Click 'Read Original' for details. Pinduoduo has created another legend: it went public in the US in just three years, with a market value ranking among the top ten Chinese internet companies, and founder Huang Zheng's personal wealth even surpassed that of JD.com's Liu Qiangdong. While most people are caught up in criticizing its 'counterfeits', perhaps we need to rationally ask another question: Besides 'counterfeits', what else does Pinduoduo have? Today, I'm sharing with you an in-depth case analysis of Pinduoduo, written by renowned product manager Liang Ning, who will soon teach at Chaos University. The content is incisive, broad in scope, and highly penetrating, akin to a psychoanalysis of the industry, companies, products, people, and business value. Almost all the news talks about Pinduoduo's counterfeits, which is the media's perspective. I agree with the media's criticism of Pinduoduo, because although opinions cannot change matter, everyone's opinions will eventually reshape matter. As a product person, we need to think: is it enough to sell counterfeits to become Pinduoduo? So today, our perspective is to look at this fast-growing, strong company, Pinduoduo, and see what else it has besides counterfeits. It should be noted that I don't know anyone at Pinduoduo, and I've had no contact with them. This analysis is based solely on external materials and my personal feelings. Why is Pinduoduo considered strong? Let's review how Pinduoduo developed over the past three years: In September 2015, Pinduoduo's WeChat official account went live, and within two weeks, followers exceeded one million. (How did they do that?) In November 2015, two months after the WeChat account launched, without any advertising, users surpassed 12 million. (How did they do that again?) In January 2016, Pinduoduo's paying users exceeded 10 million, and daily transaction volume surpassed 10 million yuan. In July 2016, Pinduoduo completed its Series B financing, receiving investments from Gaorong Capital, IDG, and Tencent. (Becoming a member of the Tencent family, gaining preferential treatment and whitelist for WeChat promotion.) In September 2016, Pinduoduo merged with Pinduoduo (Pinduoduo and Pinduoduo? Actually, it merged with Pinduoduo? The text says 'Pinduoduo and Pinduoduo merged'? It says '拼多多和拼好货合并' - Pinduoduo and Pinhaohuo merged), and users exceeded 100 million. (Proving that WeChat's preferential treatment was not the only reason for Pinduoduo's rapid growth; JD.com, 58.com, eLong, Tongcheng, etc., all received the same benefits.) In November 2016, daily orders exceeded 2 million, and daily transaction volume surpassed 200 million yuan. In September 2017, users exceeded 200 million. In August 2018, users exceeded 300 million, and the company went public. If this growth rate isn't strong, what is? What can we learn from this growth rate? The Dividends Supporting Pinduoduo I once had a viewpoint: A great river is not born out of thin air, nor is it created by a single rainstorm; it is formed by the movement of mountains and the direction of mountain ranges. The same applies to a strong company: several major currents have flowed into Pinduoduo's riverbed to form the Pinduoduo we see today. These great rivers are the era dividends that support Pinduoduo. A major background is the era of consumption upgrading we are in. In this era, we face new life, new consumption, and new business, such as new users from population upgrades, new scenarios and services brought by WeChat, the maturity of mobile payments, and upgrades in logistics and information... New life demands new consumption; when new consumption cannot satisfy new life, new business emerges; new business then builds new life, creating unprecedented scenarios and consumption power, which again generates new consumption... These three things cycle and iterate continuously, constantly reconstructing our world, and everything is worth redoing. What specific changes supported Pinduoduo? >> First, the spillover of Taobao merchants. A great river is formed by the convergence of countless tributaries, and in business, there must be sellers before buyers. So for Pinduoduo, the first thing is how to obtain a large number of merchants in scale. In fact, Alibaba did the work of popularizing e-commerce in China, bringing people who had no concept of internet e-commerce online. For example, Alibaba's strong ground promotion team had a job: they would go to places like small commodity cities or leather cities in Zhejiang, find a building full of one type of commodity, and start from the first floor, negotiating unit by unit. In a year, they could finish every stall. The next year, they would go to another building... When Pinduoduo later acquired merchants in an organized and scaled manner, this difficult process of literacy was no longer needed; these people had already been swept by Alibaba and Meituan's ground teams countless times. Due to Taobao's traffic peaking and the anti-counterfeiting campaign starting in 2015, merchants spilled over. These people needed to do business but had nowhere to go, and Pinduoduo accepted them in an organized way. This formed a dividend. The essence of this is actually 'how to place low-end supply chains and low-spending consumers'. This involves the concept of 'value network', which Professor Li Shanyou taught me: What makes a company successful is not the entrepreneur, but the value network—who needs you. With Taobao merchants spilling over and low-spending consumers existing, even if we curse Pinduoduo to death, do these low-end supply chains and low-spending consumers still exist? Until this problem is solved, they need a place to go. This time, they concentrated on Pinduoduo, forming a large number that startled everyone.

Low-spending consumers Regarding low-spending consumers, Pinduoduo's rise must have made countless people slap their thighs in regret. For example, Chen Nian of Vancl. He and Lei Jun founded Joyo.com, then sold it, and after some twists and turns, decided to do Vancl. I asked him why he called it Vancl. He said the name he hated most was Joyo. Joyo sold books, providing spiritual consumption. What did Vancl plan to do? He said, I want to sell street-stall goods. Chen Nian said that the most real consumption change comes from street-stall goods. Street-stall goods have no brand, so there's no brand premium; what users want is the product itself. In fact, Vancl was de-branded back then, with extremely low-key logos on clothes. From a user experience perspective, such products are completely different from brands that make you feel expensive when you enter a mall. Street-stall goods don't make users feel inferior; they give users a sense of superiority. So you know why Pinduoduo and Taobao have a 50% user overlap, while the overlap with JD.com is extremely low. Because 'Go to JD.com, use something good' is a product that makes users feel inferior. In other words, before I worked at Lenovo, I felt that things in malls were too expensive; I should buy street-stall goods or go to the Zoo Wholesale Market. That was the place for me. The demand for low prices is still the majority. We are often misled by what we constantly focus on, thinking the world is like that. In web dramas, TV shows, and movies, everyone is glamorous, and on Xiaohongshu, idols love to show off luxury brands. But in 2017, excluding developed cities like Beijing, Shanghai, Guangzhou, and Shenzhen, the per capita disposable income in China was less than 2,000 yuan, not counting mortgage or rent. Low-end supply chains Speaking of low-end supply chains, we must mention Taobao's severe anti-counterfeiting campaign in June 2015 and JD.com abandoning Paipai in July. When Pinduoduo's merchants rose rapidly, Taobao and JD.com couldn't do anything because these were the people they had 'abandoned'. The foundation of all dividends is the demographic dividend. Because the essence of business is two things: opportunity and scale. The demographic dividend is the core scale. On the consumption side, most people's disposable income is limited. On the supply side, whoever can acquire new merchants in an organized way can seize this dividend, whether they are those trained and abandoned by Taobao and JD.com, or new entrepreneurs and the new urban proletariat. Why do I mention new entrepreneurs and the new urban proletariat? In 2004, when Taobao was just starting, those who opened shops on Taobao were the urban proletariat. They couldn't get resources in the city, couldn't afford to rent storefronts, and could only find opportunities on the internet. But as Taobao became more complex, huge, and systematic, traffic peaked after 2012. If you didn't have money to advertise, and as a new entrepreneur learning the system, you only wanted to exchange effort for entrepreneurial opportunities, there were actually few opportunities left on Taobao. If the placement of low-end supply chains and low-spending consumers cannot be solved, and the industry doesn't upgrade, even if Pinduoduo is destroyed, society will not improve. >> Second, group buying and bulk purchasing are ancient and effective. Group buying is not new, so when Pinduoduo appeared, no one was surprised. But why did no one do group buying in the mobile era, even though it had been proven effective? In 2002, my friend Zhang Jingqiu founded Xcar (爱卡汽车网), which initially operated on a group-buying model. They did ground promotion in offices, cafeterias, and other places where people meet, saying that if enough people gathered, they would go to the underground parking garage and apply car film for you. Within two years, Xcar became a decent car forum. In terms of demographics, Pinduoduo is most similar not to Taobao, but to Vipshop, which started with clearance goods. Note: Data chart from Penguin Think Tank (企鹅智库). This is because for first-tier city residents, Pinduoduo is consumption downgrading, while for third-to-sixth-tier residents, using Pinduoduo is consumption upgrading. China's logistics and warehousing are not centralized, and many things are not accessible in their daily life scenarios, and price is an absolute experience threshold. For example, when the 'thousand-group war' (千团大战) just started, many people would go to a five-star hotel restaurant they had never tried because it was discounted. They had thought it was too expensive to experience, but suddenly with group buying, they went to try it. Why did the thousand-group war end? This is actually an interesting story. At the beginning of the thousand-group war, Chinese group buying was, as Wang Huiwen (Meituan co-founder and senior vice president) said, location-centered, providing service group buying. But soon everyone discovered that physical goods group buying (like group buying zongzi or mooncakes) grew much faster than service group buying (like restaurant or spa deals). This is because product group buying is not limited by location, so the thousand-group war all turned to physical goods group buying. Once volume increased, they could afford advertising, so at that time, Focus Media's elevator ads were all group buying ads. But at this point, Wang Xing made a decision: not to do physical goods group buying, but to stick to the positioning of location-based service group buying. This made Meituan's team very painful at the time, because when they went out, they saw competitors' ads everywhere, obviously with much larger user numbers, and they felt demoralized. At that time, Wang Huiwen was traveling everywhere to comfort the team, but when he met local managers, they would say, 'Don't say anything. First answer my question: when are we going to advertise?' In fact, if you don't do product group buying, there's no need to advertise, because service group buying can't support advertising. For Wang Xing, this was a difficult choice. If a local team didn't identify with this positioning and this difficult growth model, the company could only lose that team. But in fact, Meituan saw this very simply and clearly. Product group buying is Alibaba's business; its essence is a membership issue. The reason Wang Xing didn't move was to guard his territory and wait for Alibaba to make a move. So, when Juhuasuan was launched, locking down the core members of group buying websites became extremely simple, because Alibaba even forced JD.com to choose between the two, let alone these group buying websites. This is like Thanos in 'Avengers': a fierce operation. When you're operating vigorously in a field, you need to know if there's a Thanos in that field. Wang Xing held onto service group buying, which others found hard to defend. Everyone else fought in Alibaba's camp, and when Alibaba launched Juhuasuan, the other group buying sites were wiped out. The thousand-group war is such a story. In the end, only three companies survived the thousand-group war: one is Meituan, now mainly focused on food delivery; the second is Juhuasuan; and Wowotuan once went public but later delisted. In 2016, Juhuasuan was placed under Tmall, meaning Taobao's low-end products could no longer be group-bought. In fact, this was another huge door the market opened, and at that time, the thousand-group war suddenly disappeared. Why is only Pinduoduo left? Let's think about another question: the physical goods group buying model had already been proven, so why did no one in the entire field do this business anymore, leaving only Pinduoduo? I think there's only one reason: all entrepreneurs were led astray by VCs. In 2016, Chinese VCs started investing in consumption upgrading. The media followed the VCs, reporting on whoever could raise funds, which formed the market perception that 2016 was the trend of consumption upgrading. In fact, consumption upgrading should be a matter of more than 10 years, but in 2016, VCs came up with the concept of artificial intelligence, and in 2017, blockchain. If you really follow the VCs, you'd become a pig. The fact is, after the thousand-group war, a batch of VCs died miserably, so everyone lost interest in group buying. It's that simple. But as a product manager, you should return to the essence of the market, not do things for VCs or the media. Back then, Taobao deleted 240,000 merchants in one second, cutting off those merchants they had developed with great difficulty. Where did they go? Counterfeit merchants are often more active. The physical goods group buying that once supported the thousand-group war was killed by Juhuasuan, and when Juhuasuan was placed under Tmall, the entire low-end group buying ecosystem of Taobao suddenly became vacant. This big open door was filled by Pinduoduo, which emerged as the times required. >> Third, the third-to-sixth-tier population came online. The emergence of new users was driven by the popularity of low-priced smartphones represented by Redmi, which quickly brought third-to-sixth-tier users online, increasing internet penetration in rural areas. In 2017, 36% of the rural population had become netizens. In December of that year, WeChat's user base reached one billion, meaning almost everyone was a netizen. Soon after, WeChat Pay was launched, solving the payment problem. After more than a decade of e-commerce development, cash on delivery was no longer needed, and logistics nodes at the town level could almost meet the purchasing needs of all villages. These were once the hardest things for every e-commerce company at its start, but now they have become basic social capabilities. That is, the 'body' in the point-line-surface-body framework is changing. I first heard about Pinduoduo last year when I visited Su Hua of Kuaishou. There I learned that the app with the highest overlap with Kuaishou was Pinduoduo, and Pinduoduo brought these new users their first group buying experience. >> Fourth, the rise of WeChat social traffic. Almost all articles mention WeChat's social traffic, but it's not as simple as saying that Pinduoduo succeeded because it clung to Tencent's leg. That's a stereotype. Just as almost 100% of mainstream economists believed that if Trump came to power, the US economy would collapse. But last week's data showed that US GDP reached its best growth in years, and the US economy will grow strongly in the second half of the year. The lesson is: are you defending a stereotyped economic theory, or returning to simple business common sense? The same applies to Tencent's traffic. Just giving traffic can make something succeed—that's completely meaningless operationally. Pinduoduo's rise is because it did something different from other Tencent-affiliated e-commerce companies. We'll analyze the differences between Pinduoduo and other e-commerce in the next section. >> Summary Pinduoduo satisfied the four dividends above: it took over Taobao's merchants, no one was doing group buying, third-to-sixth-tier users came online, and finally, it used social traffic. These supported Pinduoduo. The theory behind this is the value network: what makes a company successful is not the entrepreneur, but the value network it is attached to. What are the differences between Pinduoduo, Taobao, and JD.com? Group buying and discounts are also done by Taobao and JD.com. What's different about Pinduoduo? >> First, the starting product category is different, and the genes are different. Where a person earns their first pot of gold, their habitual abilities, mindset, and capability building will continuously reinforce that direction. In Pinduoduo's top ten categories, the number one category is food. Taobao's number one is clothing, specifically women's clothing. How did JD.com start? JD.com sold 3C products, then expanded to home appliances, and now to many other things. Selling food, selling clothing, and selling electronics are three very different businesses, so their capability building, customer base, and purchase frequency are also very different. Speaking of which, why do I say Pinduoduo is still strong? Because high frequency beats low frequency.

  • Tip: Three-Stage Rocket Model General vehicles (like cars, airplanes) use one stage of fuel to directly propel the object, while a rocket has two stages of fuel, with the satellite placed in the third stage. For a rocket, the first stage cannot break through the atmosphere, so it uses the first stage to create potential energy, and the fourth stage would become uncontrollable due to added complexity. In business, the three-stage rocket model is often used to analyze a company's dimensionality reduction attack:

First stage: Head traffic, forming strong potential energy.

Second stage: Settle the business scenario for a certain type of user.

Third stage: Complete the business closed loop. More and more internet companies use the three-stage rocket model, with a core feature of high frequency driving low frequency. This is why WeChat is so powerful, because it is undoubtedly an extremely high-frequency thing. Let's look at Baidu. In the PC era, search was an absolutely broad-spectrum and high-frequency application. Everyone opened the browser and searched, using it five times a day, each time with three page views. This formed Baidu's first-stage rocket, which could effectively drive countless businesses: Baidu Tieba, Baidu Knows, Baidu Baike, etc. In the mobile internet era, Baidu is not as high-frequency as Douyin, because search is like a dictionary; you only check it when needed. Baidu's problem is that it didn't increase the frequency of its core business according to the usage characteristics of the mobile internet era. In such an information scenario, push notifications are definitely higher frequency than search, and Toutiao is definitely higher frequency than Baidu. Why do we talk so much when analyzing Pinduoduo? I want to say that to make a business big, there are two points:

  1. You must have your own first-stage rocket.

  2. The higher the frequency, the better. From this point, food is higher frequency than clothing, and even higher than 3C. Pinduoduo's users were able to 'multiply' so quickly because it is attached to such a scenario, choosing an extremely high-frequency category—nuts, snacks, and fruits. Let's analyze the reasons from this user stickiness data: Taobao's user stickiness comes from long-term user habits, while Pinduoduo's user stickiness comes from its own business characteristics. >> Second, user profiles are different, and behaviors are different. I found a 2017 Pinduoduo poverty alleviation and agricultural support annual report. In 2017, Pinduoduo, along with a bunch of impoverished counties, helped sell 1.83 million tons of agricultural products for farmers nationwide, supported 900 million poverty alleviation orders, assisted 730 national-level impoverished counties, with a total of 48,000 merchants, and annual sales growth exceeded 300%. What do I want to illustrate with this number? This is the second difference between Pinduoduo and Taobao/JD.com: users.

Three types of users When I was building websites, I created a user profile: Ming (大明), Benben (笨笨), and Xiaoxian (小闲). A typical Ming is a man buying a shirt—I know what I want; I want the most efficient, cost-effective thing. You'll find that early e-commerce users were all Ming users. JD.com's 3C, Ctrip's flights and hotels are standard products; I directly get what I want. Baidu also serves Ming users: I know what I want, help me find it as fast as possible. A typical Benben is a woman going shopping for clothes—I don't know what I want; I need to look. She visits a dozen clothing stores, looks at hundreds of clothes, and finally buys a hat. The second generation of e-commerce, including later Taobao, Meilishuo, and Mogujie, are product recommendation sites serving Benben users. Non-standard products like clothing have a particularly strong effect on Benben users, because I don't know what I want, and I can't search for it. A typical Xiaoxian user has no needs, just wants to kill time, and is entertainment traffic. Tencent's traffic is all Xiaoxian users, meaning entertainment traffic, and the conversion efficiency is very high. For example, in early QQ, there were stranger links, and WeChat also constantly breaks down class barriers to connect different worlds. So Tencent is essentially a game company in terms of revenue. Ming is Baidu traffic, Benben is Taobao traffic, and Tencent is actually Xiaoxian traffic, that is, entertainment traffic. This is why JD.com, Tongcheng, eLong, and other e-commerce companies serving Ming users got official WeChat access and entry points long ago, but they didn't effectively export WeChat traffic. I'm here to relax; reading a public account or playing a game is fine, but suddenly asking me to buy something feels weird—I don't have that need. Real conversion of Xiaoxian users How does Pinduoduo do it? It can consume Tencent's Xiaoxian traffic. A Xiaoxian user has no needs. Opening JD.com Supermarket, Vipshop, JD Fresh, or JD Daojia, they can only silently exit. Even if Tencent directs traffic to Taobao, opening Tmall, Juhuasuan, or Tmall Global, they still have no needs. What is Pinduoduo? Limited-time flash sales, brand clearance, daily cash giveaways, cash check-ins, and free items through bargaining. What does this mean? It means I have no needs, don't want to buy anything, but suddenly I get this thing, and opening Pinduoduo, I can still do something. For example, cash check-in: on the first day, I got 4.5 yuan, I was so happy; the second day, another 1 yuan; the third day, a few cents. With over 6 yuan, I can already buy a roll of toilet paper on Pinduoduo. After checking in for three consecutive days, I used the money to buy tissue paper and took it home. I was very happy and had a high opinion of Pinduoduo. This is a real conversion of a Xiaoxian user. At that time, I showed this page to colleagues at JD.com, and they took out a similar page and said, 'Look, we have the same, except we don't give money.' But you know what? Qutoutiao quickly developed tens of millions of users by simply checking in daily to earn a little money. Zhang Zhen (founding partner of Gaorong Capital and early investor in Pinduoduo) commented that Huang Zheng has a deep understanding of human nature. I was thinking, what exactly is this human nature? Why could Pinduoduo get one million WeChat users in two weeks without spending money? Because they used a rule of WeChat logic: if you place an order, you follow by default. Pinduoduo made a bunch of things originally priced at 1 yuan but now priced at 1 cent, quickly getting one million users at a very low price. Before this, who was the fastest to get one million users? It was Xu Husheng of Yitiao. In 2014, when it was very easy to acquire traffic on Guangdiantong, he did two things: shoot beautiful videos and directly spend money on Guangdiantong to buy users. Basically, in just two months, he achieved the one million users agreed upon with the first-round investors. When you have the fastest way to get users, do it without hesitation. You must believe in the power of the market. When Pinduoduo had the opportunity to get users cheaply, its execution was extremely thorough. In contrast, when faced with the opportunity to get users cheaply, a wealthy company like JD.com didn't do it. Pinduoduo defaults to recommending tissue paper because it's a high-frequency consumer product. At that time, when you opened JD.com, there was also group buying, but the group buys were for very low-frequency items like Biluochun tea. Even with discounts, low-frequency items can't build a first-stage rocket. Converting Xiaoxian users to Benben users According to a report from Penguin Think Tank, we can see that JD.com serves Ming users, Taobao serves Benben users, and Pinduoduo converts Xiaoxian users into Benben users, then lets them consume. Data 1: Among the reasons users choose to shop on Pinduoduo, 44% say it's easier to group buy with acquaintances. What does this mean? Users don't know what they want, but I want to eat fruit. What exactly? If someone pulls me into a group, I'll eat that. This is a typical Benben user. Taobao only uses AI to continuously recommend, but having acquaintances recommend and pull you into group buys is a more effective promotion for Benben users. Data 2: 24.8% of people bought things they had never used or seen before. This is like when group buying first started, many people went to five-star hotels they had never tried. Before Meituan merged with Dianping, I always thought Dianping had more users than Meituan, but in fact, Meituan had three times more users than Dianping. Why? Because Dianping's scenario is: I'm nearby, what do I want to eat? Something good. Meituan's scenario is: find something I want to eat among discounts. If in a supermarket, which area does Pinduoduo operate in? It's actually the discount area. There are always people specifically picking what they need in that area. It's that simple. Data 3: For Taobao and JD.com shopping habits, 93.1% come from direct search, then choose based on sales and reviews. Pinduoduo users buy from flash sales, special offers, lists, and free order areas. This is the typical difference between Ming and Benben users: One is entering the supermarket and going to the shelf to pick what I want, even specifying the brand and production date; the other is entering the supermarket and first going to the discount area to see what's on sale, then picking what I need, something I've never seen and happens to be on sale, and buying it to try. >> Third, the difficulty of opening a store is different. To experience Pinduoduo, I first bought something on it and found that Pinduoduo greatly simplified the shopping process. Because Taobao developed from the PC era, in the minds of Taobao insiders, many PC-era practices have been rationalized. For example, everyone has the habit of adding items to the cart, then on the weekend, comparing the items in the cart, discarding some, and then buying. That's Taobao's logic. Pinduoduo's logic is: if you don't join this group now, it's gone, and you pay first, then group buy. Every small detail reflects a different logic of user conversion. Then I registered as a Pinduoduo merchant myself. It took three minutes, and it was so fast that I forgot to take screenshots along the way. Everyone knows how hard it is to open a store on JD.com or Tmall. If you're not a big brand, forget it. Basically, you have to pay a commission of 5%-10%. Opening a store on Taobao basically requires Baidu Baike or Taobao University to guide you. You basically have to hold your breath and make a huge determination to open a store on Taobao. These processes require submitting a bunch of materials before you can own a store. First, maintain the store information, and then in the next round, maintain product information. But opening a store on Pinduoduo is called 'post a product, get a store'. The logic is completely different. You don't need to think about opening a store; just say what goods you have to sell. I really didn't know what to sell, so I sold my pet hermit crab. The whole process was extremely simple. I set a price, and the retail price was automatically given by the system. For example, I wrote 25 yuan, and the system automatically marked it as 28.5 yuan without group buying. Then I clicked three times, and suddenly the order was generated, and the store was also generated. Then I sent the page to my friend, and my friend paid, and then I shipped. From downloading to completing my first order, it took only three minutes. Pinduoduo vs. Meituan? So at that time, I thought of a scenario. We now talk about Pinduoduo vs. JD.com, Pinduoduo vs. Taobao. In fact, Pinduoduo will also fight a battle with Meituan. Why? Because after Meituan finished the thousand-group war, its core business was Meituan Waimai, empowering many small merchants. But the core of Meituan's empowerment is that these merchants passively accept Meituan's traffic, and the merchants' own initiative is limited. But Pinduoduo gives merchants a tool. For example, a fruit store owner has a basket of peaches that might not sell. He directly comes up and 'posts a product, gets a store', first posts the peaches for group buying, and then throws it to his daily-maintained WeChat group. Before this, although these owners also scanned QR codes and built customer groups, they didn't have tools to maintain them. But if they can group buy and sell clearance goods, it actually gives every street-side shop owner an opportunity to actively maintain, mobilizing the subjective initiative of these small merchants, which is more active than passively waiting for orders on Meituan. This is consistent with objective facts. For example, I ordered flowers, and it was delivered by Meituan Waimai. I bought a product on Pinduoduo, and it was delivered by JD.com. Later, I learned that JD.com's logistics part can actually serve as a third-party service company. >> Summary This is Pinduoduo's logic for opening stores and selling goods. E-commerce is said to be a life-and-death struggle, extremely difficult, but the core is three things: customer acquisition, store opening, and supply. Customer acquisition In terms of platform traffic, advertising traffic, operational positions, search display, etc., Pinduoduo merchants use the same methods as Taobao and JD.com. But social fission traffic is only done by Pinduoduo, and it uses a series of methods to receive Xiaoxian users, allowing social fission traffic to effectively settle in Pinduoduo's scenario. Opening a store Previously, opening a store was psychologically stressful. I saw someone open six stores on Pinduoduo within three months, which I couldn't understand. Later, after opening a store in three minutes, I found it was indeed easy. Pinduoduo doesn't aim to open stores, but to sell goods. This brings us back to Chen Nian's insight. Large e-commerce like JD.com operates by category. Vipshop has finer granularity than JD.com and Tmall, operating by brand. Pinduoduo has gone beyond categories and brands, operating by product. Post a product, get a store. If you have goods, come and sell directly. The difficulty of opening a store is different, the motivation for users to open a store is different, and the demands on merchants are also different. Supply On Taobao, few factories operate their own stores because Taobao has increasingly complex rules. Later, many professional Taobao operators emerged, just like a bunch of SEO and SMO experts who specialize in managing Baidu search engine optimization for you, because it's too complex. The value of these intermediaries is not that they understand users better, but that they understand Taobao's rules better. So it formed a chain: factories to intermediaries, intermediaries to platforms. Pinduoduo's prices, like the user characteristics and expectations it formed at the beginning, are extremely sensitive to price. And its operations are still simple now, so intermediaries have no value. Therefore, on Pinduoduo, factories have more opportunities. Pinduoduo's de-categorization and de-branding, including Huang Zheng's own statement of the 'goods find people' model, are all serving Benben users. This is precisely intelligent business, and it's also the ultimate model of future e-commerce that Professor Zeng Ming has discussed. So here, let's summarize again: What are the differences between Taobao, JD.com, and Pinduoduo? First, the starting businesses are different: one does food, one does clothing, and one does 3C. Second, the state in which users enter is different: the difference between Ming, Benben, and Xiaoxian users. Third, the speed of opening a store is different. Those who cultivate on Pinduoduo for a long time may not be the same group of people as those on JD.com and Taobao. Industry Endgame and Process Opportunities Pinduoduo's Process Original Sin Intelligent business is driven by algorithms, where goods find people. The second is C2B, where users define, and then the mall comes. Another important thing is the equality of experience. What is equality of experience? In Europe and the US, the things used in rural and urban areas, and the quality of life, are not much different. At most, some luxury brands are not sold in rural areas, but aesthetics and quality are consistent. Lai Yilong posted on WeChat Moments the day before yesterday, saying that eight years ago, when he was building a farmer community next to Foxconn, most of the workers used counterfeit and shoddy knockoff phones. But now, does anyone still use knockoff phones? No, everyone uses Redmi phones. Similarly, the counterfeit and shoddy situation on Pinduoduo is actually an opportunity for entrepreneurs. Lai Yilong said that entrepreneurs shouldn't all rush into blockchain. Take action, integrate supply chains, reduce intermediate links, and solidly improve the low-cost consumer market. I strongly agree. The question we need to consider is: if Pinduoduo dies, can everyone get an equal experience? Pinduoduo's opportunity is actually called a process opportunity (or process original sin), but the ultimate endgame must be equality of experience. So here, I still want to support Xiaomi. In Lei Jun's public letter before the IPO, there was a sentence about equality of experience. Xiaomi's 5% hardware profit is indeed about achieving equality of experience. Phones, power banks, chargers, batteries—these things have the same experience whether in the city or in the countryside. Of course, Lei Jun works extremely hard, and many people don't understand him, but I think his approach is also a way to reach the industry endgame. As media people, we must defend everyone's spirit; spirit will eventually change matter. What product people need to do is to change these things. Behind every type of counterfeit on Pinduoduo, a Xiaomi may be born. My Speculation on Pinduoduo and My Subsequent Core Observations Pinduoduo is essentially the value network behind it: the low-end supply chain and low-spending consumers that have nowhere to go, whose needs cannot be met, ultimately supported Pinduoduo. Now that Pinduoduo is a listed company with market-driven forces, what kind of people will it choose as the core to build its corporate value network? This is actually the judgment of Pinduoduo's future: if it still associates with counterfeits, earning one order at a time, it may be hard to talk about it in the future. But if it uses market forces to drive change, it will certainly be a very promising company. In 2014, Professor Li Shanyou began teaching disruptive innovation, with the famous three curves. For mobile phones, the first curve is Nokia, which encountered non-continuity, not because it didn't launch smartphones, but because it formed a value network with telecom operators. The second curve is Apple, which formed a value network with internet service providers. Who is the third disruptive innovation? It's actually Xiaomi. Professor Li Shanyou said in class that because R&D inevitably overflows, just as social capabilities inevitably progress, you take mature technologies and capabilities, then reduce costs, and provide them to a broader user base. That is disruptive innovation. Xiaomi used the core features of Apple's internet phone, then cut the price to one-third of Apple's, becoming a hit product. In Pinduoduo's user categories, do you see at least 100 opportunities for disruptive innovation? Besides cursing, what else can you do? You can't follow the VCs. Last year, VCs were into AI; this year, blockchain. To raise funds, they'll package new concepts. But will you follow the migration? No, we need our own certainty in life. Summary This is an era of consumption upgrading. The world is constantly being reconstructed, and everything is worth redoing. What makes you successful is your value network—who depends on you. That's the essence of this matter. Next, you need to have independent judgment, because products connect the past and the future. In my 'Liang Ning's 30 Lectures on Product Thinking' on Dedao, I told a story: a Chinese chemist went to the seaside in Tanggu, Tianjin, and saw the beach covered in white salt. He said, as a chemistry student, seeing such abundant resources, if I don't have any ambition, I'd be too pathetic. Why? Because in the past, fishermen didn't know they could extract salt from the sea. They could only fish in rough seas and complain about the waves, not realizing that the waves were a resource. When we all flock to mock Pinduoduo's counterfeits and mock many people who can't tell the difference and buy fakes, what's the difference between you and those fishermen complaining about the waves? You need to see that everything is a resource and an opportunity. Today's knockoffs and counterfeits are like the two phones Lai Yilong showed. Will they still exist tomorrow? No. The future world will not be like today. Where does change begin? It begins with us today.