On the evening of November 21, pdd holdings Group (PDD.US) released its third quarter performance report for 2024.

At the performance conference that evening, pdd holdings co-CEO Zhao Jiazhen stated, "Due to the natural constraints of business development, the growth rate of the business will not be linearly extrapolated in the long term, and under these circumstances, it is inevitable that revenue growth will slow down."

The news quickly sparked heated discussions in the market.

At the same time, Zhao Jiazhen stated that in the future, there will be a continued commitment to patiently invest in the platform ecosystem, focusing on strategies such as "new quality supply" and "e-commerce going west" in the coming quarters, with the aim of bringing longer-term returns to users, merchants, and industries.

This also releases an important signal that pdd holdings' development has entered the "Next Level", aiming for high-quality development by focusing on the platform and industrial ecosystem.

1. Squatting down is to jump higher.

In the third quarter, pdd holdings achieved revenue of 99.354 billion yuan (unit: RMB, the same below), a year-on-year increase of 44%; net income was 24.981 billion yuan, a year-on-year increase of 61%.

From the financial report data, this is still a quarter where pdd holdings' growth "outperformed" the e-commerce industry large cap, maintaining double-digit year-on-year growth in both revenue and profit despite a relatively sluggish global economy. However, compared to the past, its revenue growth has slowed down, and net income has also declined to some extent.

Specifically, trade revenue (transaction service) was 50 billion yuan, a year-on-year increase of 71%. This figure is significantly lower than Bloomberg's consensus estimate of approximately 53 billion yuan and shows a marked slowdown in growth compared to the previous quarter, which is the main reason for pdd holdings' performance disappointment relative to market expectations.

Looking deeper, this is inseparable from pdd holdings' proactive approach to 'slow down and improve quality'.

The logic behind this is not hard to understand; the platform's overall scale has already reached a considerable size, and it needs to gradually shift from 'gaining new users' to 'maintaining existing users', entering a period of deep cultivation.

pdd holdings has a strong sense of crisis and recognized this issue early on. In several recent quarterly performance conference calls, pdd holdings' management has actively lowered external expectations for its growth rate.

Various signals indicate that for this company, which has maintained extremely high growth rates over the past two years, the issue that has emerged is more important than simply 'making profits'. Today's pdd holdings is more focused on building a healthy platform ecosystem, enhancing from the supply side, and accumulating strength for long-term development through real monetary support, subsidies, and investments.

2. The e-commerce sector requires a long-term perspective.

Before this, pdd holdings' rise brought about a huge domestic market, driving the rapid expansion of several industrial belt scales. As the development of industrial belts matures and entry barriers lower, merchants in the industrial belts inevitably face severe homogenization competition.

Many merchants, in order to improve sales and gain market share, lower prices to enhance product appeal on one hand, and compress product quality to reduce costs on the other hand. Although this can bring short-term growth, it has also led some industrial zones into the dilemma of 'bad money driving out good money' in the long run, greatly impacting the real economy, especially the manufacturing industry.

Promoting industrial zones to shift towards higher threshold deep processing stages or developing products with more complex processes has become the key solution to this problem.

In this context, pdd holdings has timely recognized the demand for industry transformation and upgrade, and began to try a different approach.

Similar to Zeng Guofan's wisdom of 'building strong fortifications and engaging in actual battles', today’s pdd holdings does not sacrifice the interests of one party; instead, it is committed to using the platform's strength to build a bridge connecting consumers and merchants, pursuing a long-term cooperative relationship, and constructing a positive and healthy commercial ecosystem to form its unique competitive barriers.

Specifically, in mid-August, pdd holdings launched a series of measures called 'Hundred Billion Exemptions', which included reducing the service fee for the 'pay later' service, store deposit requirements for merchants, and returning basic technical service fees and promotional fees. For refunds and returns, merchants do not need to initiate the process; the platform automatically refunds the service fees collected, effectively helping merchants reduce their operational costs.

At the same time, pdd holdings also initiated the 'New Quality Merchant Support Program', investing a resource package of 10 billion to select and establish special teams to deeply support 100 agricultural areas and industrial zones, aiding new quality merchants and new quality brands with product and technological innovation capabilities. The platform has upgraded the after-sales service system for merchants, fully supporting merchants in appealing against abnormal orders, and platforms will compensate relevant orders after a successful appeal by merchants; for transaction orders from new quality merchants and other quality merchants, the platform will no longer intervene in simple refunds.

In addition, pdd holdings continues to heavily invest in the ecological construction of 'e-commerce advancing westward'. In September of this year, pdd holdings announced the exemption of logistics transfer fees for remote regions such as xinjiang, tibet, gansu, ningxia, and inner mongolia, again leading the western pace of the e-commerce industry. According to data from the State Post Bureau, the growth rate of express delivery in the central and western regions has exceeded the national average this year, with a year-on-year growth rate of over 40% in provinces such as gansu and shaanxi.

It can be seen that pdd holdings not only places great importance on the development of merchants, providing them with more motivation and space for product and technology innovation upgrades, but also pays significant attention to user needs, enhancing service quality and coverage while offering the most cost-effective products.

There is a concept in economics called the 'impossible triangle', which has a similar rule in e-commerce platforms, meaning it is difficult to achieve a balance among cost control, efficiency improvement, and user experience enhancement. The balance between merchant interests and user interests is a classic problem that e-commerce platforms cannot avoid.

Through this financial report, it can be observed that pdd holdings is gradually breaking the so-called 'impossible triangle' in the traditional e-commerce industry and is making strides towards a win-win situation for the platform, users, and merchants. Although this will lead to a slowdown in growth in the short term, the healthy ecosystem that pdd holdings has built creates its core competitive advantage with differentiation, assisting its long-term development and providing sustainable development ideas for the entire e-commerce industry.

3. Focus on 'new quality', uplifting the new value ecosystem of the platform.

From a national perspective, the entire country is currently at a crucial stage of economic transformation and upgrading, driven by various factors such as changes in the global economic situation and evolution of the domestic economic structure.

As an important link connecting consumers and merchants, e-commerce platforms have greatly facilitated the circulation of goods and services, injecting new vitality into economic growth. They play an indispensable role in the grand scheme of national economic development.

Amidst this, pdd holdings is continuously increasing investments in ecosystem construction, not only meeting the dual needs of market competition and its own development but also aligning perfectly with the national push for high-quality development, successfully establishing a positive industry model.

Just as pdd holdings has consistently supported agriculture, what it ultimately seeks is not only to promote rapid growth in industrial scale but also to drive the entire industry towards transformation and upgrading in high added value.

From this, we can briefly explore from three perspectives how pdd holdings focuses on "new quality" to build a new value ecosystem for merchants, users, and the platform.

Firstly, pdd holdings has rapidly promoted the scale expansion and transformation upgrade of various industries.

For example, as early as when pdd holdings started to emerge, industry clusters represented by Bozhou herbal tea, Donghai wearable armor, and Pingdu false eyelashes had already utilized the brand identity granted by the pdd holdings platform to share channel resources, achieving a dual improvement in conversion and repurchase rates.

In the past two years, with a series of "reduction + support" measures promoted by pdd holdings, merchants have been fully motivated to seek differentiated development paths.

For instance, Bozhou has transitioned from traditional Chinese medicine trading to herbal tea e-commerce, and then to solid beverage processing, completing an industrial "triple jump" in just five years, achieving a transformation from traditional agriculture to modern, high-value industries, accomplishing in a short time what might take thirty years for other industrial clusters. This has not only led to significant economic achievements in Bozhou but also made it the fastest-growing city among the six cities in northern Anhui, providing valuable experience and inspiration for industrial transformation and upgrading in other regions across the country.

Secondly, pdd holdings empowers through big data and other emerging technologies, integrating upstream and downstream resources, breaking the limitations of traditional e-commerce models, while providing better services and assistance for consumers and merchants, also significantly promoting the economic benefits of the industrial clusters.

On one hand, pdd holdings empowers merchants through big data technology, helping them accurately grasp consumer needs and preferences, thus achieving precise production, marketing, and inventory management, while also encouraging merchants to continuously innovate, allowing them to stand out in fierce market competition.

On the other hand, pdd holdings has integrated upstream and downstream resources, successfully connecting raw material supply, production manufacturing, logistics distribution, and other links, building an efficient and collaborative new quality supply ecosystem across the entire chain. The establishment of this ecosystem allows merchants to respond to market changes more quickly, adjust production strategies in a timely manner, and achieve cost reduction and efficiency improvement.

Moreover, during the process of ecological construction, pdd holdings created tens of thousands of job opportunities, contributing to the balanced development of regional economic industries.

According to public data, in the 2023 "Q&M Dental Employment Season" campaign, pdd holdings created direct employment for 0.012 million people, supported 0.9 million third-party couriers, over 6.4 million merchant positions, and 200,000 third-party service jobs, totaling over 7.5 million indirect jobs.

IV. Conclusion

This time, pdd holdings proactively slowed down and improved quality in Q3, focusing on building a healthy ecosystem, deeply collaborating with local industry belts, successfully leading a wave of innovation in "new quality supply," achieving a comprehensive win-win situation among the platform, merchants, and consumers.

This is not only a strategic adjustment in e-commerce competition but also a "catalyst" for the national economic transformation. In the current context of a complex and changeable global economic situation, the chinese economy is facing a shift from high-speed growth to high-quality development. Pdd holdings, by promoting the upgrading and development of local industry belts, has facilitated the optimization and adjustment of industrial structure, providing valuable references and inspiration for the transformation and upgrading of the entire e-commerce industry and even the national economy.

From the perspective of capital markets, under the policy's continuous encouragement of new quality productivity, pdd holdings' deep accumulation in ecological construction will further release potential in the new market environment, achieving growth in performance, and future market performance remains worthy of expectation.