Pinduoduo cemented its position as China’s most used e-commerce platform in the first quarter as annual active buyers inched ahead of key rivals and revenue more than tripled year-on-year.
Pinduoduo said on Wednesday that active buyers in the twelve-month period ended March rose 31 per cent to 823.8 million from the same period a year ago. Alibaba Group Holding said on May 13 that active consumers on its e-commerce retail platforms rose 41 per cent in the last financial year to 811 million.
The e-commerce giant’s revenue jumped 239 per cent from last year to 22.17 billion yuan (US$3.3 billion) for the three months ended March, better than the 19.71 billion yuan expected in a Bloomberg poll of 13 analysts. The Nasdaq-listed company’s adjusted loss per share narrowed by 44 per cent to 1.52 yuan, beating the expectation of 2.25 yuan.
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“Pinduoduo registered a strong quarter of revenue growth ahead of expectations, with its Duo Duo Grocery business driving user engagement,” said Natalie Wu, a managing director at Haitong International Research. “The strong growth in annual active users and monthly active users show that they are on the right track in terms of driving user engagement.”
Pinduoduo’s results come as the company sharpens its focus on agriculture and online groceries and after the surprise departure of founder Colin Huang in March, who handed over the reins as chairman to chief executive Chen Lei.
“As we work towards our goal of becoming the world’s largest agriculture and grocery platform, we must also seize the golden opportunity to transform and modernise the agri-food system,” said Chen Lei, chairman and chief executive at Pinduoduo, in a statement.
The Shanghai-based company has been investing heavily in new agriculture-focused technologies. Its new grocery delivery service Duoduo Grocery, known as Duoduo Maicai in Chinese, has helped drive user growth during the pandemic.
The company said on Wednesday that it has teamed up with the Singapore Institute of Food and Biotechnology Innovation (SIFBI) to conduct a study that aims to determine the nutritional impact from replacing traditional animal proteins with plant-based proteins.
In a conference call with analysts, Chen said Pinduoduo would keep on helping farmers and agri-merchants to operate better and earn more. Vice President David Liu said on the same call that the company had pioneered the consumer-to-manufacturer (C2M) model, recasting how Chinese manufacturers think of their value in the supply chain. He added that agriculture would benefit from the same model.
Chen also said the company was rethinking its logistics systems and infrastructure. “We have the privilege of being the only exclusively mobile commerce player of this scale in the world. This unique characteristic of PDD has helped us to become the world‘s largest commerce platform by the number of paying users,” said Chen.
Founded in 2015, Pinduoduo started out by helping to popularise social e-commerce in China, allowing users to get lower prices by inviting friends on social media to purchase the same item. Since then, it has expanded rapidly to become one of China’s largest e-commerce platforms based on its group-buying model and huge consumer subsidies.
In March, Pinduoduo announced that it had over 780 million annual active buyers in 2020, surpassing e-commerce rivals Alibaba and JD.com to become China’s largest e-commerce platform based on that number.
However, Pinduoduo still lags behind its rivals in terms of average revenue per user (ARPU) – with its current gauge only a fifth of Alibaba’s ARPU. Alibaba is the parent company of the South China Morning Post.
Given the low ARPU, JP Morgan analyst Andre Chang said in a recent note that Pinduoduo’s strategy of focusing on asset-heavy investments was sensible, although such a strategy means that the company will have to build up a wide range of offline capabilities, including merchandising, logistics management and warehousing operations from scratch.
The company is also facing challenges at home and overseas due to ongoing US-China tech tensions, as well as Beijing’s continued antitrust probes into the industry.
“The US government is considering banning Chinese companies from listing in the US, and the outcome is still unclear,” said Bo Pei, an analyst from Oppenheimer, in a recent note.
Pinduoduo’s stock price tumbled in March when the US Securities and Exchange Commission announced it was taking steps to enforce a law requiring accounting firms to let US regulators review the audits of overseas companies. PDD’s shares are currently trading at about US$130 compared with a year high in February above US$200.
The company has also been in the group of internet giants lectured by China’s market regulators in recent months amid Beijing’s ongoing antitrust crackdown. Earlier this month, Pinduoduo and online food delivery giant Meituan were both summoned by the Shanghai consumer rights watchdog for problems related to product quality, counterfeits, and copyright infringements.
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