Not the victory of low prices, but the satisfaction of needs.
Text |China Business StrategyLego Chen
Pinduoduo's ** continues.
As of 16:00 ET on November 30**, Pinduoduo (PDD.)US) ended up in 1958With a total market capitalization of $900 million, it has become the largest Chinese concept stock in the United States.
A bright financial report is the most powerful logic to drive market capitalization.
On November 28, Pinduoduo released its third quarter 2023 performance report. There are many highlights in the report, such as its revenue of 688 in the current period400 million yuan, an increase of 94% year-on-year;Another example is its net profit for the quarter was 155400 million yuan, an increase of 47% year-on-year.
But there is one business data that shines the brightest-Because of Duoduo's cross-border revenue, Pinduoduo's commission income in the quarter was 29.2 billion yuan, a year-on-year increase of 315%, which greatly exceeded market expectations.
The domestic e-commerce business is rising, and the overseas e-commerce business is soaring, which is even unexpected for many Pinduoduo employees who only know how to bury their heads in business.
[A lot of cross-border, momentum like a bamboo].
In September 2022, Pinduoduo launched a new business: Duoduo Cross-Border.
It mainly sells daily necessities produced by domestic manufacturing enterprises overseas through the Temu app, and the first stop is in the United States.
For a long time, not only Americans could not pronounce the name temu accurately, but even internal employees did not agree on it. But behind the curiosity of consumers, there is a slogan that inherits the tradition of Pinduoduo:Team Up, Price Down (buy together, cheaper).
Duoduo's cross-border business is so overwhelming that merchants, competitors, and even its own employees are unexpected.
Less than half a year after its launch, it landed on the "Super Bowl" (that is, the annual championship game of the NFL Professional Football League), and on the field of top events, the advertising slogan "shop like a billionaire" instantly conquered hundreds of millions of American audiences.
It took the Apple Store by whirlwind, and on October 18, 2022, Temu topped the list of free shopping apps in the App Store in the United States. Outside of the United States, it is also soaring. On April 21, 2023, temu launched in the UK, and two days later, it was launched in Germany, the Netherlands, Italy, France, and Spain.
It only took more than 7 months for TEMU to enter almost half of the world's e-commerce market, and in July, it entered the Asian market by landing in Japan and South Korea, completing the layout of the global map non-stop.
Since then, Temu has become a regular visitor to the top of the overseas app charts. But behind the massive **, there is a big net woven by Pinduoduo:
It covers almost all commodity categories except food and daily chemicals, which makes it penetrate into more than 100 industrial belts in China, covering and helping more than 10,000 factories to successfully go to sea, and it has reached consumers in more than 40 countries and regions such as North America, Europe, Australia, and Asia, and has more than 100 million users in the United States alone.
Since the launch of Duoduo's cross-border business, how much it has contributed to Pinduoduo's performance has always been a point of market speculation. But these days, the numbers speak for themselves:
In terms of profit, Pinduoduo's gross profit in Q3 2023 will reach 420100 million yuan, a year-on-year increase of 496%。Since the launch of Duoduo's cross-border, Pinduoduo's gross profit margin has maintained rapid growthThis proves from one perspective that Duoduo's cross-border financial status has not only not become a drag on Pinduoduo's performance, but has become its new growth pole.
from 14.4 billion yuan in the second quarter of 2023 to 29.2 billion yuan in the third quarterThe doubling of commission income in a single quarter proves the potential of Temu to recreate another Pinduoduo.
What does the rapid rise of Pinduoduo depend on?
From the industry to the capital market, from the top to the public, many people believe that Pinduoduo's success is quite fortuitous - it just happened to hit the cycle of global economic weakness and consumption downgrade. In this context, Pinduoduo directly penetrated the user's mind with low prices.
Lower **, of course, is the eternal pursuit of channel providers, and it is also the eternal requirement of consumers. But if Pinduoduo's victory is only based on a low-price strategy, it is obviously not the whole reason.
[Super power, how to practice].
Chen Lei, chairman and co-CEO of Pinduoduo, said a sentence in an interview with **:So far, Pinduoduo has experienced two ventures, one is the main station, and the other is Duoduo to buy groceries.
The cross-border of Duoduo is not only Pinduoduo's third venture, but also an extension of its capabilities. This ability lies not only in the insight into user needs and industry pain points, but also in its own accumulation in the operation of the first chain.
The special period that began in 2020 has catalyzed changes in the shopping Xi of consumers around the world. The increasing demand for online shopping is not only happening in China, but also globally.
In the development process of the main site, Pinduoduo's managers and front-line teams have found that many overseas Chinese will often place orders on the platform, and then transfer them to the country and region where they are located through logistics companies, and e-commerce ecology such as sharing good things, buying experience, and Taobao strategies has also been born.
But the gap is still there - in 2022, China's e-commerce penetration rate reached 2721%, compared to the overall global e-commerce penetration rate of only 204%。
This means that there is a huge room for improvement, and some practitioners see the difficult pioneering, while others see the cake of the future. Either way, the reality is the same - cross-border e-commerce is not easy to do.
China has the world's strongest manufacturing capacity for clothing, shoes and hats, bags, home appliances, beauty and hardware department stores, and is ...... in Guangzhou, Yiwu, Wenzhou and PingduThe manufacturing capabilities of these locations meet the needs of consumers all over the world.
But this ability has not actually been translated into corresponding brands and revenues.
According to the most traditional foreign trade model, if Chinese goods want to be exported to the mainstream market, they must rely on a series of middlemen in different links. Only do the thinnest profit OEM link.
If you send goods from China to a U.S. customer, the usual link is at leastFactory - freight forwarding company - sea freight - port - Amazon warehouse - last mile delivery. Insufficient capacity and abnormalities in each link will affect the timeliness and increase inventory costs, and the bearer is either the customer or the factory.
Of course, there is another option for these factories - to set up stores on overseas platforms. However, traditional cross-border e-commerce has a long link and high uncertainty, and if merchants want to build their own overseas independent stations, online operation and traffic acquisition are difficult, and it may not be able to keep up with the changing needs of overseas consumers.
We can experience these difficulties through the perspective of a garment factory owner.
To operate an overseas independent station, you need to think about the title that can attract traffic for different clothes - but the factory owner's English may not be good enough;
He needs to place ads on the platform, but he needs to know how to find keywords, find hot spots, and match budgets, which is a completely unfamiliar field for non-Internet practitioners
He needs to make his own shipping template, need to keep an eye on the whole process of the order, and need to accurately calculate the cost, freight, profit, marketing expenses ......Think carefully about every link that should be thought of, otherwise it will be a loss of profits, an embarrassment of no traffic, and a loss of competitiveness of your own products.
These difficulties have blocked the pace of Chinese factories going overseas. It also gave birth to Pinduoduo's insight into the industry - there is an urgent need to meet overseas needs, and the ability to export is needed domestically. So the new possibilities are:
If there is a cross-border e-commerce platform that can make good use of the first-chain operation experience and rely on the traffic advantage to help small and medium-sized manufacturing enterprises open up new foreign trade channels and reduce intermediate links, it can obviously improve the profit margin of cross-border goods and build a completely different foreign trade bridge.
Pinduoduo's accurate observation of user needs and industry pain points constitutes the driving force for it to cut into cross-border business. But it also needs to verify its ability to operate on the ** chain again.
This ability is clearly reflected in the "two entrepreneurships" mentioned by Chen Lei.
In the development process of Pinduoduo main station, it has penetrated into many manufacturing fields such as home appliances, clothing, sports, beauty, daily chemicals, home furnishings, etc., it has split the product structure of various industries, participated in design and development, and also understands the key points of manufacturing. It has provided full-link digital services for tens of thousands of manufacturing brands, and many traditional digital factories have achieved transformation and upgrading.
This ability was later transferred, which is what Chen Lei called "the second venture" of Duoduo Grocery Shopping.
Like Pinduoduo, which is directly connected to the factory, Duoduo Grocery directly connects more than 1,000 agricultural production areas and 16 million farmers across the country, and nearly 60% of the goods are directly sourced and supplied by the production area, making it the largest uplink platform for agricultural and sideline products in China.
In order to ensure the flexibility of the entire chain of procurement, warehousing and distribution, operation and investment promotion, the front-line team of Duoduo Grocery may be the most empowered in the entire industry - its headquarters only sets targets for the total transaction amount and the number of users, and the regional head is the highest decision-maker with all powers.
This mechanism of handing over the decision to the "person closest to the gunfire" ensures that Duoduo can respond quickly in the face of competition - for example, contact the first merchant in the morning, sign the contract in the afternoon, and realize the goods on the shelves within one day.
The ultimate first-class strategy and fast response speed have trained the competitiveness of buying more groceries.
Today, Duoduo has covered all provinces except **, with a market share of 45% in 2022, and has become the first in the industry in 2022 with a GMV of 180 billion yuan.
This tempered and tough team is the basic team of today's Duoduo cross-border, obviouslyFor the reorganization of the overseas ** chain, the Xi cost and organization cost of Duoduo cross-border are not from 0 to 1, but from 1 to 10.
From the insight into the needs and pain points, to the familiarity with the management of the ** chain, to the experience of digital services. On the basis of these basic capabilities, Duoduo's cross-border core capabilities have begun to take shape.
One of the core of these capabilities is the efficient operation of the "fully managed model".
Under the "full custody model" of Duoduo cross-border, merchants on the temu platform only need to do a good job in R&D and production, and the platform is responsible for providing merchants with one-stop services such as drainage, store operation, cross-border logistics, and legal intellectual property rights. On the consumer side, the platform is responsible for ensuring the quality of goods and the timeliness of fulfillment to ensure the shopping experience of consumers.
In this process, the help of the factory is obvious.
Convenience is a common feeling for the factory – shipping has since become simpler, with only the need to send the goods to Pinduoduo's warehouse in Guangdong, and then nothing has to worry about the process. This means that energy can be saved, and more energy can be focused on improving production capacity and controlling quality.
Cost savings are another bonus. Taking cross-border logistics as an example, only the first-leg freight is shared by the merchant and Duoduo Cross-border, and other logistics costs are borne by Duoduo Cross-border. Under the "full custody model", logistics costs, which used to account for nearly a quarter of the selling price of goods, have been greatly reduced.
The cost of investment and operational difficulties in the operation of merchants have also been solved through the "full custody model" - merchants who join Duoduo cross-border can settle in with zero commission and do not need to pay traffic costs to the platform.
These cost savings mean the best profit of the factory.
Another core competency of Duoduo cross-border is also of great help to the factory"Flexible**".
The so-called "flexible" model refers to the rapid response of a small number and multiple times, identifying and summarizing the consumer needs of different countries and regions, and providing long-term and stable orders for platform merchants.
In the past year, Duoduo has launched cross-borderJIT (just in time, first order and then ship) pre-sale mode,It has helped the factory greatly reduce the pressure of stocking.
In JIT mode, the factory only needs to deliver the goods in order, and does not need to prepare the goods to the warehouse in advance. Those explosive and potentially explosive goods can be boldly produced, while the unsalable goods with less sales can grasp the market reaction as soon as possible and make timely adjustments.
This allows multi-border merchants to often only need to prepare goods for 15 days, which is two-thirds less than the preparation time of traditional cross-border e-commerce.
With the help of "whole-process hosting" and "flexibility", the factory's business model is simpler and more direct: it only needs to provide the source of goods, prepare the goods to the warehouse, pricing, marketing, logistics, and after-sales platform are all inclusive, forming a simple transaction chain of "first-class chain platform for overseas consumers".
What is more important for the factory is the direct sales brought by the explosive order volume, and with the help of Duoduo's cross-border dividends, it can achieve faster and more certain return of funds and profits.
"Merchants are more convenient, the entry threshold is low, orders are not worried, and users are affordable".In the context of this multi-party benefit, more and more consumers and factories began to join Duoduo Cross-border, and the flywheel effect under the virtuous circle was realized, which finally achieved the rapid rise of Duoduo Cross-border and its strong promotion of Pinduoduo's overall performance.
[The second curve, ready to come out].
After the release of the Q3 financial report and the successive surges, many people lamented the speed of Duoduo's cross-border, after all, it only has a history of more than a year, and counting Pinduoduo, it is only eight years.
But at a historic moment, it became the bearer of historical responsibility.
With the shift of labor-intensive industries to Southeast Asia, the passivity of OEM business has also been exposed, and they need to make more compromises on terms such as deposits, account periods, and pressure goods. In the special three years, many foreign trade factories have either disappeared with the change of pressure, or have struggled to operate.
Chinese factories, which have always been known for their rapid response and flexible change, have encountered a historic problem in the face of the timesThey need to find a suitable way out for themselves and find new export channels for Made in China.
Why did Pinduoduo become the problem solver?This answer needs to be found in the not long history of Pinduoduo.
From Pinduoduo's main website to Duoduo grocery shopping, and then to today's Duoduo cross-border, Pinduoduo's young company's business territory seems to be getting bigger and bigger, but its business is very small.
This view was confirmed by Chen Lei, who expressed it in the face of **:
Pinduoduo is actually a very restrained company in business, and has only done one thing since its establishment in 2015. Because of sufficient concentration and restraint, we have formed our own cognition and judgment on this track, and we are also more accurate in grasping the general direction. ”
This makes all of its firepower focused on one thing:Do a good job in e-commerce.
Doing a good job in e-commerce includes accurate control of the best, more specialized data analysis, faster execution, and more proficient management of the ** chain.
Looking at Duoduo cross-border from this perspective, we can understand why it is regarded as a new growth engine for Pinduoduo both internally and externally.
It has taken the initiative to extend its own capabilities, using traffic and innovation models to firmly attract capable foreign trade factories to join its global expansion footsteps
It greatly compresses the huge waste of intermediate links in the past, and as a platform party, it unifies the dispatch of logistics warehousing, terminal distribution, online marketing, and after-sales serviceAt the same time, it helps factories save money and time costs, so that they can provide better products.
These proactive efforts have enabled Duoduo Cross-border not only to inherit the style of Pinduoduo, but also to innovate and develop the capabilities of PinduoduoIt seems to have recreated a more extreme and powerful Pinduoduo. Therefore, becoming the second profit center in the future is actually a high probability event.
As the manager of Pinduoduo, Chen Lei once faced ** and gave a confident answer:
"If we look at the next ten years, even if we add up all domestic cross-border e-commerce now, and then add up all the goods sold by domestic cross-border e-commerce in the past ten years, these can be ignored. The development of overseas cross-border markets is only the beginning. ”
The greater imagination lies in the fact that in the future, if Duoduo cross-border can further help the factory and become a platform for cultivating brands, it will promote China's manufacturing to the world and no longer only roll the world, but start to roll the product quality, and the efficiency of the roll chain will ......Roll out a future that goes to sea to conquer the world.
This will be a historical opportunity for Made in China to enhance its image, and it will also be a historical opportunity for Pinduoduo to break through again.
end——Welcome to pay attention to [China Business Taoluo], know the people, and read the legend of Taoluo.
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