After the financial report was released on November 28, Pinduoduo’s stock price rose by 18% that day. The stock price continued to rise in the following days. In just three trading days, Pinduoduo’s market value increased from US$156.4 billion to US$195.8 billion. As of December 1, Pinduoduo has become the e-commerce platform with the highest market value in China.

▲Duoduo cross-border booth at the 2nd Global Digital Trade Expo

Pinduoduo’s third-quarter financial report is the main factor that stimulates the rise in stock prices, and the most surprising thing in the financial report is Pinduoduo’s cross-border business.

In Q3 this year, Pinduoduo’s revenue increased by 93.9% year-on-year to 68.84 billion yuan, nearly 14 billion yuan higher than market expectations of 54.87 billion yuan. The analysis briefing of Dolphin Investment Research stated that the market needs to gradually price the valuation of Temu (Duoduo Cross-border) into the valuation of Pinduoduo. The briefing believes that Pinduoduo’s Q3 revenue exceeded market expectations by 14 billion yuan, which only shows that Temu’s overseas performance is excellent, because Pinduoduo’s domestic revenue is relatively clear.

Pinduoduo has also attracted the attention of many overseas institutions. Bloomberg said that this is a "watershed" for China's Internet industry and "also marks the rise of a new generation of upstarts from Pinduoduo to ByteDance, which are subverting the traditional fields of social media and e-commerce." After the results were released, many major banks sang their praises. Goldman Sachs raised its target price from $155 to $176, Citigroup raised its target price from $153 to $173, and Morgan Stanley raised its target price from $140 to $170.

Cross-border business enters more than 40 countries

In September last year, Temu was launched in North America for the first time. In more than a year, it has entered European and American countries such as the United States, Canada, Australia, the United Kingdom, and France, Asian countries such as Japan and South Korea, and Southeast Asian countries such as the Philippines and Malaysia. It has entered more than 40 countries and regions.

According to data released by AppMagic, Temu became the sixth most downloaded APP in the world in August this year. According to data from mobile insights consulting firm GWS, Temu has added nearly 10 million new users every day since January, and this growth shows no signs of slowing down. CICC predicts that Temu's GMV will reach US$18 billion in 2023, equivalent to 60% of Shein's GMV in 2022.

In overseas markets, Pinduoduo was not the first to enter the market, but was even a latecomer. In addition to the existing overseas giant Amazon, Shein, Alibaba overseas shopping, etc. have occupied the market in recent years. Why can Temu still develop so fiercely?

Chen Lei, chairman and co-CEO of Pinduoduo, mentioned in a previous interview that Duoduo’s cross-border business is Pinduoduo’s third venture. What is different from the previous two times is that Duoduo cross-border has mobilized elite personnel from Duoduo’s grocery shopping business to lead the team, and the team generally has a deep understanding of the national manufacturing supply chain that has been accumulated since the establishment of the independent website. Although new businesses also require learning, the learning costs of the team and the organizational costs of the supply chain are much lower than those of other companies.

▲Recently, Pinduoduo donated more than 9,200 books to the primary school in Jimunai County, Altay Prefecture, Xinjiang

It is understood that in the third quarter of this year, Pinduoduo accelerated its layout of overseas consumption nodes such as Halloween, Christmas, and Black Friday. During the "Black Friday" promotion, Duoduo continued to launch price subsidy strategies across borders, allowing overseas consumers to purchase millions of cost-effective products. These measures have boosted the development of Pinduoduo’s cross-border business.

A merchant who participated in "Black Friday" this year said that labor costs have dropped sharply by selling goods on Temu. For example, to sell hats in the United States, France and Russia, you used to have to hire at least three translators with strong professional skills. According to the salary level of local fresh graduates, each person would spend at least 6,000 yuan per month, but Temu does not need to consider this at all.

Merchants on Temu adopt a fully managed model. Under this model, merchants only need to supply goods and deliver the goods to the platform warehouse in advance, while the platform is responsible for transportation, operation, and sales. Both parties conduct periodic settlements according to the agreed nodes.

This is a model pioneered by Pinduoduo last year. Currently, this model is also being learned by other cross-border platforms.

The above-mentioned merchant used a metaphor to describe the simplicity and ease of use of this model: "Doing cross-border business on other platforms is like advanced mathematics. Temu only needs to know the multiplication table."

As of the end of the third quarter, Duoduo Cross-Border has penetrated into more than 100 manufacturing industry belts in Guangdong, Zhejiang, Shandong, Anhui and other places, promoting high-quality manufacturing products to more than 40 countries and regions including North America, Australia, Europe, and Asia. Currently, Duoduo exports more than 400,000 cross-border parcels every day, with an average daily cargo weight of about 600 tons, more than half of which are sent to the U.S. market. In the U.S. market, the number of online SKUs has exceeded 2 million, and it is expected to reach 4 million categories this year.

Chen Lei said that he looks forward to working with more manufacturing manufacturers and various partners to draw on each other's strengths to jointly create a new supply chain and shopping experience that is in line with the development trend of the times. For consumers in different countries and regions around the world, create a life that suits them.

According to China Customs statistics, my country's cross-border e-commerce import and export volume has continued to grow rapidly in recent years. In the first half of 2023, my country's cross-border e-commerce import and export scale was approximately 1.1 trillion yuan, of which exports were approximately 825.4 billion yuan, an increase of 20.6%, accounting for 7.2% of my country's total export value during the same period. Zheshang Securities predicts that China's cross-border e-commerce retail market will reach US$1.1019 billion in 2027, with a compound annual growth rate of 19.5%.

This means that Temu still has great potential. Chen Lei also mentioned in the earnings call that although Temu has a wider reach, it is still in a very basic early stage and there will be many changes. He is full of expectations and curiosity about overseas development opportunities and challenges.

High-quality development of domestic business

Another thing worth paying attention to in Pinduoduo’s financial report is its domestic business. On the basis of rapid growth in the second quarter, Pinduoduo’s domestic business continued to grow at a high rate in the third quarter.

Data shows that Pinduoduo’s online advertising revenue reached 39.7 billion yuan in the third quarter, a year-on-year increase of 40%, exceeding market consensus expectations by nearly 1 billion yuan. In addition, transaction services revenue was 29.153 billion yuan, a year-on-year increase of 315%.

Explaining the reason, Chen Lei said that with the implementation of a series of consumption-promoting policies in the third quarter, the demand for consumption upgrades became increasingly strong. At the same time, it can also be seen from user behavior that consumption upgrading is related to both quality and price. It is the optimization of "quality-price ratio" and consumers' ultimate pursuit of good products at good prices.

Therefore, Pinduoduo continues to invest platform resources to bring users a richer selection of high-quality products, more affordable prices, and better services. These measures have brought revenue growth to Pinduoduo’s domestic business.

In terms of specific practices, Pinduoduo has made key efforts in high-quality consumption, supply, and ecological aspects.

▲During the Harvest Festival, Pinduoduo helped villagers increase their income and become rich by helping Huili Pomegranate to accelerate its growth.

In order to promote consumption, in September this year, Pinduoduo invested 1 billion yuan in resource packages and launched the "Duoduo Harvest Pavilion" in conjunction with the platform's 300,000 agricultural merchants and more than 1,000 agricultural production areas across the country. It also joined hands with 100 domestic and time-honored brands such as Yili, Anta, Galanz, Yanghe, Yumeijing, Wufangzhai, and Xinghualou to launch the "Domestic Products Festival" promotion for more than a month.

Driven by support resources such as special live broadcasts, tens of billions of subsidies, and groups of 10,000 people, users have placed orders to vote for their favorite products. According to Pinduoduo platform data, since the Domestic Products Festival, the sales of domestic brands on the platform, especially daily chemicals, beauty products and other products, have increased significantly. Among them, the single-day sales growth of Yumeijing Children's Cream reached 230%, and 20,000 units of the 7.9 yuan package were sold shortly after it was launched; the sales volume of Vitality 28 increased by more than 10 times.

Some domestic brands said that thanks to the platform's initiatives to lead high-quality consumption, they have achieved a 40-fold growth in the past two years, and this value is still growing at a rapid pace.

In terms of high-quality supply, Pinduoduo has invested heavily in the construction of physical supply chains to stabilize and strengthen the chain, repair and extend the chain, so that more industrial and agricultural industries can become local leaders and lead local industries to the national and even global markets.

In the third quarter, the "Agricultural Cloud Action" launched by Pinduoduo successively entered Jiangsu hairy crabs, northwest fruits and other agricultural production areas, helping local areas create a more resilient and competitive digital agricultural production belt.

As the effects of a series of "combination punches" continue to appear, market vitality continues to increase, consumption upgrade potential is steadily released, and Pinduoduo's domestic revenue also grows.

Zhao Jiazhen, executive director and co-CEO of Pinduoduo, said that Pinduoduo will steadily promote the implementation of high-quality development strategy. On the demand side, we will insist on focusing on consumers and further improve the quality of inclusive benefits and services; on the supply side, we will continue to take root in the real economy to Technological innovation promotes industrial upgrading; on the ecological side, we strengthen platform governance, help small and medium-sized businesses and high-quality merchants, and promote ecological health and win-win results.