Briefing: Partnership with NetEase Yanxuan sends Pinduoduo shares up 19%

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与网易严选合作浮出水面 拼多多周二股价大涨19%– Sina Tech

What happened: The share price of Chinese social e-commerce company Pinduoduo surged 19.4% on September 11 after a recent app update that brings its former low-profile partnership with NetEase Yanxuan to the spotlight. NetEase Yanxuan set up its flagship store on Pinduoduo in the second half of 2017, but it only gained attention now after Pinduoduo rolled out pavilions for individual brands.

Why it’s important: Operated by NetEase, which is generally known as a video game publisher, NetEase Yanxuan sells unbranded “private label” products that are purported to be identical to their branded counterparts. NetEase Yanxuan and Pinduoduo share a similarity in their business model in sourcing directly from the makers of premium goods and selling to customers so as to lower the costs. But different from Pinduoduo, Yanxuan managed to build up a more solid reputation for providing cost-effective, quality products. Pinduoduo’s share jumped on prospects that the partnership could bring more quality products to Pinduoduo. Given the counterfeit claims surround Pinduoduo, NetEase Yanxuan, which may be affected by the problem as well, is not proactive in promoting the partnership. A company spokesperson told local media that the cooperation is just testing the waters and the company hasn’t put much effort into it. As a friend of Pinduoduo’s founder Huang Zheng, NetEase CEO William Lei is an early state investor of Pinduoduo.

Is NetEase’s Yanxuan the new trendsetter for China’s e-commerce industry?