e-commerce experts discuss pinduoduo's "10 billion yuan reduction": exploring high-quality platform ecology and recreating e-commerce dividends
2024-09-18
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while the market and the vast majority of companies are still keeping a close eye on the growth of revenue and profit levels, pinduoduo, which has delivered high growth for several consecutive quarters, has proactively slowed down its growth.
on september 9, pinduoduo launched a new tax reduction measure. from now on, for all transit orders in remote areas, merchants only need to send the orders to the transit warehouse. the logistics transit fees for the second shipment from the transit warehouse to remote areas such as xinjiang, tibet, gansu, ningxia, inner mongolia, etc. will be borne by the platform.
it is reported that this measure is also one of pinduoduo's "10 billion reduction and exemption" plan. in the earnings call on the evening of august 26, pinduoduo demonstrated its determination to adhere to long-termism with the "10 billion reduction and exemption" plan.
chen lei, chairman and co-ceo of pinduoduo group, stated in a conference call that the overall scale of the platform has reached a considerable size, and that perfecting the ecological construction is not an overnight task. the management has reached a consensus and is prepared to sacrifice short-term profits and invest in the long term.
"for the long-term and healthy development of the platform, we will continue to improve the ecological construction through the approach of 'support and governance'. in the coming year, we will invest 10 billion resources to support new merchants and resolutely carry out merchant ecological governance." chen lei said.
(photo provided by pinduoduo)
so far, pinduoduo has implemented a number of measures including the refund of service fees under the "10 billion yuan reduction" plan. in addition, pinduoduo has also upgraded the merchant after-sales service system, especially making special adjustments to after-sales dispute complaints.
as competition in the e-commerce industry becomes increasingly fierce, pinduoduo has invested billions of yuan to support new merchants and invest in high-quality development. it is foreseeable that the implementation of this strategy will inevitably lead to the platform losing some short-term profits, so the stock price has also fluctuated after the earnings conference.
many e-commerce industry experts and senior e-commerce sellers said that pinduoduo's move has reduced the operating pressure of merchants, attracted more high-quality merchants, and thus met the needs of more consumers for high-quality goods. at the same time, this series of measures is a great boon to the long-term healthy development of the pinduoduo platform and the improvement of the entire e-commerce ecosystem.
support and governance are both important in the "10 billion yuan reduction and exemption"
with revenue and profit growth leading the industry for several quarters, pinduoduo decided to give up the immediate short-term rapid growth and shift to long-term sustainable high-quality growth.
the latest financial report shows that pinduoduo's revenue in the second quarter of 2024 was 97.06 billion yuan, a year-on-year increase of 86%; the adjusted operating profit was 34.99 billion yuan, a year-on-year increase of 139%; the adjusted net profit attributable to ordinary shareholders was 34.43 billion yuan, a year-on-year increase of 125%.
although pinduoduo's revenue and net profit growth rates in the second quarter both declined year-on-year compared with the previous quarter, its second-quarter performance growth rate still ranks first among my country's internet companies.
"judging from this quarter's performance, our revenue growth rate has declined on a quarter-on-quarter basis, which also puts higher demands on us." chen lei pointed out in the earnings call that pinduoduo's high-quality development path will enter a new stage, and it will continue to build a healthy and sustainable platform ecology through both "strong support" and "resolute governance."
in terms of support, pinduoduo will invest tens of billions of resources to vigorously support new merchants and new industrial belts with product and technological innovation capabilities, significantly reduce transaction fees for high-quality merchants, and expects to reduce fees by 10 billion yuan in the next year. it will also continue to strengthen positive incentives for high-quality ecological development and comprehensively improve the quality and efficiency of the upstream supply chain.
in addition to the reduction in logistics transit fees for remote areas launched to all merchants on the platform on september 9, pinduoduo has recently announced a series of reduction and exemption measures that are beneficial to merchants at a high frequency.
on september 5, pinduoduo’s latest merchant notification showed that the basic deposit for merchant stores will be reduced from 1,000 yuan to 500 yuan, and the initialization deposit for newly settled personal stores and corporate stores will also be reduced to 500 yuan.
on august 13, pinduoduo launched a refundable benefit for technical service fees to merchants who signed up to participate in the on-site resource activities. for all product orders generated by on-site activities such as 10 billion subsidies, flash sales, platform promotions, 9.9 special sales, trendy prices, and multi-person groups, after the user initiates a refund, the platform will proportionally refund 1% of the basic technical service fee for pay-later orders and 0.6% of the basic technical service fee for other orders.
subsequently, the "promotion service fee refund benefit" launched by pinduoduo to merchants has officially come into effect. for orders where consumers make a full refund before shipment, the platform will automatically return a promotion red envelope corresponding to the merchant's promotion software service fee, without the need for merchants to file a complaint.
in terms of governance, the financial report shows that pinduoduo's r&d investment in the second quarter of 2024 increased by 6% year-on-year to 2.9 billion yuan, mainly used for platform operation and r&d. pinduoduo co-ceo zhao jiazhen said that the platform will use technical means to actively inspect the products that have been listed, thereby cracking down on illegal cheating merchants, thereby creating a better business environment for high-quality merchants.
deeply cultivate new quality industrial belt platform and invest in high-quality development
fresh fruits and vegetables have always been a tough nut to crack in the e-commerce industry. as a platform that started with agricultural products, pinduoduo naturally understands the importance of improving quantity through quality, and also maintains resilience and patience towards the difficult but correct path.
when pinduoduo co-founder zhao jiazhen was promoted to co-ceo in early april last year, fully embracing high-quality development became the direction of pinduoduo's development transformation.
in zhao jiazhen's view, high-quality development first means that agriculture remains an important foothold for pinduoduo; secondly, helping the transformation and upgrading of traditional production capacity and allowing local manufacturing to enter the national and even global markets is an important task facing the platform.
"new quality merchants" and "new quality industrial belts" are not only the key words in this earnings call, but also pinduoduo's "heavy investment" this year.
take the herbal tea industry in bozhou, the "chinese medicine capital", for example. with the help of internet e-commerce platforms, bozhou's local herbal tea industry has exploded rapidly with the advantage of being a distribution center for chinese medicinal materials. data shows that the annual express delivery volume of bozhou's herbal tea business in 2018 was 35 million pieces, and this number will reach 355 million pieces by 2023.
while the industry was booming in the short term, concerns began to emerge. the attraction of the industry's bonus period and the low entry threshold made the competition among bozhou herbal tea shops increasingly fierce, and finally entered a vicious cycle of only offering low prices.
pinduoduo has taken the pulse of seemingly saturated industries and provided new growth curves for merchants and factories. for example, local pinduoduo merchants have tried to produce solid beverages with higher barriers and more added value. by extracting raw materials, coffee beans, black plums, and chinese herbal medicines are made into drinkable granules, and products such as brown sugar ginger tea, sour plum soup, and rock sugar snow pears have been developed, which has promoted the development of local industries towards technology-driven development and opened up new industrial imagination space.
with the help of pinduoduo, bozhou's herbal tea industry has achieved a "triple jump" from traditional chinese medicinal materials trading to herbal tea e-commerce, and then to solid beverage processing. in just five years, it has completed a journey that other industrial belts may take 30 years to explore.
this "haozhou model" has been successfully replicated in many agricultural production areas and industrial belts such as xianju bayberry, yangshan peach, and pingdingshan eyelashes.
"the past quarter has made us more determined to follow the path of high-quality development. we will continue to increase our investment in ecological construction, bring more low-priced products to consumers, and help transform agricultural production areas and industrial belts into gold production areas, benefiting more high-quality agricultural products, domestic products, and industrial belt merchants." zhao jiazhen said in the earnings call.
at the same time, pinduoduo insists on devoting itself to the "protracted war" of using science and technology to help agriculture. in the second quarter of this year, pinduoduo successively invested in a number of projects, including the "fourth duoduo agricultural research competition", "science and technology courtyard", and "seventh duoduo reading month". in addition, the agricultural research fund jointly established with china agricultural university has gradually borne fruit, and many of the investment projects have made important progress.
it is not difficult to see that pinduoduo is rooted in agriculture. on the one hand, it goes deep into the countryside to support the transformation of agricultural development methods and increase farmers' income with channels, technology and investment. on the other hand, it breaks through upward to create new quality productivity through product and technological innovation and explore potential opportunities and space in high-quality industrial belts.
from "quantity" to "quality" to create a new model for e-commerce
the financial report shows that in the first quarter of this year, pinduoduo's online marketing services and other service revenue increased by 56% year-on-year, and transaction service revenue increased by 327% year-on-year. specifically, the corresponding growth rates in the second quarter decreased by about 27 and 93 percentage points respectively.
in this regard, zhao jiazhen also pointed out in the conference call that in the past few quarters, competition in the overall environment of the e-commerce industry has continued to intensify. "competition" as the main theme of the e-commerce industry is inevitable. "under such fierce competition, our revenue growth may slow down."
as industry competition continues to intensify, a company that has been growing at a high rate for many quarters has shown signs of slowing down. this company is likely to make returning to high growth its primary goal, but pinduoduo has not done so. who is actually benefiting from this seemingly "uneconomical" business of "tens of billions of tax exemptions"?
"pinduoduo's tax reduction and exemption plan has reduced the operating pressure on merchants and can attract more high-quality merchants, allowing them to gain greater development space." senior e-commerce analyst zhang shule pointed out, "for consumers, the price dividend provided by the platform is still there, and the product quality has also improved, and users' stickiness to the platform will also increase."
as a pet supplies store owner who has been on pinduoduo for four years, lin cheng (pseudonym) expressed his optimism about the "10 billion tax exemption" plan to reporters, "the tax exemption is definitely a good thing and it will be convenient for us," and "pinduoduo continues to release policies that benefit merchants. i believe that new and old merchants will have more confidence in this platform."
the reporter learned that pinduoduo is conducting centralized testing on the reduction of merchants' store deposit. the first batch of merchants enjoying this policy have covered nearly 70 categories, and some merchants have completed cash withdrawals. it is estimated that millions of merchants will benefit from this, especially those operating multiple stores, as their operating costs will be further reduced.
in addition to being beneficial to the ecological construction of its own platform, pinduoduo's "10 billion yuan reduction and exemption" may create a new industry model for the e-commerce industry that is encountering a new turning point.
zhuang shuai, founder of bailian consulting, told reporters that the "10 billion yuan tax exemption" is a great boon to the entire e-commerce ecosystem. "platforms are beginning to find an (operational) balance between merchants, consumers and platforms." zhang shule also believes that the "10 billion yuan tax exemption" will allow merchants, consumers and platforms to win-win, and help build a healthier and more sustainable industry ecosystem.
"compared to simply low prices, high cost-performance is the core of a retailer or e-commerce platform's sustainable development," zhuang said. "in addition to the supply of high-cost-performance products, the long-term healthy competition among e-commerce platforms also lies in the service system, such as home delivery, the convenience of returns, and the improvement of the merchant platform's operating capabilities."
this also coincides with the direction of pinduoduo's current efforts. in november last year, zhao jiazhen said at the world internet conference that in the new stage, pinduoduo regards high-quality development as the company's most important goal and task, and promotes it in a down-to-earth manner, implementing high-quality development in platform governance, merchant ecology, high-quality supply chain, high-quality consumption and other aspects, and strives to create incremental value for consumers and society.
bidding farewell to the golden age of rapid growth, the e-commerce industry has entered a new stage of slow growth and micro-profit competition, where platforms are truly competing with each other in terms of internal strength. i believe that only platforms that are not obsessed with short-term interests and focus on cultivating internal strength can go more steadily and further on the long, steep and snowy road of e-commerce.
