Pinduoduo posts robust user gain in Q2 2019

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(Image credit: Bigstock/pvl)

Chinese social e-commerce Pinduoudo reported its total revenue surged 169% on year in the second quarter of this year, paired with robust user gains over the past year.

Why it matters: Pinduoduo is the last of China’s top-three e-commerce sites to post earnings for this quarter. Strong growth for major e-commerce players show that e-commerce remains a bright spot for the country despite a slowing economy and trade tension with the US.

  • Alibaba’s net profit more than doubled in the fiscal quarter ended June 2019 driven by the healthy expansion of its core e-commerce business and growing cloud services.
  • JD’s Q2 earnings beat market estimations with net revenue surged 22.9% on the year to RMB 150.3 billion ($21.9 billion)
  • Pinduoduo has shaken up China’s e-commerce duopoly between Alibaba and JD.com in recent years to become the second-largest shopping site for Chinese consumers in terms of daily active users, next only to Alibaba.

How Pinduoduo did in three years what took Taobao five

Details: The company’s total revenues in the quarter were RMB 7.29 billion ($1.06 billion), an increase of 169% from RMB 2.71 billion in the same quarter of 2018.

  • Average monthly active users in the quarter were 366 million, an increase of 88% from 195.0 million in the same quarter of 2018, a QoQ net add of 76.3 million. That’s higher than Alibaba’s 19% year on year growth and 34 million quarterly user gains.
  • The growth is driven by the company’s users-first strategy and the push from the 6.18 shopping festival campaign, according to the company.
  • Gross merchandise volume in the twelve-month period ended June 30, 2019 was RMB709.1 billion, an increase of 171% from RMB262.1 billion from a year before.
  • However, the operating loss was more than doubled to RMB1.49 billion compared with RMB6.64 million in the same quarter of 2018.
  • First and second-tier city markets becoming a major driver for the company’s growth.

“Our GMV from Tier 1 and 2 cities as a percentage of total GMV has gone from 37% in January this year to 48% in June.”

–Pinduoduo founder and CEO Colin Huang in the second-quarter earnings call.

Context: Competition between Pinduoduo, a relative latecomer, and e-commerce giants is escalating, went from pure business rivalry to public spat in some cases.

  • Company founder and CEO Colin Huang accused Alibaba of unfair competition in an open letter this April.
  • Pinduoduo and Alibaba confrontation made headlines during this year’s 618 shopping festival. Home electronics manufacturer Galanz, which just inked a long-term partnership with Pinduoduo in June, accused Alibaba’s online marketplace Tmall of hiding its products from search results.
  • JD.com is also doubling on social e-commerce by spinning off its Pingou group-buying business as a separate division this July.
  • Pinduoduo reported surging losses on significantly higher promotional expenses in the first quarter of this year.