Against the backdrop of bottlenecks in the development of traditional e-commerce and the growth rate of e-commerce users has slowed down significantly or even negative growth, grafting with social media is becoming the standard configuration for e-commerce platforms. The three traditional e-commerce giants are all accelerating the establishment of social e-commerce matrix.
Financial data
Pinduoduo's prospectus shows that as of the first quarter of this year, Pinduoduo's revenue was 1.38 billion yuan, 37 times the revenue of 37 million yuan in the same period in 2017. Revenue grew rapidly, and losses were also expanding, with a loss of 525 million yuan in 2017; as of the first quarter of this year, Pinduoduo lost 201 million yuan.
In the early morning of the 17th, Pinduoduo updated its prospectus and planned to be listed on Nasdaq. The stock issuance price is between US$16 and US$19, and its valuation is expected to exceed US$24 billion. Pinduoduo opened subscriptions to institutional investors on Tuesday and will price the IPO next Wednesday, people familiar with the matter said.
Liu Qiangdong, CEO of JD.com who participated in the Fortune Brainstorm Technology Forum in the United States on the 17th, was asked how Pinduoduo, as a competitor of JD.com, viewed its business model? Liu Qiangdong said that he doesn’t care about other business models, but only focuses on customer experience. “As long as you have shopped in China a few times, maybe just three times, you will have your own answer!”
For a time, Liu Qiangdong's remarks were linked to the controversy over the listing of Pinduoduo, and his remarks were interpreted as belittlement of Pinduoduo. Liu Qiangdong responded again that he had no intention of belittle Pinduoduo. We hope to think about the business model with a user-centered approach, rather than simply pursuing a novel and unique business model.
Low price and low quality
Or consumption upgrade?
However, Pinduoduo, the "dark horse" of e-commerce, is full of controversy.
Although the current low-priced group buying model has attracted the target audience, Pinduoduo does not have its own logistics and distribution. Due to the lack of logistics service experience, Pinduoduo can only make consumers more satisfied in terms of product satisfaction or product prices.
In early June this year, the National Office for Combating Pornography and Illegal Publications conducted an investigation into Pinduoduo and found that there were products involved in pornography, violence and illegality on the platform, and the relevant clues were transferred to relevant departments for investigation and punishment. In the prospectus, Pinduoduo mentioned the importance of the brand, its dependence on third-party logistics, and the requirements for platform governance, and improved supply chain management capabilities.
Cao Lei, director of the E-Commerce Research Center, told Guangzhou Daily All-Media reporter that the competition in China's e-commerce industry is currently quite fierce, and Pinduoduo is also facing the challenges of traditional e-commerce giants, vertical e-commerce, and physical retailers.
Cao Lei believes that after the rapid development in the early stage and facing the attack of giants, whether new companies can continue to make profits, provide relatively low-priced products while ensuring quality and avoiding being labeled as "low-cost, poor quality" is a major challenge for the high growth of operating income in the future. But in terms of total transaction volume alone, Pinduoduo's rapid growth in 2017 was enough to cause uneasiness among Alibaba and JD.com.
80% of the revenue comes from online advertising
Social e-commerce, which started in 2014, suddenly became a hot spot in 2018 and was noticeable for its fission-like growth rate.
According to the official data released by Pinduoduo, the platform currently has 300 million users and more than 1 million merchants. It took only 2 years to obtain an annual GMV (website transaction amount, which is an e-commerce platform enterprise transaction indicator) of more than 100 billion yuan. It took JD.com 10 years to achieve this goal, Vipshop 8 years, and Taobao 5 years to achieve this goal.
Guangzhou Daily All-Media reporter noticed that Pinduoduo's revenue mainly includes online market service income and commodity sales income. The revenue of Pinduoduo platform mainly comes from online advertising and transaction commissions, which is consistent with other e-commerce platforms in terms of business models.
Industry opinion
Social e-commerce subverts traditional e-commerce?
Against the backdrop of bottlenecks in the development of traditional e-commerce and the growth rate of e-commerce users has slowed down significantly or even negative growth, grafting with social media is becoming the standard configuration for e-commerce platforms. The three traditional e-commerce giants are all accelerating the establishment of social e-commerce matrix.
Will social e-commerce subvert traditional e-commerce? Cao Lei believes that social + e-commerce is the future development trend, and this new way of obtaining traffic will become the mainstream. Low-cost traffic will attract more giants and capital to enter the social e-commerce system, and social e-commerce services using mobile terminals will also become more common.
"Social e-commerce can only be regarded as a subversive trend. Its essence is the difference in marketing methods, but in fact it is a platform and self-operated e-commerce model." E-commerce analyst Li Chengdong believes.