△Add friend, please note "考察" (inspection) to register. Keywords: supply-side optimization, C2M, Chinese market, essence of demand. If I were Huang Zheng, I would actually hope that all competitors underestimate me, thinking that Pinduoduo is just a platform for selling cheap goods. Because they fail to analyze Pinduoduo's core, thus delaying their strategic response. Especially those who have long lived in a "high-end atmosphere" still understand Pinduoduo as just a platform for selling cheap goods, and then riding on Tencent's traffic, with no other special features. This understanding can only be described as: Too Young Too Simple**.** What truly drives Pinduoduo's rise is its underlying logic, core tactics, and timing. Let's first look at timing. In September 2015, the summer heat had not yet dissipated, and people's hearts were even fervent. Most entrepreneurs and VCs were immersed in showing off and fundraising. The following year, a surge in housing prices completely bewildered the middle class they wanted to harvest. But in the autumn of 2015, the general consensus was that cheap discounts had no future. This statement is both right and wrong. Wrong in terms of looking at the demographic and costs. That year, another conclusion was drawn: the purchasing power of all Chinese people would rise rapidly and continuously. It wasn't until 2017 that people realized this was wrong. That year also saw three important events:

  1. Led by Xiaomi, Chinese domestic mobile phones began to launch phones costing a few hundred yuan, entering a fierce price war, but at the same time, smartphone penetration in China rose rapidly.

  2. Alipay and WeChat Wallet invested billions, offering ride-hailing subsidies and red packets, fully opening up mobile payments. Even the uncle selling sweet potatoes used mobile payments.

  3. At the beginning of the year, Taobao was repeatedly questioned about counterfeit goods and began large-scale cleanup of low-end stores, while JD.com firmly pursued a quality route. Thus, a two-year vacuum emerged. No senior player in the market was fully engaged in e-commerce outside the fifth ring road under complete basic conditions. As long as you were willing to bend down, the biggest peach was yours. The e-commerce world in September 2015 was comparable to the Western Front during World War II. The British and French forces pursued a policy of appeasement, staying put, allowing Germany the opportunity to easily push them to Dunkirk. Opportunity is heaven-sent, but it also requires excellent tactics. What was Germany's main tactic? Blitzkrieg, a lightning war combined with rapid advancement of mechanized forces. This tactic redefined modern warfare. Poland's sacred cavalry was reduced to pulp in less than an hour against German armored divisions. What is Pinduoduo's main tactic? It is group buying and bargaining, e-commerce based on Chinese acquaintance relationships, and it focuses on high-frequency consumer products like fruits and tissue paper. It redefines the sales method of e-commerce, a violent but effective method of people driving people. The model of purely buying traffic is like the Polish cavalry against this fissionable tactic. Finally, let's look at the underlying logic: Pinduoduo understands China. A large number of people in China need to buy cheap things. This large number is not tens of millions, but 800 million people. And China has a large number of "two-yuan stores" that need to go online. There are many county-level products and factory products whose quality is not bad, but they don't understand channels or branding. How can they sell? When both C-end sides exist in large numbers, this platform is born. All of the above is right, and all of the above is wrong. Because that was from September 2015 to late 2017. During this period, the mainstream market did not care about Pinduoduo. It only surfaced when it went public this year. All analyses of its past can only deduce past success, not see the future. Pinduoduo's Q3 2018 financial report shows that for the 12 months ended September 30, 2018, the platform's GMV reached 344.8 billion yuan, a 386% increase year-over-year. Annual active buyers reached 385.5 million, a 144% increase year-over-year; The platform's mobile app average monthly active users reached 231.7 million, a 226% increase year-over-year; Active buyers' average annual spending was 894.4 yuan, a 99% increase year-over-year. Many people have interpreted the financial report, so I won't go into detail. I just want to say: The increase in active users and average spending is the best touchstone to prove a business logic. Pinduoduo is redefining Pinduoduo. Dr. Sun Yat-sen once said, "The general trend of the world is mighty and surging. Those who follow it prosper, those who go against it perish." I personally believe that Pinduoduo is doing something extremely valuable, although it is currently full of controversy and misunderstanding in some people's world. That is the supply-side reform of goods between urban and rural areas, which is to achieve the reflow of goods, capital, and productivity through supply-side optimization, thereby improving poverty and digesting overcapacity. The Chinese market has never been a simple market; it is a highly complex market. For example: China's consumer market is like a train passing through a mountain tunnel. Its head has already emerged from the tunnel, the front part can vaguely see the world outside, the middle sees a glimmer of light, the middle-rear is a blur, and the tail hasn't even entered the tunnel. Most Chinese media basically serve the people in the "front of the carriage," so they cannot fully understand the Chinese market. Currently, production capacity in many domestic fields is excessive. High-end shopping malls no longer need these products, exports can't drive them, and discounts can't sell them. But in rural areas, you can't buy the same things even without discounts. Why? Because China is too large, logistics costs remain high, and rural demand is fragmented, making it impossible to centralize warehousing on a large scale like in cities. Hence, half of the product cost is logistics and middleman costs. This is a contradiction. China has 3,000 counties and nearly 700,000 villages. Most of them cannot become technology, finance, or cultural cities. They may not have special scenery, but they have their own local products that are hard to buy in cities, even with money. For example: In the countryside on the outskirts of big cities, many farmers bring free-range eggs to the city to sell to office workers. But they find that their own chickens can't keep up with production, so they buy regular eggs, smear them with mud to make them dirty, and pretend they are free-range eggs. A few years ago, persimmons from the northern mountain valleys, which sold for over ten yuan per jin in Shanghai, couldn't be transported out at all and rotted in the fields because there was no channel to help them digest their production. But if you go through an overly complex middleman system, the price becomes too high. When the price exceeds a certain value, consumption drops sharply to the point where it can't offset costs. This is the second contradiction. Many factories don't understand marketing or branding, are completely driven out of the first-tier market, and gradually lay off workers under the backdrop of weakening external demand. But they do have lower costs and fast production capacity. Their products are not inferior; they just lack brand added value. Users who need these products can't find them, and those who find them don't buy them. For example: When I was a child, daily chemical factories often used trucks to bring barrels of shampoo, and food factories brought boxes of snacks to the entrance of residential areas, then played a loudspeaker and started selling. Their prices were only one-third of big brands, but the products weren't much different. This scene gradually disappeared as incomes rose. I think this is the prototype of C2M. When I was young, I loved the honey biscuits from Shanghai Food Factory. Later, I saw attractive ads from various foreign brands, and that taste will never appear again, nor will that kind old aunt in a white coat. Based on these three huge contradictions, how to make urban and rural demand and production capacity flow together is the core value of Pinduoduo as a platform. The essence of Pinduoduo's sustained growth after its rise: it is a supply-side allocation platform for goods between cities and rural counties. This logic is essentially not much different from the ancient Silk Road, where China traded tea and silk for spices with Middle Easterners. Except for the top-quality items, most of these goods were actually very ordinary. A basic mistake many people make today is misunderstanding demand. What is demand? Looking at demand broadly, its indicators are relatively single, homogeneous, and commensurable. For example, Chinese people need 10 million hair dryers per year (just an example, not actual demand). But that doesn't mean China can sell 10 million Dyson dryers. Maybe only 10,000 are Dyson, 90,000 are Philips and Panasonic, and the remaining 9.9 million are products that only need the basic function of drying hair. This is what Pinduoduo solves between urban and rural areas. Demand is the primary driving force of economic growth. People need to survive. After survival is solved, they need food and clothing, affluence, development, and enjoyment. People's needs progress in stages and levels. People in the enjoyment stage, who are in the stage of buying brand premiums, cannot think that the most basic functional needs don't exist, and you cannot equate your own needs with the needs of the general public. For example: Many elites think chicken soup for the soul is low-level content, but most ordinary Chinese people think it's already too high-end. According to the "Statistical Communiqué of the People's Republic of China on the 2017 National Economic and Social Development" released by the National Bureau of Statistics on February 28, 2018, the gross national income in 2017 was 82,501.6 billion yuan, an increase of 7.0% over the previous year. The per capita GDP in 2017 was 59,660 yuan, an increase of 6.3% over the previous year. The total is impressive, but per capita it's not much, less than 60,000 yuan. Now look at the data from the "2017 National Economic and Social Development Statistical Communiqué." The chart below shows "Per Capita Disposable Income of National Residents and Its Growth Rate from 2013 to 2017" from the communiqué. Although it has increased year after year, by the end of 2017, per capita was only 25,974 yuan, just over 2,000 yuan per month. To strip out the impact of per capita, we divide the annual per capita disposable income of national residents into five groups.

Low-income group per capita disposable income: 5,958 yuan;

Lower-middle income group per capita disposable income: 13,843 yuan;

Middle-income group per capita disposable income: 22,495 yuan;

Upper-middle income group per capita disposable income: 34,547 yuan;

High-income group per capita disposable income: 64,934 yuan. Note: This is for the whole year. So, dividing these numbers by 12 gives the real disposable income. The highest group is only 5,411 yuan per month. It's worth noting that in 2017, the average monthly income of migrant workers nationwide was 3,485 yuan, an increase of 6.4% over the previous year. When you're in Beijing, Shanghai, or Guangzhou earning 30,000 a month and still lamenting, you should know that a farmer's annual income is only about 40,000 yuan. For them, sending their children to college is still very difficult. And even after graduating from college, their children still start from scratch. This is also why many people feel a sense of disconnection when watching "Kuaishou." You should know that a difference of 100,000 or even a million per year, accumulated over years, is an insurmountable gap. Perhaps, allowing more Chinese people who temporarily cannot afford "brand premiums" to buy products of the same quality, or even cheaper, and to buy products that are not too bad, is a form of supply-side optimization. I don't think consumption upgrading belongs exclusively to anyone; everyone desires a better life. Do you think buying your girlfriend a Cartier is love? Is there really a difference between that and a factory worker saving for months to buy his beloved a vivo? In many cases, you might not love your goddess as much as that worker does. Today I posted this on my Moments: Whether the middle class has one more or one less Dyson makes no essential difference. So stop bragging about changing the world. What truly makes the world better are people like Bill Gates, who do seemingly "small" things like improving toilets and helping Africa eliminate diseases. That's changing the world. Making a speaker or a radio is not. Then a friend commented: For example, Pinduoduo. My mother was hospitalized a while ago. The caregiver aunt was very kind, only in her thirties, with several children, the youngest only five or six, the oldest fifteen. I gave her many books, various dolls, a lot of food, and an old iPad 2 that I hadn't used for a long time. She said their oldest child had wanted an iPad for a long time. She insisted on taking a few Ganso breads home for the little sister. I will never forget that look of joy and gratitude, but these things no longer bring me joy. Every mother loves her children; this is an unchanging human nature, but they may not have the ability to provide the most refined life. They may not be able to afford imported products, but their love is certainly no less than that of wealthy parents. There is a brand on Pinduoduo called "Kerxinrou" (可心柔), which makes tissue products. It is actually a very traditional manufacturer, mainly selling through RT-Mart and various local supermarkets. But this model has become very difficult because the traditional channel payment terms are very long, some up to 9 months. If they go through distributors, it's the same; they might advance some payment, but they have to take several times the amount of goods, and if they can't sell, they have to return them, causing inventory backlog, and inventory itself incurs storage costs. Many traditional Chinese enterprises have been completely dragged to death by this. After Kerxinrou joined Pinduoduo, their children's tissue suddenly sold out because demand was huge, and most ordinary Chinese families cannot afford imported products. At that time, they received 100,000 orders a day, shocking the entire company. Because of the increase in orders, their unit costs decreased, allowing them to sell at lower prices, putting the whole thing into a virtuous cycle. What I want to say here is: Many people find it hard to earn substantial wealth, and they cannot access that kind of service and enjoyment. But if we can lower the threshold, it becomes a huge business. Ford's success was making cars, a luxury item, affordable to the middle class through mass production on assembly lines. So shouldn't we set our sights on a broader horizon? China has hundreds of industrial belts. In many places, the pillar industry of a whole village, county, or even city is one industry. Over the past forty-plus years, generations of people have made shoes one by one, clothes one by one, cups one by one, earning hard-earned money to complete primitive accumulation. But under the conditions of weak external demand and unclear domestic demand, many of them go bankrupt and die every day. The summer before last, I went to inspect the Baiyun Industrial Zone in Guangzhou. The taxi driver refused to go further once we reached the outskirts. Only black motorcycles could go further. A railway ran through the entire area. Suddenly a thunderstorm hit, and the roads were covered with dirty water and mud. Deep inside, there were rows of small buildings connected without gaps. These buildings were all factories. The young man who came out to pick me up had only three fingers; I remember it clearly. The owner of that small factory was from the northeast, had been in Guangzhou for over a decade, and had 300 workers. He said the shoes they produced were of excellent quality, even better than big brands. He demonstrated it on the spot, and indeed it was true, but he had no brand, and his business was deteriorating. At that time, I realized that for 99% of Chinese factories, it's impossible to make them brand themselves using the international company approach. It will never happen in their lifetime; they only know how to make products. They also don't have the capital to build a brand. If they go through intermediaries, they become OEM factories. This is a vicious cycle. So Pinduoduo's value lies in enabling these factories to potentially explode the market with a single product, like Kerxinrou, because by eliminating middlemen, they can acquire customers at lower cost, thus entering a virtuous cycle. Regular readers may notice that I often cheer for Pinduoduo, even though I basically don't buy anything on it. Why do I always act as Pinduoduo's "tap water" (voluntary promoter)? It's because I think we shouldn't view the world with prejudice; it does us no good. One late night, I @all my colleagues in the company group and said: Never forget why you studied. You studied to live better, for your ideals, to see a bigger world. But today, so many educated people have studied themselves into stupidity, into complacency, into timidity, into arrogance and prejudice. Because I think they are all very hardworking, but they are not open-minded enough. They may not know what is happening dozens of kilometers outside our downtown office. And I want to push them off the peak of self-confidence, and then find a way to rebuild a broader worldview. I very much hope: Pinduoduo, redefine Pinduoduo. Only then can those who feel good about themselves be thoroughly awakened. Of course, before it truly redefines itself, it must thoroughly solve those problems that have long been criticized. Source: Jibo Finance (ID: jinbubo) The 10th B-end E-commerce Inspection -- "From Product to Scenario" Event time: December 10-13 Event location: Wuhu, Nanjing, Changsha Event schedule: December 10 morning: Visit Three Squirrels headquarters + snack store

December 10 afternoon: Visit Nanjing Squirrel small store

December 10 evening: Visit Nanjing Master Gao Beer Workshop

December 11 all day: Nanjing to Changsha, or free arrangement

December 12 morning: Community group buying exchange salon

December 12 afternoon: Koala Select Heroes League launch event

December 12 evening to December 13 early morning: On-site inspection of Koala Select logistics center — This time is the peak sorting period in the warehouse, allowing direct observation and learning of the backend operation process of community group buying e-commerce Welcome interested distributor friends to join us for understanding and on-site inspection : Organization format 1. Big-name exchange salon************2. Company visit

  1. On-site explanation
  2. One-on-one communication************5. Actual market case visit Friends who want to participate If you are interested in a specific day's content, you can register separately Long press this QR code or click "Read Original" to register in one click! Add friend, please note the purpose -END-