Pinduoduo Q2 2024: Growth, competition, challenges.
2024-04-28 Business Trend Prediction

Profitable business makes your profit

Pinduoduo Q2 2024: Growth, competition, challenges.

On August 26th, Pinduoduo released its financial report for the second quarter of 2024, demonstrating steady company performance with continuous positive development in online retail, achieving a revenue of 97.1 billion yuan for the quarter.

However, during the earnings call, Chen Lei, Chairman and Co-CEO of Pinduoduo, stated that the company's global business is facing a more severe and rapidly changing international environment, with increased interference from non-business factors in business operations, leading to a significant increase in the uncertainty of future business development. It is inevitable that revenue growth will gradually slow down.

Chen Lei indicated that the company is facing fierce market competition across various fronts and is still in the investment phase, with no plans for share buybacks or dividends in the coming years. It is understood that Pinduoduo will invest billions of resources to support new quality merchants and waive 10 billion yuan in transaction fees for merchants over the next year, further expanding the scale of investment.

"In the first half of this year, we have continued to invest in a healthy and sustainable platform ecosystem, and have received positive feedback from both the supply and demand sides," said Zhao Jiazhen, Executive Director and Co-CEO of Pinduoduo Group, adding that the platform has seen a continuous emergence of new consumption and new demands, with the number of new merchants and products maintaining high growth, which has also driven agricultural production areas and industrial belts to increase production and income, improve quality and efficiency, and further strengthened our focus on the path of high-quality development.

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"In order to ensure the long-term healthy development of the platform, we will continue to improve ecological construction through a combination of 'support and governance', and will invest billions of resources to support new quality merchants over the next year, and resolutely carry out merchant ecological governance," Chen Lei stated. The overall scale of the platform has reached a considerable size, and improving ecological construction is not something that can be achieved overnight. The management has reached a consensus and is prepared to sacrifice short-term profits for long-term investment.

In the second quarter, Pinduoduo's "Agricultural Cloud Action" went deep into the fields of major agricultural production areas, promoting the movement of seasonal fruits such as Xianju bayberries, Guangdong lychees, Shandong cherries, Yangshan water peaches, and Xinjiang Hami melons from villages to cities, and continuously promoting the brand of the place of origin through billion-yuan subsidies, flash sales, and group purchases of tens of thousands of people.

During the 6.18 period, Pinduoduo continued to adhere to the principle of simple and affordable promotions, leveraging the digital advantages of new e-commerce to attract more new merchants and products directly to new consumption. In the first week of the promotion, the number of merchants participating in Pinduoduo's billion-yuan subsidy program increased by more than 90% year-on-year, the number of agricultural product merchants increased by 83% year-on-year, and the number of merchants in various categories such as digital, home appliances, and beauty maintained rapid growth.

In the second quarter, Pinduoduo's R&D investment reached 2.9 billion yuan, a year-on-year increase of 6%, mainly due to a new round of investment in operations and R&D. According to Zhao Jiazhen, in order to further strengthen the governance of the merchant ecosystem, the platform has optimized the process for merchants to join and products to be listed, and actively patrols products that have been listed through technical means, combined with a regulatory team for refined review, to combat illegal cheating merchants and create a better business environment for quality merchants.

In the earnings call following the release of Pinduoduo's second quarter financial report, Zhao Jiazhen stated that in the past few quarters, competition in the e-commerce industry has continued to intensify, and Pinduoduo will resolutely follow the path of high-quality development, support quality merchants, crack down on inferior merchants, and increase investment to continuously optimize the platform's ecological environment. "On this path, there will inevitably be a cost of growth, but for the sake of long-term health, the management team will unite and build our platform ecosystem well," said Zhao Jiazhen.

Since the beginning of this year, as Pinduoduo has deepened its strategy of high-quality development, competition in the e-commerce industry has further intensified, and the impact of changes in the international environment on global business has also increased, with new challenges coming one after another. "Looking at the performance of this quarter, our revenue growth has declined on a quarter-on-quarter basis, which also poses higher requirements for us," Chen Lei said. Pinduoduo's path of high-quality development will enter a new stage, and it will continue to build a healthy and sustainable platform ecosystem through a combination of "strong support" and "resolute governance".On the one hand, Pinduoduo will invest a resource package of ten billion to strongly support new quality merchants and new quality industrial belts with product and technological innovation capabilities, significantly reduce the transaction fees for high-quality merchants, and is expected to exempt 10 billion yuan in the next year. It will continue to strengthen the positive incentives for high-quality ecological development and comprehensively enhance the quality and efficiency of the supply chain's upward movement. On the other hand, Pinduoduo will also continue to increase investment in operations and technology, resolutely carry out ecological governance of the platform and merchants, crack down on illegal cheating merchants, promote the industrial belt to retain the essence and discard the dross, and continuously optimize and upgrade the supply chain to create a more effective and healthier ecological environment for new quality merchants.

Zhao Jiazhen stated that in this process, sacrificing short-term profits is necessary, and the management has reached a consensus, willing to pay a huge current price for long-term health. Profits in the next few quarters may fluctuate and rebound, but the trend of long-term profit reduction is inevitable. "As the social environment changes and the company's scale grows larger, we will also upgrade the company's governance structure or distribution methods to adapt to the ever-evolving era, to give back more to society, agriculture, and industry, to help the most ordinary people in need, and to take on more social responsibility," said Chen Lei.

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