Exploring the High-Quality Development Path of Pinduoduo from Financial Reports: Reinvesting in R&D to Release High-Quality Supply, Fully Stimulating Consumer Potential

The era theme of "high-quality development" is placing higher social expectations on companies. In the view of Zhitong Finance APP, "high-quality development" requires companies to shift from the previous growth paradigm of speed and scale to a new growth paradigm where quality comes first.

The year 2023 has just passed, marking the beginning of Pinduoduo's comprehensive transformation towards "high-quality development". Combining the company's recently disclosed financial reports for the fourth quarter and full year of 2023, we can glimpse into the company's footsteps in implementing the "high-quality development" strategy...

High-quality supply makes growth more substantial

At first glance, investors may be attracted by Pinduoduo's latest financial report with its impressive financial data. The report shows that in the fourth quarter, Pinduoduo achieved revenue of 88.9 billion RMB, a year-on-year increase of 123%; operating profit under US GAAP was 22.4 billion RMB. Looking at the whole year, Pinduoduo's revenue reached 247.6 billion RMB, with a year-on-year growth rate of 90%.

However, besides marveling at the strong growth performance, investors may need to clarify the underlying logic and core driving forces behind Pinduoduo's achievement of higher-quality growth.

Zhitong Finance APP believes that Pinduoduo, with its operating data singing praises, can actually be seen as a mirror of consumer improvement and upgrading. Over the past year, in order to encourage more people to consume, dare to consume, and be able to consume, Pinduoduo has done a lot of work. From a quantifiable perspective, Pinduoduo's continuous "evolution" is closely linked to its strategy of reinvesting in research and development. The financial report shows that after research and development expenses exceeded 10 billion RMB in 2022, Pinduoduo's research and development investment once again exceeded tens of billions in 2023, reaching a new historical high. Of course, technological innovation is just the foundation, and on top of that, Pinduoduo effectively connects high-quality supply with a large number of consumers.

Taking Pinduoduo's basic agricultural sector as an example, in 2023, the company made remarkable achievements in increasing investment in agricultural product research and "cloudification".

In February last year, based on its own perfect supply chain, Pinduoduo launched the "Agricultural Cloud Action". On the platform, merchants can not only connect with local high-quality warehousing, cold chain, and other specialized agricultural logistics and supply chain systems with "zero commission", but also enjoy support in terms of traffic.

Such down-to-earth actions quickly received positive feedback from the market. With Pinduoduo's strong promotion, last year's "Agricultural Cloud Action" penetrated into agricultural production belts in Shaanxi, Sichuan, Shanxi, Yunnan, Hubei, Fujian, Shandong, Jiangsu, and other regions, helping hundreds of agricultural production belts across the country to quickly "move to the cloud". It is worth mentioning that the "Agricultural Cloud Action" was also recognized as a "typical case of county revitalization nationwide" by the China Urban and Small Town Reform and Development Center of the National Development and Reform Commission.

In Pinduoduo's practice, high-quality supply is far more than simply bringing high-quality agricultural products to consumers' tables. In terms of agricultural product research and development, Pinduoduo spares no effort. Over the past few years, Pinduoduo has held three consecutive "Duoduo Agricultural Research and Technology Competitions" and supported the Science and Technology Small Courtyard Competition for two consecutive sessions. Applying cutting-edge technology to agriculture and integrating academic and production practices has become one of Pinduoduo's main pursuits after transforming towards high-quality development Taking the recently concluded second "PDD Cup" Technology Small Courtyard Competition as a sample for observation, PDD is clearly becoming an "extension" part of the competition. For example, Chu Cheng Technology Small Courtyard reached a cooperation with PDD as early as 2019, extending a new model of "industry-education-research". Over the past few years, in order to help Chu Cheng expand its sales channels, PDD has continuously provided strong support through methods such as billions in subsidies. Judging from the current results, PDD is infinitely close to achieving a commercial closed loop of "research and development innovation, advanced production, and efficient circulation" in the agricultural sector.

High-quality Chinese products are another focus of PDD's high-quality supply. In recent years, high-quality Chinese products have sparked a new fashion trend among the people. In the midst of this, e-commerce platforms represented by PDD have been continuously increasing their investment in traffic and subsidies for Chinese brands.

For example, the "Duoduo New Chinese Trend" initiative has successively delved into industries such as home appliances manufacturing, light industry, and beauty industry, collaborating with numerous Chinese brands to explore new models of integration through platform-exclusive products, end-to-end cooperation, digital upgrades, etc. In the second half of the year, in various "Chinese Brand Building" themed live streaming events and "Chinese Brand Festival" promotions, PDD has invested a large amount of traffic and substantial subsidies to help high-quality Chinese brands break through, further enhance brand influence, and allow more consumers to understand the stories behind the brands, obtaining a high-quality consumption experience in selecting affordable and good products.

PDD-style Consumer Upgrade

From the buzz about "consumer upgrade" two or three years ago to the recent doubts about "consumer downgrade", controversies about the consumer industry have been ongoing in public opinion in recent years.

Regarding consumer upgrade, public opinion seems to be accustomed to using a general narrative to equate consumer upgrade with high consumption. However, after the hustle and bustle, perhaps it is time to rethink the definition of consumer upgrade. The Securities Times app believes that consumer upgrade is by no means high consumption at the expense of overdrawing demand, but rather helping consumers enjoy high-quality products and services in a more economical and convenient way.

Using PDD as an example, in the past year, PDD has focused on the two key points of "more benefits" and "good service", focusing on increasing subsidies for people's livelihood and continuously stimulating potential consumption.

For example, in the three days leading up to last year's Double 11 promotion, PDD's subsidy for users exceeded 620 million. Among them, the order volume of users in first-tier cities increased by 113% year-on-year, and the order amount in fourth- and fifth-tier cities increased by 167% year-on-year. The data behind this indicates that both middle- to high-income groups and low-income groups can achieve consumer upgrades on PDD.

In terms of service, PDD has further upgraded its logistics and after-sales service, providing consumers with comprehensive service guarantees such as price compensation for buying expensive items, tenfold compensation for fakes, and home delivery, and providing quality assurance insurance through cooperation with insurance companies.

It should be noted that PDD's high-quality consumption is not only beneficial to consumers, but also a two-way journey between consumers and merchants. Data shows that during Double 11, PDD's flash sale channel provided incremental engines for over 100,000 small and medium-sized merchants, with over 40 subcategories such as agricultural products, Chinese products, and global goods achieving double-digit growth At the same time, the number of agricultural and domestic goods merchants entering the billion-yuan subsidy has more than doubled year-on-year. In the global shopping business, among the top 100 brands, 21 brands achieved a year-on-year growth of over 300%, and 59 products with daily sales exceeding one million.

The series of "red-hot" data above reflects that PDD is continuously creating more value for consumers and merchants.

Finally, as a company with warmth, PDD also attaches great importance to integrating its social functions and social values into the strategic planning and management of the entire business development cycle. In this regard, PDD is also making great efforts to promote the "Number One Project", which aims to build and manage the platform ecosystem well, shaping an environment where good money drives out bad money. From a holistic and long-term perspective, only when high-quality merchants have more growth opportunities, can consumers obtain more incremental value, and PDD, as the "soil", will have the opportunity to create long-term value for society