Pinduoduo

From Wikipedia, the free encyclopedia
Pinduoduo Inc.
拼多多
TypePublic
IndustryInternet
Headquarters
Shanghai
,
China
Key people
Lei Chen (Chairman and CEO)[1]
ProductsE-commerce, Agriculture
Number of employees
7,986 (2020) Edit this on Wikidata
Websitepinduoduo-global.com

Pinduoduo Inc. (Chinese: 拼多多; Pinyin: Pīn duōduō) is the largest agriculture-focused technology platform in China.[2][3][4][5] It has created a platform that connects farmers and distributors with consumers directly through its interactive shopping experience. In 2019, nearly 12 million farmers supplied their fruits and vegetables to Pinduoduo users.[6]

It has pioneered several new trends including social commerce,[7] and consumer-to-manufacturer (C2M)."[8]

As of December 31, 2020, Pinduoduo has generated RMB 1.67 trillion gross merchandise value (GMV) in the last twelve months.[9] The number of average monthly active users reached 724.6 million in the 1st quarter of 2021.[10] For the 12 months ending on June 30, 2021, Pinduoduo's annual active buyers reached 849.9 million.[11]

History[]

Founded in 2015, Pinduoduo is one of the fastest-growing tech companies in the world.[12] 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 across more categories. According to Pinduoduo Inc.'s July 2018 prospectus, this change from a first-party to a third-party marked the start of explosive growth for Pinduoduo.[13]

In July 2018, Pinduoduo was listed on the Nasdaq with the ticker, PDD.[14] Pinduoduo then launched its New Brand Initiative in December 2018, which aimed to support factories and manufacturers in developing their own brands. In April 2019, Duo Duo Farm was introduced, an integrated program to equip farmers with skills like e-commerce, finance, business operations and online marketing that they need to be able to sell online.

Duo Duo Live was launched in December 2019 as a livestreaming feature available for merchants to better promote their wares.[15] Duo Duo Grocery, a next-day, click-and-collect grocery service, was rolled out in August 2020, as a response to the changing consumer needs for buying groceries in the wake of the COVID-19 pandemic.[16][17]

In 2019, Pinduoduo has a net deficit of 8.54 billion yuan (~1.32B USD).[18][19][20]

In 2020, Pinduoduo has a net deficit of 7.18 billion yuan (~1.11B USD).[21][22][23]

Corporate Governance[]

As of Mar 2021, 6 members sit on Pinduoduo's board, the majority of whom are independent directors. The directors are Lei Chen, Haifeng Lin, Nanpeng Shen, Qi Lu, George Yong-Boon Yeo and Anthony Kam Ping Leung.[24]

According to Pinduoduo, 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.[25]

On July 1, 2020, Pinduoduo announced the appointment of Lei Chen as its CEO,[26] Tony Ma as Vice President of Finance[27] and Andre Zhu as General Counsel.[28] Chen was appointed the Chairman of the board on March 17, 2021, taking over from Colin Huang, who stepped down from the board.[29]

Since taking over as chairman of Pinduoduo, techie Chen Lei has adopted a strategy of focusing on research and development and light on marketing. Chen Lei said that Pinduoduo will shift its focus from marketing in the past five years to R&D and use Pinduoduo's strengths in technology to further promote the digitization of agriculture.[30]

In terms of team management, Chen Lei said that Pinduoduo will provide more opportunities for young talent, and in the next six months to a year, more young managers will come to the forefront and take on important roles.[31]

Business Model[]

Pinduoduo monetizes primarily through advertising - about 90% of Pinduoduo's revenues come from online marketing services with the remainder coming from transaction services.[32][33][34]

Pinduoduo has seen merchant base expands rapidly to reach 8.6 million active merchants within 6 years of its founding.[35]

Pinduoduo operates its own logistic infosystem that helps to track the parcels generated from its platform. It started the services to improve the efficiency of its logistics, and to track and crack down on illegal activities such as online gambling and brushing. The e-waybill system was launched during the first quarter of 2019. The system is integrated with all major logistics services providers in China, as well as the store management systems of sellers.[36]

Social Commerce[]

Pinduoduo is known for its interactivity and value-for-money offers.[37][38] 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 easily share what they have browsed or purchased with their social network, inviting them to join teams of mostly two people within 24 hours to enjoy a lower price. Users get a clear benefit of enjoying a lower price while still having the convenience of getting the product shipped to them individually.[39] This in turn drives greater sales volume for sellers, allowing them to continue offering value-for-money prices due to economies of scale. Pinduoduo scored higher than its online peers in the brand attributes of adventurous, fun, and playful.[37]

The user experience is anchored around browsing and interactions, as opposed to deliberate, search-based discovery.[40] The company presents users with a personalized feed of products to encourage them to explore, a user experience that is designed to more closely resemble visiting a real-world shopping mall or a bazaar.[41]

While team purchase was the main reason for Pinduoduo's rapid growth, a few pillars supported its growth and success,[42] the high penetration of logistic network, that supported fast and low cost delivery services, prevalence of online payment facilities, and the fact China is the manufacturing base of most items sold by e-commerce platforms worldwide.

Agriculture[]

Pinduoduo is the biggest online marketplace for agricultural produce, and is known for applying consumer insights to help revamp the traditional supply chains to benefit both consumers and producers. In 2020, it recorded more than RMB 270 billion worth of agricultural goods, constituting about 16% of its total GMV for the year.[43][10]

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.[44][45] Through its Duo Duo Academy programs, Pinduoduo equips farmers and entrepreneurs in rural communities with skills such as finance and marketing to fill the rural talent gap.[46]

During the Coronavirus outbreak in China, which paralyzed traditional wholesale distribution networks, Pinduoduo helped to collect information about supply and demand and connected the farmers with consumers through its platform to help farmers sell the perishable stock.[47][48]

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.[49][50]

Consumer to Manufacturer (C2M)[]

Pinduoduo has actively promoted the concept of "consumer to manufacturer" which it calls C2M.[51] The consumer-to-manufacturing (C2M) model aims to provide more transparency to producers so that they can more accurately produce according to actual consumer demand.[52] By cutting down on unnecessary production and guess work, fewer resources are needed and the cost savings can be passed on to consumers.[53][54]

In December 2018, Pinduoduo introduced its New Brand Plan. Through this initiative, Pinduoduo supports its partners with product development suggestions and marketing support on its platform.[55]

Thus far, Pinduoduo has partnered with a variety of manufacturers in different industries to develop tailor-made products for its users. According to MIT Technology Review, in 2019, 106 manufacturer-owned brands were launched on Pinduoduo.[56]

Investments and Partnerships[]

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.[57] 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.[58]

Pinduoduo has been investing heavily in agricultural logistics infrastructure and evaluating opportunities in alternative proteins and functional foods.[59]

Intellectual Property Protection[]

In 2018, Pinduoduo came under scrutiny following a spate of negative press calling the company out for inferior and imitation products.[60] 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.[61] The company also disclosed that it had removed 500,715 items and closed more than 40 stores as of February 4, 2020 to protect consumers from counterfeit and substandard masks being sold by merchants hoping to profit amid pandemic.[62]

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.[63] This implies potentially huge losses for merchants found guilty and has sparked merchant protests at Pinduoduo offices as a result.[64]

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.[65] The portal allows brand owners and rights-holders to make 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.[66]

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.[67][68]

Controversies[]

  • On June 7, 2018, China Legal Evening News reported that "there are many illegal and violent goods involved in the law," and you can buy cheap goods, and there are many commodities that involve pornography, violence, and illegal activities. Including the blade knife, pseudo base station device, motorcycle license plate and inflatable doll, etc.[69]
  • On January 20, 2019, the company reported theft of online discount vouchers worth tens of millions of yuan.[70] An online collective of users exploited a loophole in Pinduoduo's system and stole tens of millions of yuan worth of discount vouchers. The company notified the police about the incident.[71]
  • On 3 January 2021, a 22-year-old Pinduoduo employee died from extreme overtime work, which angered the public on the 996 working hour system.[72][73]
  • On 9 January 2021, a Pinduoduo employee, surnamed Tan, committed suicide in Changsha, a city in Central China.[74][75]

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