Pinduoduo


Pinduoduo Inc. is the largest interactive e-commerce platform in China and in the world. It is the second-largest online marketplace in China by number of users and number of orders. It is also one of the world's largest internet companies. It has pioneered several new trends including social e-commerce, team purchase and consumer-to-manufacturer that have revolutionized online shopping in China. Pinduoduo ranks just behind Alibaba Group with close to 600 million users and recorded 1 trillion yuan in GMV in under five years. Getting to the same scale took Alibaba 10 years to achieve. It has been said that “to understand the success of Pinduoduo is to understand the future of global e-commerce.
As of Dec 31, 2019, Pinduoduo has generated over RMB 1 trillion gross merchandise value, 585.2 million active buyers in the last twelve months, 481.5 million average monthly active users in the 4th quarter of 2019, and an average daily order of 54 million parcels in 2019.

History

Founded in 2015, Pinduoduo has become the fastest growing tech company in the world. In Q1 2017, the company ended its online direct sales model of acquiring fresh produce and other perishables from suppliers to sell to consumers, and transitioned to purely providing online marketplace services to third-party merchants. This change from a first-party model that takes inventory and sells to consumers, to a third-party facilitator to connect consumers and merchants marked the start of explosive growth for Pinduoduo.
Month YearEnglish
Sep 2015Pinduoduo launched
Jan 2016Active buyers reached 10 million
Sep 2016Monthly GMV surpassed RMB 1 billion
Sep 2017Active buyers reached 200 million
Jun 2018Active buyers reached 300 million
Jul 2018NASDAQ: PDD
Dec 2018New Brand Initiative
Apr 2019Duo Duo Farm
Sep 2019Active buyers reached 500 million
Dec 2019Duo Duo Live

Corporate Governance

In compliance with the NASDAQ listing requirements, Pinduoduo is governed by a board of directors who are independent industry personnel. As of 2020, members of Pinduoduo’s board of directors are Colin Huang Zheng, Haifeng Lin, Nanpeng Shen, Qi Lu, George Yong-Boon Yeo and Anthony Kam Ping Leung.
According to Pinduoduo Inc, there are three committees within the board which oversee more specific matters. These committees include the Audit Committee, chaired by Anthony Kam, which oversees the company’s accounting and financial reporting processes and the audits of the financial statements of the company; the Compensation Committee, chaired by Qi Lu, which assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to directors and executive officers; the Nominating and Corporate Governance Committee, chaired by George Yeo, which assists the board of directors in selecting individuals qualified to become the company’s directors and in determining the composition of the board and its committees.

Interactivity + Value-for-Money

Pinduoduo is known for its interactivity and value-for-money offers that has been described as a combination of the best features of Costco and Disney. One special feature is its use of team purchases, where consumers form “teams” of at least two to get a lower price. The format has been so successful that most other e-commerce platforms in China have copied it and introduced similar versions of team buying. While team purchase was the main reason for Pinduoduo’s rapid growth, a significant enabler of Pinduoduo’s virality was the widespread use of WeChat as a platform in China.
Team purchase is built upon a distributed AI infrastructure where user behavior could be influenced by their circle of trust and environment. This helps to aggregate demand to lower down the cost of production and logistics.

Agriculture Leadership

It is also the biggest online marketplace in China for agricultural produce, and is known for applying consumer insights to help revamp the traditional supply chains to benefit both consumers and producers. Pinduoduo launched its Duo Duo Farms initiative in April 2019 to help farmers in impoverished counties in China improve their productivity and find new sales channels online. The company aims to launch 1,000 Duo Duo Farms in 8 provinces in China’s western provinces in the next five years. The first Duo Duo Farm was launched in Baoshan, Yunnan and reached 792 coffee farmers across two villages. Through its Duo Duo University programs, Pinduoduo trains merchants in e-commerce-related skills such as finance and marketing. Pinduoduo has introduced this to farmers and entrepreneurs in rural communities as well, with the program helping to fill the rural talent gap.
In 2019, it sold RMB 136 billion worth of agricultural goods, constituting 13.5% of its total GMV for the year.
The number of active buyers of agricultural products on Pinduoduo surpassed 240 million in 2019. In the first quarter of 2020, Pinduoduo helped open more than 270,000 new agriculture-related online shops.
During the Coronavirus outbreak in China, which paralyzed traditional wholesale distribution networks, Pinduoduo helped to collect information about surplus agricultural produce and then connected the farmers with consumers through livestreaming to help sell the perishable stock.
Amid the pandemic Pinduoduo has helped 180,000 farmers in nearly 400 agricultural areas sell the equivalent of 120,000 metric tons of agricultural produce from February 10 to March 18 through its Help the Farmers Covid-19 response program.

Consumer to Manufacturer (C2M)

Pinduoduo has actively promoted the concept of "consumer to manufacturer" which they call C2M. The consumer-to-manufacturing model aims to evolve traditional manufacturing from a marketing-driven process into a consumer-driven process by leveraging consumer insights to create and refine designs and specs to cater to different users demands.
Pinduoduo has implemented this by helping brands and factories so that they in turn can produce products users need the most. By cutting down on unnecessary production, less resources are needed and the cost savings can be passed on to consumers.
In December 2018, Pinduoduo introduced its New Brand Plan, which aims to help 1,000 domestic brands by 2020. Through this initiative, Pinduoduo supports its partners with analytics, product development suggestions and marketing support on its platform.
Thus far, Pinduoduo has partnered with a variety of manufacturers in different industries to develop tailor-made products for its users. For instance, Pinduoduo signed a strategic cooperation agreement with Shenzhen MTC Co., Ltd, a contract manufacturer that produces more than 10 million TV sets annually for renowned global brands. The cooperation covers joint research and development, design and manufacturing as well as marketing. Songfa Ceramics and Sipiao, a tissue paper manufacturer, are other partners that have been named. According to MIT Technology Review, in 2019, 106 such manufacturer-owned brands were launched on Pinduoduo.
With export orders for Chinese manufacturers being hit in the wake of the Covid-19 pandemic, Pinduoduo extended its C2M initiative to target export manufacturers that were looking to pivot to fulfill domestic consumption. Apart from new incentives for these affected manufacturers, it also held promotional sales events and partnered with local governments. As Reuters reported, Pinduoduo has tied up with the Dongguan government to reach a goal of helping 1,000 brands and manufacturers make a combined 100 billion yuan in sales".

Duo Duo live streaming

In January 2020, Pinduoduo launched its Duo Duo Live streaming service and made it widely available to all of its merchants for free. Duo Duo Live’s approach to livestreaming is give the stage to creators and makers for them to showcase their own products and services. According to Xinhua, in May, "China's poverty relief authority teamed up with Pinduoduo to promote the sales of agricultural products from poverty-stricken regions via livestreaming". According to the program, there will be 100 live online sales promotion activities on Pinduoduo’s platform to aid poverty relief.
Notably, Pinduoduo also held a series of livestreaming festivals with manufacturers and offline retailers that were affected by softened consumer demand due to the coronavirus outbreak. In March, the company hosted a series of livestreaming fairs in key production centers including Guangdong, Fujiang, Zhejiang and Shandong to help merchants promote locally produced merchandise to domestic consumers.
In May 2020, Pinduoduo’s livestreaming session of six bonded warehouses, featured popular imported items such as milk powder and diapers, which drew attentions from more than 1 million Chinese consumers who wanted to see for themselves the conditions of the products.

Social e-commerce

Pinduoduo’s platform is built around the concept of social commerce. On Pinduoduo, users can discover and purchase products from a wide range of sellers. What sets Pinduoduo apart is the social aspect where users can then easily share what they have purchased with their social network and enjoy lower prices if people in their network also join their team purchase to buy the product. This creates an incentive for customers to share products with their network which in turn drives greater sales volume for sellers, allowing them to continue offering value-for-money prices due to economies of scale.
While browsing on the platform, products that users friends have purchased or reviewed positively before are flagged as such, and there are also features that enable users to ask each other for recommendations and also see their friend's reviews. These features mimic the spontaneity and experience of browsing and shopping offline with friends, and the more fun the shopping experience is, the more users naturally engage and generate even more signals. These buyer-to-buyer interactions that drive trust, inspiration and relevance are a key part of social commerce which places people at the center of the shopping experience. Thereafter, as the number of users and interactions grow, the platform is able to refine the recommendations it presents to users based on its social graph formed from the browsing, sharing and team purchase behavior of its users taken in combination.

Investments and Partnerships

Pinduoduo has made a few investments and partnerships with both international and Chinese retailers.
In late Nov 2019, Amazon.com Inc opened a pop-up store on Pinduoduo to coincide with its Black Friday Sales. The pop-up lasted through the end of December and featured a selection of 1,000 products from Amazon’s global stores. The partnership gave Amazon access to Pinduoduo’s user base in lower tier markets while helping Pinduoduo to expand its premium product offerings.
In April 2020, Pinduoduo made its first strategic investment by subscribing to US$200 million in convertible bonds issued by Gome Retail Holding, a major household appliance and electronics retailer in China. The bonds are convertible at  HK$1.215 per share, which translates to around 1.28 billion of Gome shares or a 5.6% stake on a fully diluted basis. This investment is expected to strengthen Pinduoduo’s position in the household appliances and electronics sector and also accelerate its push into C2M, with more tailor-made appliances made available to its users. As part of the deal, Gome’s entire product range would be listed on Pinduoduo and its logistics, delivery and assembly services would also be integrated.

Intellectual Property Protection

In 2018, Pinduoduo came under scrutiny following a spate of negative press calling the company out for inferior and imitation products. The company responded with an open letter stating that it had in a single week in August shut down 1,128 stores, taken down more than 4 million listings and blocked 450,000 suspected counterfeit goods listings from being published. The company also disclosed that it had removed 500,715 items and closed more than 40 stores to protect consumers from counterfeit and substandard masks being sold by merchants hoping to profit amid pandemic.
Pinduoduo has been applying its 10x penalty policy on counterfeit goods, which is stricter than the three times penalty required under Chinese law. Its 10x penalty policy is the strictest among all platforms in China. If the platform finds a product to be fake, it would impose a penalty on the merchant that is ten times the total value of the entire batch of problematic goods. This implies potentially huge losses for merchants found guilty and has sparked merchant protests at Pinduoduo offices as a result.
The penalty is deducted from the deposit and outstanding funds of the store concerned as well as from others owned by the same merchant if necessary. These funds are then disbursed to affected consumers as a compensation.
In November 2018, Pinduoduo launched an online Intellectual Property Protection portal to communicate with brand owners. The portal allows brand owners and rights-holders to make takedown requests. The same year, Pinduoduo launched an English-language version of its portal to help international vendors and brands. Brands working with Pinduoduo can set their own requirements and characteristics, choosing from specific parameters and design rules, and in some cases pre-screening models. The portal uses enhanced algorithms to improve the speed of takedown requests. Pinduoduo also has a dedicated team that addresses inquiries from rights-holders’ about its IP protection portal. By late 2019, over 12,000 brand owners had registered their IP rights on the Pinduoduo protection program.
In 2020, Pinduoduo introduced mini programs that enable users to verify the authenticity of branded products. The mini programs are tailored to the unique features of each brand and provide consumers with the manufacturing information and supply chain details of the product they have purchased.

Controversies