On the evening of May 22, Pinduoduo Group (PDD.US) announced its results report for the first quarter of 2024, which once again surprised the market.

The report shows that in the first quarter of 2024, Pinduoduo Group achieved revenue of 86.81 billion yuan (RMB, same below), an increase of 131% year on year; net profit of 27.998 billion yuan, an increase of 246% year on year.

The capital market also reacted positively to this. Along with the release of financial reports, Pinduoduo's stock price rose nearly 6% on the same day, and the total market value reached 217.379 billion US dollars.

Behind this, in addition to optimism about China's core assets, what is more important is that the company maintains rapid growth in terms of revenue and net profit, and continues to raise market expectations for the company's future. The outside world is endlessly curious about Pinduoduo — what exactly does Pinduoduo's long-term growth path rely on?

The answer is probably hidden in the keyword “consumption upgrade” in Pinduoduo's earnings report.

In the author's opinion, Pinduoduo's deep understanding and accurate grasp of market trends contributed greatly to the reason why it was able to frequently break market expectations. Pinduoduo has always insisted on standing as a consumer and putting the user experience first, whether it is the introduction of a patchwork model or a “10 billion subsidy”. Specifically, it can be viewed from the two aspects of multiple benefits and good service.

1. More affordable, so that consumers can live a better life

According to the data, the overall growth rate of online retail sales in China has been slowing down in the past five years. The Chinese e-commerce market has moved from focusing mainly on incremental growth to putting equal emphasis on growth and stock, and exploration of new development models has accelerated. Furthermore, current residents' mainstream consumption ideas are also gradually changing. According to the “2023 China E-commerce Market Research Report” published by iResearch, in 2023, more than 85% of online shopping users spent more rationally online. At the same time, more than 86% of online shopping users valued the comparative advantage in product prices.

In this context, various platforms hope to attract consumers through price strategies, and Pinduoduo is no exception. However, according to traditional economic logic, cheap prices often lead to a decline in corporate profitability, which is the concern of most investors in the market. Why was Pinduoduo able to stand out from the fierce competition and run at Pinduoduo's unique speed?

In the author's opinion, this is mainly due to different companies' different understandings of “affordability.”

Generally speaking, the price strategy of traditional e-commerce is due to “consumption downgrading” considerations, that is, prices are lowered simply to reduce prices. However, Pinduoduo's price is not simply a roll price; it is a cost-effective strategy based on the concept of “consumption upgrade”, and is committed to enabling consumers to obtain better products at a lower cost.

To this end, Pinduoduo continues to innovate around “more affordability” on the consumer side, and continues to build a mentality of high price and high quality in the minds of users by increasing subsidies for high-quality supply. In the New Year's Goods Festival, which began in early January, “zero commissions” for fresh agricultural products, and continued to favor in-site resources and red envelope discounts worth more than 3 billion yuan, such as “10 billion subsidies” and “10,000 groups,” giving full play to innovative consumption models such as “multi-person groups” to meet the needs of urban and rural consumers for New Year's goods.

At the same time, Pinduoduo is also deepening the supply chain and continuously enriching high-quality supply. During the New Year Festival, the platform collaborated with thousands of landmark production areas in all provinces and cities across the country to select millions of quality merchants to protect the platform's activities from the source of supply. Direct procurement from the source and delivery from the place of origin reduces intermediate links and returns profits to merchants and consumers to the greatest extent possible. Such “affordability” is a truly cost-effective price.

On the one hand, Pinduoduo relies on activities such as the “10 billion subsidy” to put the discount into practice; on the other hand, Pinduoduo continues to attract high-quality brands and merchants to enter and enrich the platform's product matrix, thereby continuously strengthening consumer mentality and further promoting Pinduoduo's rapid growth. As Zhao Jiazhen, executive director and co-CEO of Pinduoduo Group, once said, “The platform's revenue growth is the result of our implementation of effective consumer promotion measures and overall consumption recovery.”

Behind this, there are also countless vivid cases to support this.

Helen Su is a native of Guangzhou and has always been in Guangzhou from school to work. Once a journalist, he was able to travel all over the country and experience the impact of different events. However, since starting his business, he has had little time to travel all over the country like in the past, and “always feels like there is something missing in his life.”

By chance, he tried to order milk from a small merchant in Xinjiang because of its affordability. “It was so delicious, I really didn't expect it,” he admired. Since then, he enjoyed ordering specialty products from all over the world at Pinduoduo and had a new experience. Although starting a business made it impossible for him to go anywhere, through Pinduoduo, he saw novel things he had never tried before, and met his spiritual needs during his boring entrepreneurial life.

This is a Pinduoduo-style consumption upgrade. It doesn't mean you have to buy good and expensive products, but it allows consumers to buy higher quality products that they couldn't buy before at the most suitable price.

From a data perspective, in the context of continuing to promote more affordability, the platform continues to make breakthroughs in the number of 10 billion subsidy users, and the number of 10 billion subsidy orders continues to rise, and the trend of global consumption upgrading is obvious. From this perspective, the strategy has contributed significantly to Pinduoduo's growth, and this growth has strong sustainability and certainty.

2. Good service to protect consumers' rights

Of course, as a retail e-commerce platform, simply being multiple and affordable does not fully convince consumers; service quality is just as important. How do I do that? Adhering to the consumer position is Pinduoduo's answer.

Among them, the most direct way for more users to experience Pinduoduo's high-quality service is that the company has upgraded its express delivery service once again.

For a long time, regions such as Xinjiang and Tibet have often been excluded from the “free shipping” policy due to problems such as large areas, sparse population, high logistics costs, and difficulties in large-scale transportation of packages. In order to solve this problem, Pinduoduo innovatively proposed a transit shipping free shipping model. This model allows all merchants to first deliver packages from consumers in Xinjiang to a transit warehouse in Xi'an, and then the platform uniformly delivers them to Xinjiang through a third-party logistics service operator, thus breaking the situation where express delivery is not free of charge in the Xinjiang region.

However, due to scattered villages and high delivery costs in the Xinjiang region, many express parcels remain at the county and town level, which limits the release of local consumption potential to a certain extent. In order to further unblock channels for consumer goods into rural areas, Pinduoduo pioneered a free e-commerce package delivery service to the village, further shortening the distance between terminal delivery outlets and consumers to less than 2 kilometers and reducing the time required for receipt to 24 hours, greatly improving the consumer experience.

Thanks to this, the platform achieved rapid growth in order volume in these regions. With the improvement of service capabilities, the platform's business has also been further grown, forming a positive cycle of development, laying a solid foundation for the long-term development of Pinduoduo.

Second, excellent after-sales service cannot be ignored.

Returns and refunds have always been the most annoying thing for many consumers. In this regard, Pinduoduo has always helped consumers reasonably protect their rights and interests.

In the few years since Pinduoduo first introduced only refunds, outsiders have raised widespread questions about this. But now, along with more and more e-commerce platforms like Pinduoduo, they are introducing refund-only services. As can be seen, Pinduoduo is undoubtedly a leader in pioneering a new after-sales path for e-commerce platforms.

Today, Pinduoduo has not stopped innovating. The platform continues to optimize services for the entire consumption path before, during and after sales, and has achieved remarkable results.

Currently, the response rate of the platform store within 5 minutes has been upgraded from no less than 70% to the store's response rate of no less than 80% within 3 minutes. Delivery timeliness has also continued to improve, and the vast majority of categories have been upgraded from supporting 72-hour shipping to supporting 48-hour delivery. In terms of after-sales strategy, Pinduoduo favors services for the elderly and consumers in remote areas. If something goes wrong with the store, Pinduoduo's back office will also promptly intervene to deal with it, thereby fully improving the consumer experience.

In addition, Pinduoduo is also actively providing “trade-in” services for users in line with national trends.

In March of this year, the Executive Meeting of the State Council reviewed and approved the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which further states “adhere to market-oriented, government guidance, insist on encouraging advancement, eliminate backwardness, adhere to standards leadership and orderly upgrading”, “promote the continuous increase in the share of advanced production capacity, and bring more high-quality and durable consumer goods into residents' lives”, and promote the upgrading of “equipment in key industries, transportation equipment and old agricultural machinery, educational and medical equipment, etc.”

In response, Pinduoduo responded positively to national policies and launched a “trade-in” service with a third-party service platform, covering various categories such as mobile phones, digital products, air conditioners, refrigerators, washing machines, televisions, etc., providing consumers with a convenient and affordable way to upgrade. Currently, the number of service users has passed the 10 million mark.

This service not only helps consumers save money, but also contributes to resource recycling and environmental protection. At the same time, through integration with the 10 billion subsidy program, Pinduoduo has further enhanced the appeal of the “trade-in” service, providing consumers with more benefits and convenience.

III. Concluding Remarks

All in all, Pinduoduo's growth model is actually very simple. It promotes consumption upgrades through more affordability and good services, so that consumers can enjoy a high quality of life at an affordable price.

Pinduoduo's performance fully proves consumers' love and trust in the platform. Only by allowing consumers to enjoy a simple and convenient shopping experience and a worry-free shopping process can e-commerce platforms achieve continuous growth.

Currently, Pinduoduo is still in a period of rapid development, and the future is expected to bring more innovations and surprises to the e-commerce industry. By continuously optimizing services, enriching products, and improving experiences, Pinduoduo is expected to create more possibilities in the e-commerce field and bring more value to consumers.