While following the low price strategy on other platforms, Pinduoduo (PDD. US) has turned a blind eye and started to give merchants red envelopes.
On September 9, Pinduoduo's "Ten Billion Reduction" plan issued welfare again. All the transfer orders in remote areas generated from that day on, the merchants only need to send the orders to the transfer warehouse, and the logistics transfer fees for the second shipment of the transfer warehouse to remote areas such as Xinjiang, Xizang, Gansu, Ningxia, Inner Mongolia, etc., are borne by Pinduoduo. At present, this new reduction measure has covered all the merchants on the platform.
Due to factors such as geographical location, logistics costs in remote areas such as Xinjiang have always been high. Major e-commerce platforms generally reduce the logistics costs of merchants through transit consolidation and charge them a certain amount of logistics transit fees. Pinduoduo's exemption of merchant logistics transfer fees is the first in the industry.
And this is just one part of Pinduoduo's recent package plan.
On September 5th, Pinduoduo issued an internal notice to merchants on the platform, adjusting their business policies: the basic deposit for merchant stores will be reduced from 1000 yuan to 500 yuan. The initial deposit for newly established personal and corporate stores will also be reduced to 500 yuan.
As early as the release of its Q2 financial report, Pinduoduo had already announced an investment of billions to support new quality merchants and significantly reduce transaction fees for merchants. It is expected to reduce transaction fees by 10 billion yuan in the next year. This is also known as Pinduoduo's "Billion Reduction" plan.
What does' billion yuan reduction 'mean?
The operating profit of Pinduoduo in the second quarter of this year was 32.5645 billion yuan, and the net profit attributable to Pinduoduo's common shareholders was 32.0094 billion yuan. This means that the reduction of Pinduoduo this time will give up nearly one-third of the profits in the second quarter of 2024, and almost give up the entire operating profit in the first quarter of the second quarter of last year.
And all of this seems to have footnotes.
At the Q2 financial report and performance exchange meeting this year, Zhao Jiazhen, Executive Director and Co CEO of Pinduoduo Group, stated that the management has reached a consensus that sacrificing short-term profits is necessary for long-term healthy development.
Chen Lei, founder and CEO of Pinduoduo, directly stated that Pinduoduo believes that the company is still in the stage of investment, and its multiple business lines are facing fierce competition and uncertainty brought by the external environment. In the next few years, it will not consider repurchasing or distributing dividends!
Pinduoduo, as an e-commerce platform, connects merchants and users. Why is it that at this point in time, after winning market share through the consumer oriented launch of the 'billion dollar subsidy', the 'billion dollar subsidy' is being used to 'give red envelopes' to businesses.
Merchant: Pinduoduo in the next big game
On September 4th, Mumu (pseudonym)'s Pinduoduo store suddenly received a message from the website stating that the basic deposit threshold for the store had been lowered from 1000 yuan to 500 yuan, which can be viewed in the "Merchant Backend - Account Funds - Deposit" section.
Mumu was also puzzled because this was the only store she operated that had on-site discount information prompts. Later, she learned that the platform was conducting centralized testing and this store became one of the first batch of discount recipients. She withdrew the waived amount directly and the waived fee was credited to her account 24 hours later.
Not only has the deposit decreased, but some merchants have also noticed that Pinduoduo has recently made significant adjustments to its policies towards merchants.
Li Lin (pseudonym), a toy merchant, was pleasantly surprised to discover a "red envelope arrival reminder" in the promotion finance department. The message states, "In order to enhance your advertising experience, the system will refund the corresponding amount of promotional red envelopes for partial refunds and service fees. This time, the system will refund the promotional red envelopes under Account Management - Financial Management - My Coupons. The conditions for using the red envelopes are no threshold and the validity period is 14 days
And behind this is actually the implementation of a series of "reduction" actions by Pinduoduo. Since mid August, Pinduoduo has successively launched refunds for technical service fees, promotion service fees, and upgraded the exemption of technical service fees.
On August 13th, Pinduoduo launched a refund policy for technical service fees for merchants who registered to participate in the on-site resource slot activity. For any product orders generated from participating in billion yuan subsidies, flash sales, platform promotions, 9.9 yuan special sales, trendy prices, multiplayer groups and other on-site activities, after the user initiates a refund, the platform will refund 1% of the basic technical service fee for first use, then pay orders and 0.6% of the basic technical service fee for other orders proportionally.
Subsequently, Pinduoduo upgraded its "refund rights for technical service fees", offering a 60% discount on technical service fees for merchant use before payment activity orders.
In addition, the "Promotion Service Fee Refund Benefit" has also taken effect, which means that for orders where consumers make a full refund before shipment, the platform will automatically refund the corresponding amount of promotion software service fee to the merchant as a promotional red envelope, without the need for the merchant to file an appeal.
Recently, Pinduoduo released the latest merchant notice, reducing the basic deposit for merchant stores from 1000 yuan to 500 yuan, and the initial deposit for newly joined personal and corporate stores will also be reduced to 500 yuan.
According to Pinduoduo, the first batch of merchants to enjoy this policy have covered nearly 70 categories, and some merchants have completed withdrawals, benefiting millions of merchants
Pinduoduo's recent actions have sparked heated discussions among merchants. For us, the main operating costs of running a Pinduoduo store include opening a store, tool fees, platform service fees, traffic promotion fees, and logistics after-sales fees. Therefore, this series of measures is very practical for merchants, which is to reduce operating costs and strive for a better business environment. "said Chen Qing (pseudonym), a seller of fresh produce on Pinduoduo.
Li Lin bluntly said, "This is Pinduoduo's next big move. Following this line of reasoning, the logic of this operation is very simple. Only when we benefit from it, will we be willing to bear the cost, and ultimately truly benefit consumers, can this chain work. Similarly, only when the interests of consumers are protected and the trust crisis between merchants, consumers, and platforms is eliminated, can business be done for the long term
Mumu said that the main reason he continues to cultivate on Pinduoduo is "making money". Compared to other domestic e-commerce platforms, Pinduoduo currently has a huge traffic dividend, and for white label merchants, it has to compete with small and medium-sized merchants and big brand merchants for traffic on Taobao and Tmall; On JD.com, it is necessary to compete with self operated products for traffic, but on Pinduoduo, white label merchants have gained the most direct attention from consumers. The second advantage is that the entry procedures for Pinduoduo are relatively flat and simple, such as zero yuan entry and fast review speed, which are friendly to small and medium-sized merchants who want to try e-commerce. Now, with the addition of this package plan, Pinduoduo will have a great help in attracting merchants.
Platform: 'Blade inward' is a natural progression
Pinduoduo has only been established for 10 years. Looking back at the development history of Pinduoduo, the platform has always had supportive policies for merchants throughout, such as zero yuan entry, store traffic support plan, and zero commission policy for fresh agricultural products... In 2018, Pinduoduo broke through its "billion yuan subsidy" and attracted brand merchants to join, beginning to shift towards a "high cost-effectiveness" mindset. In 2020, Pinduoduo's policies of "zero commission" and "zero platform service annual fee" saved merchants over 80 billion yuan in operating capital costs..
Thanks to the joint efforts of merchants and consumers, Pinduoduo achieved a total revenue of 97.0595 billion yuan in the second quarter of this year, an increase of 86% compared to the same period last year's 52.2807 billion yuan, just one step away from breaking through the billion yuan mark.
From this logical perspective, Pinduoduo's decision to adopt an "inward facing" strategy is a natural progression.
At the mid-2024 performance exchange meeting, it was pointed out that the senior management of Pinduoduo made rational judgments about future growth, stating that "Pinduoduo's profit curve is not linear" and "the profit growth in the past few quarters is the result of a mismatch between short-term investment cycles and financial reporting cycles
Pinduoduo founder and CEO Chen Lei directly pointed out that Pinduoduo's high-quality development path will enter a new stage, and the next step will be to continue building a healthy and sustainable platform ecosystem through both "strong support" and "resolute governance".
Why should Pinduoduo, which leads the industry in revenue and profit growth, take the initiative to slow down and re-examine the relationship between the platform and merchants?
From an industry perspective, the high growth dividends of the e-commerce industry have faded away, and platforms have begun to engage in close competition for existing users. However, in the siege of low prices, it is difficult to say that there are real winners for e-commerce platforms, merchants, and consumers.
Top e-commerce sellers have expressed to Time Finance that excessive pursuit of low prices can lead to no profit in various links, and the participants in these links are also ordinary consumers. When they have no money to make, consumers will also face a decrease in their purchasing power, forming a vicious cycle.
Nowadays, the era of high growth of e-commerce is far away. Whether it is traditional shelf e-commerce such as Alibaba and JD, or Pinduoduo, a new e-commerce growing on the mobile Internet, as well as content e-commerce such as Tiktok, Kwai, and Xiaohongshu, they are all making changes in their competitive strategies.
For platforms, reaching a certain scale will face the choice between short-term high growth and long-term stable growth. Obviously, the management of Pinduoduo chose the latter and came up with their own solution. On one hand, "billions of subsidies" compete for consumers, and on the other hand, "billions of exemptions" support businesses, shaping a virtuous cycle of ecology. From a broad perspective, the healthy growth and increased profitability of businesses can not only drive employment and consumption, but also achieve a positive economic cycle; From a small perspective, Pinduoduo provides businesses with a better soil, and the healthy development of businesses can in turn strengthen the platform and serve more consumers.
Pinduoduo stated that since the beginning of this year, it has been continuously increasing its efforts in high-quality development. With the implementation of a series of policies, high-quality development will also enter an acceleration period, bringing more benefits to both supply and demand sides.
According to insiders at Pinduoduo, Pinduoduo will also upgrade its after-sales service system for merchants. Currently, a green channel has been opened and a special after-sales service team has been established to fully support merchants in appealing against abnormal orders, malicious complaint orders, negative consumer experience orders, etc. After successful appeal, the platform will compensate for the relevant orders.