Pinduoduo 2Q23 Conference Call Summary

Minutes of the Conference Call for Pinduoduo 2Q23, for the earnings report review, please refer to " Doubts Dispelled, Pinduoduo: The Ruthless Money-Making Machine"

I. Management Remarks

1. High-Quality Development Strategy: Starting from 2023, high-quality development is our focus, and our investments are laying the foundation for sustained high-quality growth. We are increasing our feedback to consumers and promoting promotional activities covering various categories such as electronics, cosmetics, fresh agricultural products, and clothing to stimulate demand across all categories. To enhance consumer trust in the platform, we have upgraded logistics and after-sales services, including price protection, tenfold compensation for counterfeits, home delivery, and partnering with insurance companies to provide product guarantees.

1. Research and Development Investment: In the past 12 months, our R&D expenditure exceeded RMB 10 billion, and R&D spending in the second quarter reached a new high, with continued investment in research and development.

2. Agricultural Technology: We hope to improve the quality and efficiency of agricultural production through technology, accelerate the transformation of research results into products, and optimize the matching of supply and demand. We are promoting agricultural development through support for basic research. In May of this year, we donated RMB 100 million to China Agricultural University as part of a RMB 10 billion agricultural plan. We have appointed Professor Richard Yvonne as an independent director of the Pinduoduo board and established a Legal and Compliance Committee to strengthen our global influence and operational capabilities.

3. Digital Transformation of Manufacturing: Leveraging our consumer insights and technological capabilities, we will help manufacturers understand the ever-changing consumer demands and improve production efficiency. Last quarter, our team entered the industrial belt and organized a series of live streaming events to showcase various local products to consumers.

4. Product Design and Marketing: We are strengthening deep cooperation with merchants, such as a recent collaboration with a well-known liquor brand to explore online and offline integration by opening temporary offline stores.

II. Q&A Analyst Questions

Q: What are the future directions for the "High-Quality Development Strategy"?

A: Since the first half of this year, we have entered a new phase of high-quality development. As a growth company, there is still room for improvement in serving consumers and building a good platform ecosystem. Regarding high-quality consumption, we will continue to strengthen the platform's ability to provide "affordability + good service" to meet the diverse needs of consumers. For high-quality supply, we will delve into the supply chain, promote the technology inclusiveness of manufacturing and agriculture, and aim to connect high-quality products directly to national and global markets. As for a high-quality ecosystem, we will enhance the overall governance capability of the platform by creating a billion-dollar ecosystem.

Q: How will the agricultural strategy and the core strategy of high-quality development be emphasized and coordinated? How will it affect the company's operations? Will there be any changes in future investment scale and pace? A: The efficiency of agricultural circulation still has a lot of room for improvement. In the future, agriculture will continue to be one of our main focuses for development. In the past period, we have strengthened the deep integration of industry, academia, and research. With the addition of Professor Ivonne Rietjens, we look forward to making greater contributions to the transformation of agricultural modernization.

Q: What are the reasons behind the growth rate of total revenue? Will this trend continue into the second half of the year?

A: On the one hand, it is due to the favorable macro environment, and on the other hand, it is a positive feedback from the initial stage of our high-quality development strategy. We have expanded the coverage of low-priced and high-quality products, such as increasing subsidies during the 618 event. We have invested billions of dollars in consumer vouchers to benefit consumers and implemented the concept of "618 Every Day". By increasing the enthusiasm of platform users for consumption, we have provided more sales opportunities for merchants.

We believe that revenue is a natural result of the platform creating value. We do not deliberately pursue the growth rate in the third quarter, and profitability is not the primary goal. In the process of implementing the high-quality development strategy, we have increased efforts in areas such as consumer feedback, support for small and medium-sized businesses, investment in agriculture and the supply chain, and the billion-dollar ecosystem plan. As competition intensifies, we will respond by saving costs and providing better services as our core competitiveness.

Q: Regarding competition, we have seen strong data on active buyers and merchants among our peers. How does this phenomenon affect the company's operations? Do you feel the pressure of competition?

A: We have noticed the changes in the industry and it is not surprising to see competitors increasing subsidies. We believe that healthy competition centered around the goal of consumer-centricity can benefit the entire industry. For us, the key is to adapt to rapid changes, not to focus on what competitors are doing, but to focus on consumer needs and enhance our own capabilities, bravely facing competition.

We will turn competitive pressure into more motivation and focus on implementing the high-quality development strategy. We will focus on research and development, improve the consumer experience, not only limited to price, but also understand and adapt to the ever-changing consumer demands.

High-quality supply is crucial for cost-effective products. We are working hard to upgrade logistics and after-sales services, and promote the digital transformation of agriculture and manufacturing. Our team is also helping farmers and small and medium-sized manufacturers standardize and improve production, design, and logistics.

Q: What are the latest developments regarding TEMU? What is the overall strategy?

A: Our current focus is to use professional knowledge to create unique value. We are not concerned about market share or other financial indicators at this stage. We hope to leverage our technological background and supply chain expertise to provide high-quality and reasonably priced goods to consumers in various markets.

Our team is working hard to understand and adapt to the cultural preferences, social environment, and consumer demands of different markets. We will carefully evaluate the return on investment opportunities and make responsible capital allocation decisions.

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