Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Pinduoduo (PDD) suffered an unprecedented 30% decline in its share value at the start of this week, but business analyst Shaun Rein sees here an opportunity for investors. Buy PDD, he tells them on CNBC. The company has hit a wall through China’s consumer decline in trust, but he sees enough possibilities to grow overseas, especially with Temu, he adds.
Temu, owned by Pinduoduo, is one of the leaders in online retail that has been ruffling international competitors in the past year. Business analyst Shaun Rein looks for the BBC at the firm’s international expansion. “They’re proud that Chinese companies can slay the e-commerce dragons from the United States like Amazon,” he adds.
BBC:
Temu is owned by Chinese giant Pinduoduo – “a monster in Chinese e-commerce,” according to Shaun Rein, founder of the China Market Research Group.
“Throughout China, everyone buys products on Pinduoduo, from speakers to t-shirts or socks,” he says.
The company consistently trades places with rival Alibaba for the top spot of most valuable Chinese firm listed on a US stock exchange. Its current worth sits at just under $150bn (£117bn).
With the Chinese consumer market under its spell, Pinduoduo expanded overseas with Temu, using the same model that had ensured its previous success. According to Mr Rein, who is based in Shanghai, the firm has become a great source of pride and patriotism.
“They’re proud that Chinese companies can slay the e-commerce dragons from the United States like Amazon,” he adds.
A quick scroll through the Temu app or website will bring up anything from steel-toecap trainers to a device designed to help the elderly and pregnant women put on socks. A menagerie of manufactured goods, almost entirely produced in factories in China, Mr Rein explains.
China’s consumer confidence remains low, even when its largest e-commerce platforms offer massive support, says business analyst Shaun Reinat the Hill. Rein said that consumers were less likely to spend more during 618 as merchants had already been discounting heavily for years because of the pandemic, and deals were not that much better compared to previous months.
The Hill:
Analysts say that consumption remains soft this year as China emerges from the pandemic, even as platforms including JD.com, Tmall, Taobao and Pinduoduo offered billions in subsidies.
“Chinese consumer confidence remains weak due to a mix of geopolitics, continued weakness from COVID-19 and domestic Chinese politics,” said Shaun Rein, founder and managing director of the China Market Research Group in Shanghai.
Rein said that consumers were less likely to spend more during 618 as merchants had already been discounting heavily for years because of the pandemic, and deals were not that much better compared to previous months.
In March, JD.com launched a “10 billion yuan subsidies” program to compete with rival Pinduoduo, which is known for its low-priced goods. The CEO of Alibaba’s e-commerce business unit, Trudy Dai, also previously pledged to make “huge, historic” investments to attract users to its platforms.
“For months, Chinese consumers have been price-conscious, looking for deals and trading down across most product categories,” Rein said.
China’s e-commerce landscape is changing fast and branding expert Ashley Dudarenok explains how brands can deal with the new big five: Alibaba, JD, Pinduoduo, Douyin, WeChat, for Technode. Here are her top-5 tips.
Ashley Dudarenok:
Adopting an overall e-commerce strategy and repositioning flagship stores on Douyin and Pinduoduo
E-commerce platforms need to adopt a comprehensive layout and reposition their flagship stores on Douyin and Pinduoduo. Douyin is focusing on developing its digital shelf e-commerce, while Pinduoduo is leveraging its advantage in high-frequency consumer goods categories to become a comprehensive platform that meets diverse needs. For brands, as the digital shelf e-commerce landscape becomes evenly matched, Douyin/Pinduoduo flagship stores will play an equally important role as their Tmall/JD flagship stores.
Building a stronger cross-platform synergy and seizing the opportunity to enhance bargaining power with e-commerce platforms
As e-commerce platforms become increasingly mature, the overlap of their consumer groups will inevitably continue to increase, making it more difficult to expand user increment. However, it is a good opportunity for brands to increase their bargaining chip with e-commerce platforms in terms of traffic, product promotion, and consumer data transparency. Stronger cross-platform collaboration between brand and e-commerce platforms is worth exploring on both sides, especially in category differentiation, pricing, and promotion.
Reducing the reliance on livestream e-commerce influencers and strengthening content co-creation
The role of e-commerce live streaming, especially influencer live streaming, in “transactions” will be further weakened. Most influencers may find that selling standard or common products are losing their appeal to the public. Influencer live streaming will reach a critical crossroads, and influencers will need to attract consumers through better content. Currently, “selling-only” influencers who lack content will lose their competitiveness and gradually be phased out. Patterns may emerge where common goods are sold more through digital shelf e-commerce and influencers will focus on more niche products with strong digital content potential like trendy goods.
4. Developing innovative supply chain solutions
Innovative supply chain solutions such as direct sourcing and supply chain financing can help brands reduce costs and improve efficiency. Brands need to optimize their organizational structure, develop cross-platform e-commerce capabilities, accumulate universal key capabilities to support multi-platform development, and lay a foundation for other e-commerce models with future development potential, such as instant retail.
Improving consumer experience through data analytics and personalized marketing
Brands need to use data analytics and personalized marketing to improve the consumer experience. It can help brands better understand consumer behavior and preferences, and provide tailored products and services to meet their needs. With the convergence of platform models, the profit levels of brand flagship stores on various platforms are expected to gradually converge. In order to improve efficiency, brands need to optimize their organizational structure, develop cross-platform e-commerce capabilities, accumulate universal key capabilities to support multi-platform development, and lay a foundation for other e-commerce models with future development potential, such as instant retail.
Overwork in China – called the 996 culture – is rampant, especially in the IT industry. The recent death of a Pinduoduo employee also shocked social commentator Zhang Lijia. For her, this cannot be solved by the industry or employees, but the government should step in, she writes in the South China Morning Post.
Zhang Lijia:
The Chinese government has done little to address the 996 regime, which clearly violates labour laws that state that workers should work for no more than eight hours a day and 44 hours a week on average.
The 996 culture makes inhuman demands on workers’ health and hurts their well-being, yet workers are left in a weak position, too often simply unable to resist their bosses’ unreasonable demands. The government should step in to protect workers, end the 996 regime, and stop capitalism in its coldest form from being practised in socialist China.
Labour laws must be strengthened and vague legal terms avoided. For example, a 1995 State Council revision of working hours stipulates that where companies are unable to give their employees their two days of weekend rest, flexible days off may be arranged in light of actual conditions. Some companies take this as an excuse to not give their workers the weekends off.
In many developed countries, labour unions try to protect workers’ interests. In China, unions exist but primarily in name only. Perhaps the authorities can give labour unions some space and allow them to play their role in easing the tension between employers and employees.
The loss of a young life is a tragedy. At the very least, I hope it spurs positive action.
“China’s private sector economy is fast-paced, dynamic, and in many areas, intensely competitive. The lucrative and rapidly expanding internet services sector amplifies these characteristics, taking them to a whole other level,” Matthew Brennan, a China-based tech analyst and co-founder of digital marketing consultancy China Channel, told VICE World news.
As the tech industry’s toxic work culture gains prominence in the public consciousness, there is now greater pushback from Chinese employees. In 2019, a GitHub-based protest movement called 996.ICU saw software developers challenging the exploitative practices that run rampant in the industry (ICU is short for Intensive Care Unit). In the 996.ICU GitHub repository, people shared workplace anecdotes, exposed unreasonably demanding tech companies, and designed a software license that forces companies to comply with local labor laws.
Despite such isolated incidents of activism, however, Brennan thinks that the culture of overworking in China is “unlikely” to subside anytime soon. “Business in China’s internet industry is conducted like a brutal guerrilla war in which developers, engineers, and operations staff work themselves to death under grueling schedules in which speed of execution is everything,” he said.
And in this system, tech employees are often “willing to be chewed up and spat out of the system by their mid-30s in exchange for generous compensation or the chance to strike it rich with an IPO.”
E-commerce firm Pinduoduo is closing in on market leader Alibaba, show recent post-corona figures, says marketing expert Arnold Ma in Kr-Asia. Ma believes that the key to Pinduoduo’s growth is its continuing focus on its D2C (direct to consumer) model across manufacturing, agriculture, independent sellers, and new brands.
Kr-Asia:
The number of Pinduoduo’s active annual buyers in the year ended September 30 reached 731.3 million, an increase of 36% YoY, and closing the gap with rival Alibaba, which boasted 757 million annual active consumers in the same period.
General merchandise volume (GMV) in the twelve-month period ended September 30 2020 reached nearly RMB 1.5 trillion, up 73% YoY. In addition, the Shanghai-based firm recorded a net loss of RMB 784.7 million during the third quarter, narrowing from a loss of RMB 2.3 billion in the same quarter of 2019.
“Great to see such a positive quarter from Pinduoduo post-pandemic in China,” noted Arnold Ma, founder of Qumin, a digital marketing agency based in London and Shanghai, echoing Wu’s comments.
Ma believes that the key to Pinduoduo’s growth is its continuing focus on its D2C (direct to consumer) model across manufacturing, agriculture, independent sellers, and new brands. DuoDuo Maicai is a dedicated C2M function for farmers to directly reach consumers, which the company launched in October.
Pinduoduo’s strong performance is evidenced by the average annual spending per user increasing from RMB 1,857 (USD 280.84) in the second quarter to RMB 1,993 (USD 301.41) in the third quarter, despite the net addition of 48 million active buyers.
While the jury is still out on the economic effects of the coronavirus crisis, the majority of the wealthy ended off better since the COVID-19 hit the world, says Hurun rich list founder Rupert Hoogewerfin the Business Standard. "The two biggest ‘winners’ from the Hurun Top 100 of Covid-19 were online retailers Jeff Bezos of Amazon and Colin Huang Zheng of Chinese low-end ‘social shopping’ giant Pinduoduo," says Hoogewerf.
The Business Standard:
Amazon Inc boss Jeff Bezos, Reliance Industries chairman Mukesh Ambani and Dr Cyrus Poonawalla of Pune-based Serum Institute of India saw their wealth increasing during the coronavirus pandemic, says research done by a Chinese group.
Hurun Research's 'Wealth Impact 4mths after Covid-19 Outbreak' tracks the wealth changes of the world’s most successful entrepreneurs in the four months ending May 31. It is a follow-up on the 'Wealth Impact 2mths after Covid-19 Outbreak' looking into wealth changes in the two months ending 31 March 2020 and the Hurun Global Rich List 2020, which had a wealth cut-off of 31 January 2020.
As many as 60 per cent of the entrepreneurs on Hurun Global Rich List Top 100 had their wealth rise or stay the same in the four months since the outbreak. As many as 40 per cent entrepreneurs saw their wealth reducing. “Whilst the first two months of the outbreak saw a massive wealth wipeout of the Hurun Global Top 100, the second two months saw a V-shaped recovery for two-thirds of the Hurun Global Top 100, reminding us that it is dangerous to bet against the world’s best wealth creators,” said Rupert Hoogewerf, Hurun Report chairman and chief researcher.
"The two biggest ‘winners’ from the Hurun Top 100 of Covid-19 were online retailers Jeff Bezos of Amazon and Colin Huang Zheng of Chinese low-end ‘social shopping’ giant Pinduoduo, who added Rs 1.51 trillion (20 billion US$) and Rs 1.35 trillion (18 billion US$) to their fortunes, pretty much all the gains coming in the past two months,” said Hoogewerf.
Another big winner was Eric Yuan Zheng, 50, of popular video conferencing app Zoom, who saw his wealth triple from Rs 34,000 crore in January to Rs 98,200 crore today, propelling him up from 555th in the world four months ago to knocking on the door of the world’s Top 100 today."
Pinduoduo has been challenging e-commerce giants Alibaba and JD during the corona crisis. Marketing analyst Ashley Dudarenok looks if Pinduoduo can keep up in the e-commerce wars in China, for Bloomberg.
China's e-commerce players JD, Alibaba and Pinduoduo tried to build leverage during the coronavirus crisis, explains marketing guru Ashley Dudarenok at Bloomberg. And how are they profiting now the demand for Chinese products in the rest of the world is down?
Alibaba has spent millions of dollars in its efforts to fight counterfeits, including using artificial intelligence systems that can automatically identify, take down and block listings that appear to be knockoff or counterfeit goods.
Whether Pinduoduo’s rapid rise to fame turns out to be a flash in the pan or it becomes a genuine competitor to incumbents like Alibaba and JD.com remains to be seen, according to Shaun Rein, founder and managing director of the China Market Research Group.
Some of its most popular products are commoditised items like toilet paper or laundry detergent.
“Many consumers are looking for better value and are becoming more price sensitive on items they don’t care about,” said Rein. “When you’re not rich, you don’t care what toilet paper you use to wipe your butt.”
For many outside China the successful IPO on Nasdaq of group purchasing platform Pinduoduo, mildly comparable to the less successful Groupon, came as a surprise. Shanghai-based business analyst Ben Cavender tries to explain the success at Inkstone. It uses the popular Tencent platforms WeChat and QQ.
Inkstone:
Pinduoduo has a mini-game called “Duo Duo Orchard,” in which players plant a tree of their choosing on the app and collect points by logging in daily, making purchases and inviting friends. After collecting a certain number of points, users will receive a box of fresh fruit.
Pinduoduo’s social media features give it “more stickiness” than Groupon, according to Ben Cavender, a senior analyst with the Shanghai-based China Market Research Group.
“It generates a lot more interest and there’s an entertainment value to the shopping process,” Cavender told Inkstone...
China’s online shopping market has long been dominated by two giants, Taobao of Alibaba (which also owns Inkstone) and JD.com.
Pingduoduo had 168 million monthly active users in May, behind Alibaba's 502 million and JD.com’s 273 million, according to data compiled by consulting firm Jiguang.
“I think increasingly what we are going to see is more space for different kinds of models,” Cavender says. “It may take some share away from Taobao and some of the low-end market share away from [Taobao-owned] Tmall and JD.com. But Pinduoduo’s not going to replace them.”
Currently, the majority of Pinduoduo’s users live in cities with populations of fewer than three million people – small cities with users who are more price-sensitive.
In the more affluent cities, Taobao and JD.com still dominate...
“If Alibaba decides that’s a market they want to own, they are going to spend a lot of money, and Tencent has to decide how much they want to support Pinduoduo’s long-term growth,” Cavender says.
