In the fourth quarter of the e-commerce peak season, Pinduoduo unexpectedly delivered another impressive financial report. On March 20th, Pinduoduo Group released its performance reports for the fourth quarter and full year of 2023 as of December 31st. In the quarter, Pinduoduo Group's revenue was 88.9 billion yuan, a year-on-year increase of 123%; The operating profit under US GAAP is 22.4 billion yuan. The annual revenue for 2023 was 247.6 billion yuan, a year-on-year increase of 90%. The net profit attributable to ordinary shareholders was 60.02 billion, an increase of 90% from 31.54 billion in 2022.
The dual high growth of revenue and net profit is related to the driving force of online marketing services and transaction services revenue. In 2023, Pinduoduo's trading service revenue reached 94.1 billion yuan, a year-on-year increase of 241%. Online marketing services and other revenue reached 153.5 billion, a year-on-year increase of 49%. In the fourth quarter, with only major promotions such as Double 11 and Black Friday, transaction service revenue increased by 357% to 40.21 billion yuan. Online marketing services and other revenue increased by 57% to 48.68 billion.
At around 8:00 pm on the evening of the financial report release, the stock price of Pinduoduo surged by over 16% before trading. Under the impressive financial report, in addition to the growth of domestic e-commerce business, Temu, which has been online for nearly two years, has long been regarded as the second growth curve of Pinduoduo. As early as the third quarter of last year, both revenue and net profit increased. Many securities analysts reached a consensus that the fundamental reason for Temu's far exceeding expectations in financial reports was its strong growth potential overseas. In the fourth quarter, Temu showed more possibilities to the outside world.
Entered 50 countries and regions within less than two years of launch
Temu, launched in September 2023, is a cross-border e-commerce platform under the Pinduoduo Group, and also the third startup after the main site of Pinduoduo and Duoduo Maicai. In this entrepreneurship, Pinduoduo has allocated the best resources for Temu, from position one to the frontline team that is charging forward.
After the launch of the overseas business, Chen Lei, Chairman and Co CEO of Pinduoduo, personally led the company and focused on global business; The backbone of Duoduo's vegetable buying team has been transferred to overseas business. The Duoduo Maicai team is known as the "Iron Army", and in an internal speech by the top management of Pinduoduo, they stated that "Maicai is the touchstone for Pinduoduo people". In the community group buying war of that year, Duoduo Maicai attacked the city and took the lead among many giants. Fresh products with high frequency, easy wear and tear, and low gross profit are categories that e-commerce has been trying to transform but find difficult to make a profit from. After experience, the Duoduo Maicai team has long been an efficient team with supply chain management capabilities and e-commerce operation experience.
Some analysts believe that Temu's entrepreneurship starts from 1 to 10, with a starting point of 1, not 0. For over a year, Duoduo Cross border has been unstoppable globally, which proves that cross-border business is very suitable for the accumulated capabilities of the Pinduoduo team in the past. "Although new businesses require learning, the team's learning costs and supply chain organization costs are far lower than other companies'."
On the other hand, Duoduo Cross border continues the advantages of its main website and Duoduo Maicai business and has been upgraded. Pinduoduo's main website emphasizes "quality to price ratio", while Temu, who has logged into the Super Bowl for the second time, has advertised "shopping like a billionaire". In terms of marketing, Temu's team has long known how to accurately attract consumers with high-value coupons, discounts, and other gameplay. At this point, the advantages of Pinduoduo's past focus on the e-commerce industry and the cultivation of young teams can be unleashed.
Even though they entered late, this newcomer launched at an astonishing speed in different markets such as Australia, Europe, and Asia. According to statistics, Temu has been online for less than two years, but has quickly entered 50 countries and regions worldwide so far.
In the third quarter financial report, commission revenue, as the core indicator, increased from 14.4 billion yuan in the second quarter to 29.2 billion yuan month on month. In the fourth quarter of last year, it increased again to 40.21 billion, a year-on-year increase of 357%. From its impact on revenue, Temu has been recognized as the "second engine" for Pinduoduo's performance growth.
"Full custody mode" helps merchants easily go global
At the previous financial report conference, Chen Lei stated that "unlike the previous two times, Duoduo Cross border has been standing on the shoulders of the main station and Duoduo Maicai since its inception, led by elite soldiers who have experienced the training of Duoduo Maicai's business, and the team generally has a profound understanding of the national manufacturing supply chain that has been accumulated since the establishment of independent stations.".
In addition to the team's internal combat effectiveness, Chen Lei believes that another core advantage of Temu lies in Pinduoduo's long-term accumulation in the supply chain. Eight years ago, Pinduoduo brought a qualitative change to the domestic industrial belt through its innovative model of consolidation. The massive demand gathered by consolidation significantly reduced the production costs of small and medium-sized businesses, and allowed consumers to buy high-quality and affordable goods, bringing benefits to both production and consumption sides. During the 8-year deep cultivation process of the industrial belt, Pinduoduo's team has accumulated profound supply chain capabilities, and in just one year, it has promoted more than 100 industrial belts such as Guangzhou, Foshan, and Shenzhen to quickly go global.
The powerful tool that Pinduoduo uses to help industrial belts quickly go global is the "full custody model". In this mode, domestic merchants who have settled in Duoduo Cross border only need to provide their products to the platform and ensure product quality and performance time, and the platform will complete almost all subsequent operational work, including marketing, cross-border logistics, after-sales, legal, intellectual property, and so on.
At present, Duoduo's cross-border "full custody model" has established a lower cost, higher growth, and lower threshold for merchants to go abroad. At the same time, the free creative space allows businesses to focus more on design, research and development, and production, improving their independent innovation capabilities. Industry insiders believe that the series of changes made by Duoduo Cross border are in line with the development trend of Chinese enterprises establishing independent brands, opening up a new growth space for merchants in the cross-border e-commerce industry.
During last year's "Black Friday" period, Liu Wenhai, a second-generation "post-90s factory" engaged in cross-border hat business, sold at least 700000 hats at once, cleared the warehouse, and even sold out the old hats that his parents had accumulated for over a decade. Before the arrival of "Black Five", he had a good expectation of order volume and prepared in advance, as the previous year's "Black Five" had a total order volume of 100000 on multiple cross-border e-commerce platforms such as Duoduo Cross border and Amazon.
The reason why merchants such as Liu Wenhai have raised their sales expectations is that many cross-border platforms have provided assurance to merchants through the "Black Five" promotion, providing them with operational certainty. On the eve of the "Black Five" promotion, in order to solve the problem of cross-border e-commerce logistics and suppress the rising air freight prices, Duoduo Cross border opened up sea freight express shipping channels and launched lower cost sea freight logistics. At the same time, the platform has also launched a new logistics selection tool to help merchants find more favorable domestic logistics suppliers.
Continue to explore new modes and technologies
According to data from the Ministry of Commerce, in 2023, China's cross-border e-commerce imports and exports reached 2.38 trillion yuan, a year-on-year increase of 15.6%. Among them, exports reached 1.83 trillion yuan, a year-on-year increase of 19.6%. This year's Government Work Report proposes to promote the healthy development of new formats such as cross-border e-commerce, optimize overseas warehouse layout, support the upgrading of processing trade, and expand new growth points such as intermediate goods trade and green trade.
Cross border e-commerce is growing into a new growth pole for foreign trade exports, and under the trend, many cross-border businesses continue to innovate and explore. After the "full custody mode", Duoduo Cross border has launched a "semi custody mode" for overseas stocking merchants, improving the delivery efficiency of the final process and improving the user experience. At the same time, Duoduo Cross border has launched a JIT model (a pre-sale model where orders are issued first and then shipped). After the merchant develops a new product, they can first send the first order to the domestic warehouse of the platform for testing, and then decide whether to increase production. Merchants do not need to prepare goods in advance to the domestic warehouse of Duoduo. Based on the actual sales orders generated, they can ship to the cross-border domestic warehouse of Duoduo within 24 hours, greatly reducing the stocking pressure on the factory.
As a new channel for industrial belt merchants to go global, Duoduo Cross border is not only the second growth curve of Pinduoduo, but also a new driving force for many industrial belt merchants. At the 2023 financial report conference call, Chen Lei mentioned that Pinduoduo's original intention for global business was to bring excellent global merchants and high-quality products to consumers around the world through supply chain and technological capabilities, helping different consumers around the world achieve their dreams.
This business is very new and still in its early stages. Pinduoduo will explore more technological and model innovations to meet market competition and challenges. In the future, connecting the industrial belt and small and medium-sized businesses on one hand, and pursuing cost-effective users on the other hand, Duoduo Cross border will create more possibilities for China's manufacturing industry.