, light industry and beauty industry, promoting the integration of digital technology and manufacturing. the main methods are:export consumer data models to a large number of small and medium-sized manufacturing companies to help them complete product iteration and innovation, and even extend further upward and gradually develop into brands.

all of this is essentially about maximizing the supply of high-quality products and consumer experience for consumers. zhao jiazhen mentioned, "competition among e-commerce platforms is rapidly escalating, and we need to return to the basis of supply chain improvement and firmly invest in supply chain efficiency. this will be the focus of our next step in high-quality development."

but pinduoduo's thinking about the product supply system does not stop there. going deep into the supply chain and expanding the supply of high-quality products is the first step.

the second step is to conduct platform ecological governance and establish a healthy ecology that is conducive to the orderly development of businesses.

pinduoduo's actions are comprehensive and in-depth, which can be said to be like a "genetic" reshaping. this protracted battle for ecological order will be fought mainly from two aspects in the future.

on the one hand, it supports merchants who are willing to innovate and improve their quality. it is expected to invest 10 billion in the first year to reduce the transaction costs of these merchants; invest in operations and research and development, and continuously simplify and optimize the merchant entry and product listing process; conduct product inspections through technical means, assist merchants in reducing compliance costs, and expand the applicable market and sales channels for products.

on the other hand, pinduoduo will continue to manage low-quality merchants, crack down on illegal and cheating merchants, and promote the industry to eliminate the false and retain the true. it will mainly use technical means to strictly control the quality of platform products so that high-quality merchants who operate seriously can obtain actual benefits.

in the long run, high-quality merchants are more likely to establish trust with consumers and become a driving force to stimulate consumption. consumers who are constantly attracted constitute the fuel tank for the development of the platform ecology.

zhao jiazhen also revealed pinduoduo's vision based on the platform's sustainable development capabilities and long-term value: "we grow together with high-quality merchant partners to provide high-quality products and services to platform consumers. satisfied consumers inject continuous momentum into the ecosystem. this is a positive cycle and the key to the long-term healthy development of our community."

3. from the six-year agricultural and industrial construction, we can see the tangible returns of long-term projects

not every investment in high-quality development strategies can produce immediate results. the construction of agriculture and industry can be said to be a project in which pinduoduo ignores short-term returns and makes long-term investments.

according to the report “digital transformation of china’s industrial belts” released by the ministry of commerce, there are more than 250 industrial belts in china’s prefecture-level cities or counties with a production value of over 10 billion yuan, and more than 1,000 specialized vertical industrial belts at the town level. the spatial distribution is extremely dispersed and scattered across the country.

according to pinduoduo's goal, it will support 100 industrial belts and drive sales of 1 trillion yuan before 2025. this quarter, pinduoduo has successively implemented science and technology courtyard projects in dali, yunnan and foping, shaanxi, and jointly launched the fourth duoduo agricultural research competition with the world's top scientific research teams to help the transformation and application of agricultural scientific research results and promote the accelerated upward trend of high-quality agricultural products.

specifically, almost every industrial belt has the characteristics of being difficult to transform, having a long supply chain, and having a large amount of work. the core reason why pinduoduo insists on investing is that industrial belt reform is a more proactive breakthrough.

the industrial belt is at the forefront of the entire transaction chain value chain, while the platform is at the end. whether it is the diversity and quality of product categories, or the degree of brand development and the richness of price ranges, they are all affected by the maturity of the industrial belt.

donghai armor industry belt

pinduoduo has a large amount of consumer data and user feedback, which can be used to connect the entire transaction chain. it also has the ability to connect all breakpoints and feed back to the platform's own development by driving the upgrading of each industrial belt.

but the implementation of this complex strategy is not a one-day task. it requires patience and long-term planning.

bozhou, located in the northwest of anhui province, is a domestic distribution and trading center for chinese medicinal materials. as a niche category, herbal tea has always developed slowly.

since 2017, pinduoduo has consciously entered this industry belt and focused on operations.within five years, we helped local factories realize the transformation from primary agricultural product processing to deep processing, and local businesses moved from small scale and weak strength to large-scale operation.

in the early days, the platform's diverse consumer groups provided sales channels for the niche category of herbal tea, and a large influx of merchants and oem factories drove the expansion of the market size.

but at that time, the entry threshold of the herbal tea industry was low, and most businesses remained at the primary agricultural product processing stage. zhi fei, the owner of a oem factory, once mentioned, "an experienced master in bozhou can make a product with exactly the same taste by just looking at the proportion of raw materials for herbal tea in just a few minutes." soon, the local herbal tea market ushered in saturated competition.

it was also from this stage that the platform began to encourage merchants to build operation teams, build their own factories, produce goods and attract consumers by substituting for big brands.

wu chuang, one of the first local merchants, followed the trend immediately and set up a 16-person operation team in hefei and built a new 4,500-square-meter factory. to date, wu chuang has launched more than 6,000 skus on pinduoduo.

as businesses move towards scale, oem factories have also begun to transform into deep processing. in 2021, the small workshop of oem factory owner zhi fei was transformed into a large factory with an area of ​​more than 4,000 square meters. he invested in the construction of two new dust-free workshops to produce solid beverages that are more popular with young people and have more complex manufacturing processes. it has also expanded from herbal tea to brown sugar ginger tea, sour plum soup, rock sugar snow pear, milk tea and other categories.

more local oem factories have shifted from the combined processing of primary agricultural products to a technology-driven production stage.

it took pinduoduo five years to help bozhou's herbal tea industry complete its transformation and leap forward, and the same story happened in many agricultural production areas and industrial belts such as xianju bayberry, yangshan peach, pingxiang false eyelashes, and donghai wear armor.

pinduoduo calls this group of merchants and industrial belts "new quality merchants" and "new quality industrial belts", and plans to invest tens of billions of resources and provide strong support in the future.

following last quarter, zhao jiazhen reiterated in the earnings call that "2024 is an important year for us to implement high-quality development. we will focus on the healthy and long-term development of the platform ecosystem, continue to increase investment, provide more resources and technical support to ecological partners, and jointly move towards the goal of high-quality development."