The five-year-old Pinduoduo has made a profit.
On November 12, Pinduoduo released its third quarter financial report today. The financial report shows that Pinduoduo’s third-quarter revenue was 14.21 billion yuan, an increase of 89% over the same period last year; under non-GAAP, the net profit attributable to common shareholders was 466.4 million yuan, which is two years after listing. After the first quarterly profit.
Affected by the financial report, Pinduoduo's daily financial report rose by 20.41% to US$134.21, with a market value of over US$160 billion.
01
Focus on Pinduoduo’s Q3 financial report, with many bright spots besides profit
The capital market is generally optimistic about Pinduoduo, not only because it achieved quarterly profit for the first time, but also because of the overall improvement of Pinduoduo's key operating indicators during the quarter.
In terms of user scale and platform transaction volume that the market is more concerned about, according to Pinduoduo’s Q3 financial report, as of the end of September 2020, the number of active buyers on the platform reached 731.3 million. Compared with the 536.3 million in the same period in 2019, an increase of 36% year-on-year, a strong increase of 195 million in a year. Among them, a single quarter increase of 48.1 million in the third quarter. As of the end of September this year, the platform transaction volume (GMV) in the first 12 months reached 1,457.6 billion yuan, a year-on-year increase of 73%, which is 8 times higher than the industry average.
In terms of revenue, Pinduoduo's transaction service revenue and advertising and marketing revenue both achieved significant growth this quarter. Among them, the platform's online marketing services and other revenue reached 12.878 billion yuan, which was 6.71 billion yuan in the same quarter of 2019, a year-on-year increase of 47.9%. Transaction service revenue was RMB 1.3321 million, and Q3 2019 was RMB 802.5 million, a year-on-year increase of 66%.
In terms of user consumption, according to Pinduoduo’s Q2 financial report, in the 12 months ending June 30, 2020, the annual expenditure of each active buyer of Pinduoduo was RMB 1857.0. This quarter’s financial report shows that in the 12 months ended September 30, Pinduoduo’s annual expenditure per active buyer was RMB 1993.1.
User growth, revenue, and user consumption are all areas that the market pays more attention to. Before the Q3 financial report was released, there were voices in the market worried about Pinduoduo's new user growth. Pinduoduo's quarterly increase of nearly 50 million users told the market that it is still developing at a high speed. The first profit is to tell the market that profitability is not difficult for Pinduoduo. The increasing consumption of users tells the market that Pinduoduo's user level and consumer confidence are gradually improving.
Xi Ge once said in a previous article: "Ten billion subsidies" will not only help Pinduoduo achieve an increase in the two key indicators of "user purchase frequency" and "user purchase price per customer", it also helps to aggregate High-quality brands enhance the overall brand scale and quality of the platform. Looking at it now, Pinduoduo's tens of billions of subsidies are realizing back-feeding the platform. Before the tens of billions of subsidies, the "New Brand Plan" launched by Pinduoduo in 2018 has also entered the "harvest period. According to Pinduoduo, more than 1,500 companies have participated in the customized research and development of Pinduoduo's new brand plan."
Pinduoduo's outstanding performance on a number of key statistics this season told the market. In the past two years, he has adopted the "new brand strategy", "10 billion subsidy strategy", and "agricultural products upward" strategy is correct and has begun to generate benefits.
02
Do ecological extension, Pinduoduo strategy to advance into the field of grocery shopping
Although Pinduoduo achieved its first profit this season and the capital market has responded positively, Pinduoduo has not lost sight of it.
In the conference call after the financial report was announced, Pinduoduo CEO Chen Lei made it clear that after the platform has more than 700 million users, a slowdown in user growth will be inevitable. However, Chen Lei also pointed out that Pinduoduo still has room for growth, such as increasing its user base. And said that he will redouble his efforts to achieve the goal.
For this reason, Pinduoduo began to expand its ecology and began to advance into the field of grocery shopping.
When answering questions from analysts, Chen Lei said that Duoduo Shopping is actually a natural extension of Pinduoduo's e-commerce business, because Pinduoduo understands agriculture. Buying more and more food is because Pinduoduo sees strong consumer demand in this area, and our current infrastructure and platform cannot meet this demand.
Chen Lei judges that in the future, a large number of consumers will buy food entirely online. "This is a bit similar to how people are increasingly buying daily necessities online. The second is the synergy between Duoduomai and our main e-commerce platform. Duoduomai has a relatively high purchase frequency, so our user platform is active It is also relatively high. In this way, they will buy other categories of goods from our e-commerce platform.".
According to Chen Lei, Duoduomai aims to solve the daily fresh demand of consumers on the platform. The current trend is relatively strong, the user pick-up rate is also good, and the acceptance is relatively high. Although the AOV of Duoduobucai is relatively lower than the AOV on the platform, its purchase frequency is higher. Chen Lei believes that as Duoduobu serves more consumers, the frequency of purchase will continue to increase. As Pinduoduo's infrastructure is improved, its AOV will gradually increase.
In a word, Duoduo Chen Lei is very optimistic about the future potential of Duoduo Shopping.
In fact, buying a lot of food has become a new strategy of Pinduoduo. In October this year, Pinduoduo Chairman Huang Zheng delivered an internal speech at the celebration of its 5th anniversary. In this speech, Huang Zheng elaborated on the grocery shopping business. While pointing out that “grocery shopping is a bitter business”, he said that he would make a lot of investment and make in-depth innovations.
According to official data, as of the end of September 2020, "Duo Duo Cai" has opened business in 13 provinces and cities including Hubei, Jiangxi, Shaanxi, Chongqing, Sichuan, Shandong, Henan, Hebei, Anhui, and Yunnan. 3500 agricultural products of origin in 1,000 high-quality production areas and 150 high-quality production areas around the world.
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Buy a lot of food or become a second growth curve of Pinduoduo
Xi Ge is more optimistic about Pinduoduo's "grocery shopping" business. There are two reasons for optimism.
The first point is Pinduoduo's supply advantage. In terms of supply, as stated by Pinduoduo's chairman Huang Zheng, the grocery shopping business is highly compatible with Pinduoduo's long-term agricultural strategy. What I want to say here is that Pinduoduo has been doing agricultural products up-streaming. At present, there is an agricultural product online team of nearly 2,000 people, deeply involved in the industrial chain of agricultural production, marketing, research, and processing. It is understood that between 2017 and 2019, Pinduoduo’s agricultural (sideline) product turnover increased from 19.6 billion yuan to 136.4 billion yuan, a compound growth rate of 163.8%, and its share of agricultural product network sales rose from 8.0% to 34.3% . Chen Lei said in October that Pinduoduo's agricultural-related GMV will increase to 250 billion yuan in 2020.
The advantage of agricultural products will give Pinduoduo a lot of advantages in grocery shopping. Moreover, buying vegetables is actually conducive to further consolidating Pinduoduo's advantage in agricultural products.
The second point: Grocery shopping is a category that fits more Pinduoduo users. Pinduoduo's main user group is the middle consumer group. The products they buy are mainly food, fruits, clothing, sports equipment, shoes and bags, women's clothing, mothers and babies, accessories, and beauty makeup. With tens of billions of subsidies, mobile phones, electrical appliances, computers, and department stores have also become key consumer goods for platform users. But generally speaking, Pinduoduo's main users still focus on affordable and smart consumption. Or to put it another way, Pinduoduo's users are a group of people who can live their lives. These people are not only sensitive to product quality, but also price and time. The launch of Duoduomai not only meets the grocery shopping needs of this group of users who will live a life, but also meets the life needs of some users in terms of price and time. In this way, while meeting the needs of some platform users in the first place, Duoduomai will continue to cultivate the grocery shopping needs of other users, and then develop and grow.
In addition to the above two points, the grocery shopping business for Pinduoduo also has the effect of enhancing platform stickiness and pulling new ones.
If Duoduomaicai can make users more and more frequent with its superior cost performance and satisfactory service quality, then it can be foreseen that their stay on the platform will be longer and longer, forming an excellent user stickiness. In this way, a traffic precipitation effect will gradually form, which not only can sell more fresh agricultural products to users, but can even bring significant new effects to Pinduoduo's full-category e-commerce business. In other words, it is to use the high-frequency consumption of grocery shopping to cultivate users' consumption habits on the platform, form path dependence, and then drive the sales of other categories on the platform, and even low-frequency products on the business sector.
Once the grocery shopping model is established, the value that grocery shopping will bring to Pinduoduo will not only "make high-frequency traffic and low-frequency profit", but will further increase the ARPU value of existing users, allowing the platform to steadily survive the current situation. The dual "bottleneck" period of user growth and GMV growth helped Pinduoduo draw a "second growth curve" and steadily move to a higher stage of development.