Included in social e-commerce company Pinduoduo’s annual report released Wednesday was a letter from its founder and CEO Huang Zheng which sought to reassure shareholders about the company’s recent troubles including continuing allegations of peddling counterfeit goods.
Pinduoduo, Huang said, is like “when Yao Ming just started in elementary school. He might have been quite tall, but was nevertheless only an elementary school student,” referring to the platform’s outsize success despite only being four years old.
The company, Huang added, like China’s most famous professional basketball player, “needs adequate nutrition, appropriate training, and life experiences” as it contends with getting “pushed onto the court to compete head-to-head with adult players.”
Huang also appeared to make a plea for understanding when it came to the company’s investment decisions. “It is probably not a good idea to put our money ‘in the piggy bank’ into a fixed deposit at this stage,” he added.
Pinduoduo shares fell 2% following the report, closing at $23.94 on Wednesday. Its market value was around $27.6 billion after going public in New York last year, around 65% of JD.com ($42.9 billion) and one-twentieth the size of Alibaba ($481.29 billion).
The already intense online retail rivalry between Pinduoduo and the country’s dominant player, Alibaba, is heating up. The Chinese e-commerce upstart has voiced concerns beginning late last year that it was contending with monopolistic advantages on the part of Alibaba, which began compelling merchants to choose between the platforms with a “forced exclusivity” policy.
Third-party merchants were reportedly forced to speak publicly about Pinduoduo as a fake seller and then rewarded with more traffic on Tmall, Alibaba’s proprietary e-marketplace, reported Tencent Tech citing Pinduoduo co-founder Dada as saying. Alibaba denied the claim at the time according to local media, and was not available for comment when contacted by TechNode on Thursday.
Shanghai-based Pinduoduo is struggling to rid itself of its reputation as a counterfeit seller. Chinese media reported previously that Apple asked several distributors to suspend their partnership with Pinduoduo, or risk losing coveted distributor status. The company defended the authenticity of iPhones available on the platform, saying it sourced inventory from Apple’s authorized offline distributors.
“The current “forced exclusivity” is likely to persist for some time,” Huang said, adding that Pinduoduo will continue to invest “proactively” for the long-term value of the company. It recorded RMB 471.6 billion ($68.6 billion) gross merchandise volume (GMV) in 2018, a 234% year-on-year increase from the year prior. However, net losses in 2018 ballooned nearly 20 times to RMB 10.22 billion compared with a year earlier.