Pinduoduo has made another big move! In just two weeks, its stock price surged over 50%, making it one of the leaders among Chinese concept stocks. As of October 18's close, Pinduoduo's market value recovered $50.9 billion (approximately RMB 361.39 billion) from the post-interim report plunge. In just four months, Pinduoduo's market value recovered nearly RMB 400 billion! The market believes that Chinese concept stocks may usher in a new cycle of development, with the e-commerce industry becoming an important sector for revaluation. Pinduoduo's recent impressive performance may also be a microcosm of the e-commerce industry. Standing at the starting point of a new cycle, the upcoming 'Double 11' shopping festival becomes more intriguing. As a latecomer in e-commerce, Pinduoduo has amassed over 800 million users in just 8 years... You can call it 'low-end,' but you absolutely cannot ignore it. You might think Pinduoduo's rapid growth is due to cheapness, and its ultra-high efficiency is due to high pressure. But you'd be wrong; it's actually playing a joke on you. So, what exactly makes Pinduoduo great? Today, let's try to break it down. Seizing the Lower-Tier Market for Rapid Rise 1. Business Philosophy Huang Zheng once said: "Consumption upgrading is not about letting Shanghai people live like Parisians, but about letting people in Anqing, Anhui have kitchen paper and good fruit to eat. " The advantage of the mobile internet era is not simply about user downgrading, but about leveling the playing field, giving the vast Chinese populace the same information access and transaction capabilities as those in first-tier cities, something the traditional PC era couldn't achieve. Founded in 2015, Pinduoduo initially was a direct-sales enterprise selling fruits. At that time, many platforms were still focused on 'consumption upgrading' and 'attracting top brand customers,' not paying attention to the 'long-tail market' in lower-tier cities. It was against this backdrop of nationwide discussion about 'consumption upgrading' that Pinduoduo seized the opportunity in the lower-tier market and rose rapidly. In its IPO prospectus, it stated that it sells only two things on the platform: convenience and lower prices for the same products. In other words, it provides convenience for both merchants and consumers, and consumers can get lower prices through group buying. What Pinduoduo sells is not products but services. How? Through group buying. Pinduoduo's innovative model is two words: 'group buying' , a concept it emphasized in its prospectus. On Pinduoduo, consumers either initiate a group buy or join one; the more people in the group, the lower the price. The 'group' approach lets consumers define their own groups and monetize their social value to some extent. Through this 'group buying' model, Pinduoduo attracted a crowd seeking high cost-performance, achieving rapid user growth. 2. Pinduoduo's 'Overtaking' Relies on Two Points Pinduoduo's model is fundamentally different from some e-commerce platforms. In Huang Zheng's view: Taobao is based on traffic logic, with search as the main function; users need to find products themselves, so it requires a massive SKU to meet diverse needs. Pinduoduo represents matching, recommending products to consumers, with limited SKUs but a rich product structure. Pinduoduo and Taobao are in differentiated competition, vying for the same users' different consumption scenarios. Returning to Pinduoduo itself, how does it achieve overtaking in operations? Specifically, there are two points: First, clear price positioning; Second, leveraging low costs to achieve extreme efficiency.

  1. Clear Price Positioning Regarding Pinduoduo's positioning, the traditional stereotype is: consumers outside the Fifth Ring Road. With 'ultra-low prices + social bargaining,' Pinduoduo used 'viral' marketing to quickly capture the third- and fourth-tier lower-tier markets, almost 'e-commercializing' China's last batch of netizens. Do consumers inside the Fifth Ring Road really not use Pinduoduo? Liking low prices and value for money is almost everyone's instinct. The real situation should be that Pinduoduo's low-price strategy targets all consumers. For example, some consumers buy Hermès bags, luxury cars, and mansions, but that doesn't stop them from spending 9.9 yuan on a box of mangoes or 29.9 yuan on a large pack of tissues. This is a real-life consumption scenario, not directly related to spending power. Affordability is a universal need. So, Pinduoduo, through low prices, taps into the diverse needs of more consumers, spanning almost all consumer groups, breaking down demographic positioning and circle competition.
  2. Low Costs for Extreme Efficiency As we all know, internet competition is not just about grabbing territory but also about speed and efficiency. Especially under the noses of two e-commerce giants, if you're not fast enough, you might be crushed in the cradle. Where does speed and efficiency come from? On one hand, over a decade, Chinese e-commerce has cultivated online consumption habits, plus a mature express delivery infrastructure, giving Pinduoduo the conditions for lightweight operations: just build a platform, connect merchants and consumers, and handle supply chain screening and platform supervision. On the other hand, as a platform-based e-commerce, Pinduoduo has pushed the limits for both merchants and consumers. For example, the much-touted '9.9 yuan nationwide free shipping' might force merchants with thin margins to bear high shipping costs to remote areas; or '7-day no-reason returns,' while amplifying consumer rights, might burden merchants who offer cheap but not necessarily quality products with high return rates. Behind extreme efficiency, there may also be extreme imbalance. As a platform, you can't only consider consumer experience and ignore merchant rights. After all, a good consumption scenario requires joint construction by multiple parties. A Good Consumption Scenario Is the Result of Multi-Party Co-construction 1. A Good Platform Needs to Attract Consumers As a rising star, Pinduoduo quickly attracted a large user base with its 'cheap' reputation. On the platform, prices for various products are relatively low, sometimes hitting 'dirt-cheap' deals, allowing consumers to experience very affordable prices, making Pinduoduo one of the first choices for online shopping. In the past, Pinduoduo's user profile was summarized as 'outside the Fifth Ring Road,' but today, users from first- and second-tier cities have long exceeded half. On Pinduoduo, some buy kitchen paper, others buy iPhones. These diverse purchasing needs support Pinduoduo's rapid growth. Before Pinduoduo appeared, it was widely believed that internet competition was about grabbing traffic. But beyond traffic, Pinduoduo noticed the contradiction of supply-demand mismatch in industrial manufacturing and agricultural production against the backdrop of a shrinking demographic dividend: on one hand, overcapacity; on the other, users' real needs unmet. This isn't just about white-label merchants seeking low-cost traffic, but also about both supply and demand sides wanting to save a few yuan. This cannot be simply summarized as 'lower-tier population,' because cost-performance is itself the most concerned issue for the Chinese public. In earlier years, outsiders only saw low prices, thinking that price strategies only attract price-sensitive customers. In fact, it's not only price-sensitive users who care about price; even non-price-sensitive users care about price at times. Consumers categorize their needs, compare across platforms, and then make purchase decisions, which has nothing to do with spending power. Those seeking high cost-performance 'will buy a Hermès bag and also use 9.9 yuan to buy a box of mangoes.' Consumption upgrading is not wrong, but don't forget that behind every transaction are real people. If you talk about consumption upgrading without considering actual consumption scenarios, you're not thinking about consumers or the many merchants. 2. A Good Platform Needs to Help Merchants If a platform blindly pleases consumers and ignores merchant interests, the outcome won't be good. Pinduoduo's 'refund only' policy greatly facilitates consumers, but the subsequent malicious exploitation by 'wool party' members, who 'fleece' the platform, is a loophole in the rules. Currently, this 'unequal treaty' favoring consumers has been adjusted. Additionally, on August 26 this year, when releasing Q2 earnings, Pinduoduo Chairman Chen Lei stated, 'For the long-term healthy development of the platform, we will continue to improve ecosystem construction through a combination of support and governance. In the coming year, we will invest a 10 billion yuan resource package to support new-quality merchants and resolutely carry out merchant ecosystem governance.' Besides Pinduoduo, before this year's 'Double 11,' other platforms are also co-building better 'consumption arenas' with merchants. First, giving money to merchants. On September 19, Kuaishou announced it would provide merchants with 20 billion traffic subsidies, 2 billion user red packets, and 1 billion product subsidies. On September 20, JD.com, at its '11.11 Merchant Ecosystem Partner Conference' in Beijing, proposed introducing hundreds of billions in new traffic through measures like 'factory goods 100 billion subsidy,' 1 billion live-streaming subsidies, and advertising gold rewards. The 'big brother' Taobao directly took out 30 billion in consumption vouchers and red packets and 10 billion in traffic purchases to create transaction opportunities for all merchants. Second, saving money for merchants. For example, in response to the platform fees that merchants complain about, Pinduoduo significantly reduces transaction fees for high-quality merchants, supporting new-quality merchants and industries with product and technological innovation capabilities. For '100 billion subsidy' merchants, Taobao will return 100% of Tmall commissions on products participating in the '100 billion subsidy,' allowing merchants to participate in various Taobao/Tmall promotions and channels at almost no cost. Before the 'Double 11' promotion, leading domestic e-commerce platforms are actively reducing burdens for merchants to maintain stable growth. 3. A Good Platform Adds to Business Not just Pinduoduo, but other e-commerce platforms before this year's 'Double 11' are actively adjusting strategies, no longer solely emphasizing low prices, but launching a series of unprecedented support policies aimed at helping merchants reduce costs, improve efficiency, and thus drive sales growth. You might wonder, 'Without low prices, is it still Double 11?' First, this shift from user-oriented to merchant support is about letting merchants make money, making e-commerce development more sustainable, and only on a sustainable basis can there be user-side experience. On October 12, Alibaba's Taotian Group stated at its 'Double 11' press conference that this year's 'Double 11' will have more coupons, greater discounts, and simpler price displays; consumers only need to see the final price when ordering. Additionally, live-streaming e-commerce platforms have targeted 'Double 11' earlier than traditional e-commerce platforms. For example, Douyin started its 'Double 11' early access period on October 8. Based on different target positioning, Douyin launched various activities like 'Super Value Team Goodies Leader,' 'Super Value Team-New Promoter,' 'Super Value Categories,' and '10,000 Stores Mega Deals.' From these platform operations, it's clear that this year's 'Double 11' is still full of gunpowder, but that's a healthy business ecosystem. Only when e-commerce platforms build a more stable stage can merchants have a better showcase. Because merchants' expectations for 'Double 11' are not just a simple digital carnival. During the 'Double 11' consumption period, e-commerce platforms play a crucial role in releasing user consumption demand: providing merchants with a platform to seize business opportunities, while users can enjoy richer and more discounted shopping choices, experience more convenient and personalized services, each taking what they need, a two-way effort. Currently, the e-commerce industry's past one-dimensional 'low-price' competition is shifting to 'sustainable low-price' competition, with battles over merchants and goods becoming increasingly fierce. Multiple platforms are also weakening the 'low price' label, loosening 'refund only' policies, and continuously extending olive branches to small and medium merchants. Whoever can maintain appeal to small and medium merchants will have a greater competitive advantage. Good platforms co-build good consumption scenarios with consumers and merchants, promoting more transactions and achieving multi-party win-win. Pinduoduo can do this thanks to extreme efficiency. Extreme Efficiency Relies on a Super Brain + Atomic Organization Data shows that Pinduoduo's per-capita efficiency far exceeds other internet platforms. In other words, under the 'two giants' situation in Chinese e-commerce, Pinduoduo wins through extreme efficiency. To this end, Pinduoduo has formed a management system that matches a 'super brain' with an 'atomic organization.' 1. Super Brain: Strong Strategy Pinduoduo has a flat structure, with only first-level supervisors, second-level supervisors, team leaders, and employees. According to a 2022 count by LatePost, including Duoduo Maicai, Pinduoduo's first-level supervisors total no more than 100. At that time, Pinduoduo had fewer than 8,000 employees, while Alibaba and JD.com had over 250,000 and 360,000 respectively. 'Alumni' are Huang Zheng's most trusted group; the executive team basically comes from his student days, and 'trust' is one of the principles for talent flow at Pinduoduo. Therefore, Pinduoduo's core layer is very stable and exceptionally united because they have been screened by time. A person who joined Pinduoduo after 2019 once saw Huang Zheng buried in reviewing stacks of paper invoices in his office. This person believed that the primitive management method stemmed from the fact that for Pinduoduo at that time, survival was paramount. A senior executive from a leading internet company once commented that good organizational capability first requires understanding the strategy, then selecting the organizational capability based on the strategy. Pinduoduo's organizational capability cannot be simply defined as good or bad, but it is highly matched to its strategy. This flat management style has advantages in fierce business competition. Facing pressure from Alibaba and JD.com, Pinduoduo's past core strategy was to boost GMV (gross merchandise volume) through aggressive tactics. An investor said that in some respects, he thinks ByteDance and Pinduoduo are two extremes: 'One type doesn't understand human nature, using management tools and methodologies to crush; the opposite is extreme understanding and utilization of human nature.' For the system's creators, all this is not the end but an intermediate process, a tool to achieve the ultimate mission. Behind the super brain, there also needs to be extreme execution to implement the strong strategy. 2. Atomic Organization: Extreme Execution Unlike centralized pyramid management and decentralized flat management, Pinduoduo is a combination: it is centralized flat management. Pinduoduo's grassroots employees work like atoms, with very limited information access, extremely detailed work indicators, and execution centered around one or two indicators. A former employee even commented: Pinduoduo has the least office politics, the lowest level of office politics, and the simplest working environment among all large companies. Working at Pinduoduo feels like 'body in hell, soul in heaven.' Although grassroots employees have single indicators, Pinduoduo's management, especially the executive group, has more diverse and balanced indicators. During execution, senior leaders often go deep into the front lines to correct course in time. In other words, although the indicators assigned to employees are single, the management has a clear picture of how to achieve goals through indicators. On one hand, by designing indicator calculation methods to consider as many diverse factors as possible, employees won't neglect one thing for another; on the other hand, management adjusts indicator content within time periods, such as chasing indicator A this month and indicator B next month. In Pinduoduo's view, the accuracy of indicator design reflects the level of managers. The more accurate the design, the higher the level. Through the setting of single indicators, to a certain extent, employees' work goals are clear, enabling extreme execution. Pinduoduo proves this: A company can operate efficiently without necessarily needing advanced management tools and concepts or strong cultural output; a super brain making decisions, management quickly issuing orders, and employees 'not moving randomly' can also establish an efficient operating system. Conclusion Consumption prosperity is the foundation for promoting steady socio-economic development. At this juncture where consumption revitalization is needed, empty slogans are far from enough; we need courage and practice, moving forward in development, and jointly exploring a better solution. A scholar once mentioned: 'The e-commerce industry should listen to the opinions of consumers and merchants, continuously adjust platform rules, jointly create a good ecosystem, and constantly achieve value co-creation and value sharing. Only by treating merchants and consumers well can e-commerce platforms have long-term competitiveness.' When platforms no longer focus solely on traffic growth but put more energy into infrastructure and ecosystem building, a healthier and more sustainable business model will follow. References:
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