BEIJING，December 3（TMTPOST) -- Chinese e-commerce giant Pinduoduo’s tthird-quarter revenues surged 93.9% to 68.84 billion yuan, sending its stock price soaring and making it the largest Chinse e-commerce company by market value in the U.S. market last week.  

Pingduoduo, founded in 2015, reported a quarterly revenue of 68.84 billion yuan in the quarterly financial report released on November 28, 2023​. Meanwhile, it generated a net profit of 15.54 billion yuan, representing a net profit margin of 22.6%.

The main catalysts for this significant increase in revenue were online marketing services and transaction fees, which expanded by 39% and 315%, respectively, when compared to the corresponding period in 2022. Pinduoduo's stock price surged, momentarily surpassing Alibaba to become the largest Chines company listed in the United States, on account of its robust earnings. The stock currently once had a market capitalization of 192.1 billion USD on Wednesday.

In light of Pinduoduo's performance, Jack Ma, the founder of Alibaba, gave an uncommon internal statement wherein he called for constructive criticism and novel concepts. He underscored Alibaba's potential to adapt and evolve, placing particular emphasis on the notion that titanic organizations invariably emerge more robust from adversity.

E-Commerce Platforms Resort to "Low Prices"  

The year 2023 has been eventful in the e-commerce sector. During the e-commerce events such as the 618 and Double 11, platforms shifted their emphasis from Gross Merchandise Volume (GMV) to order volume, user scale, and brand transaction numbers as metrics for reporting. Companies including JD.com, Tmall, and Pinduoduo have adopted this approach.

In addition to the waning appeal of retail festivals, an emerging trend has been "low prices" or a bargain purchase. Taobao and Tmall have implemented a "price power" strategy, emphasizing the 1688 platform of their respective industrial chains with profound roots. JD.com returned to its "more for less" strategy and introduced significant subsidy programs. Meanwhile, "Low-priced quality goods" became the operational theme of the ecommerce of Kuaishou, a popular short-video platform.

Pinduoduo is the envy of every competitor, but an examination of its business logic demonstrates that the "low-price" strategy that supports its market value is not simply about being inexpensive. The journey of Pinduoduo can be divivded into three phases:

Initial Stage: Pinduoduo established a new competitive landscape by adopting lenient access policies for a multitude of small and medium-sized enterprises, with a specific emphasis on white-label products that were disregarded by Alibaba and JD.com.

Growth Phase: In order to contend with industry titans, Pinduoduo expanded its product offerings and implemented the "Billion Subsidy" channel, which effectively appealed to customers belonging to more affluent demographic segments.

Consolidation Phase: Pinduoduo, now in a stronger position, further developed the monetization capabilities of its platform and incentivized merchants to engage in competition through the implementation of its low-price-focused traffic distribution logic.

On the other hand, conventional e-commerce behemoths such as Alibaba and JD.com have developed traffic distribution mechanisms that are notably dissimilar and difficult to imitate.

TEMU's Growth and Challenges

Although not mentioned in the earnings report, cross-border e-commerce platform TEMU's significant contribution to Pinduoduo's valuation surge cannot be ignored. Chen Lei, the chairman and CEO of Pinduoduo, emphasized TEMU's capacity to establish direct connections between manufacturing enterprises and consumers in more than forty countries.

Despite its swift expansion, TEMU's trajectory has been financially burdensome. Significant advertising and promotion expenditures have been crucial, particularly in the United States market. At first, endeavoring to enter the United States market via viral tactics, TEMU subsequently transitioned to a strategy predicated on advertisements. This included a significant presence at the Super Bowl, where its advertisements attracted 20 million new users for $14 million USD for two 30-second positions.

TEMU's objective was to surpass SHEIN in North America's GMV by September 1st through an investment of 20 billion yuan. The results of this assertive marketing approach were evident, as the daily GMV in August ascended to 50 million USD. Nonetheless, in response to a deceleration in order growth, TEMU has recently modified its approach by reallocating resources to other, more rapidly expanding markets while decreasing marketing expenditures in the United States.

In spite of these obstacles, TEMU continues to be a formidable competitor on the U.S. market. It is the fourth most-visited e-commerce website in the United States, behind Amazon, Walmart, and eBay, per Insider Intelligence.

By means of upstream merchant layouts and comprehensive market expansion strategies, TEMU has fortified its aspirations, now aiming to achieve a GMV of 30 billion USD by 2024, which is over two times the amount achieved this year. TEMU's valuation has been increased by Goldman Sachs from USD 200 billion to USD 370 billion.

The difference in market capitalizations of TEMU and Alibaba indicate a change in buyers’ preferences towards e-commerce models, in addition to a change in rankings. Chen attributed TEMU's success to the seasoned team that was assembled during the grocery business phase of Pinduoduo and possesses an in-depth knowledge of the national manufacturing supply chain. This approach, which is fundamental to Pinduoduo's survival, implies that in the future competitive e-commerce landscape, a concentration on healthy low prices and effective new supply and sales relationships may emerge as critical factors.