In a letter to investors, Pinduoduo founder Colin Huang suggests that companies with new business models, a group that Huang portrayed Pinduoduo as leading, are expected to outrun their older rivals in a world that’s witnessing a “reestablishment.”

Why it matters: The already intense rivalry between Pinduoduo and arch-rivals like Alibaba and JD is reaching a fever pitch as the Covid-19 is moving more Chinese shoppers online.

  • Instead of playing catch-up, the four-year-old company now claims to be China’s second-largest e-commerce platform with 585.2 million active buyers, next only to Alibaba.
  • Both Alibaba and JD have rolled out their counterpart apps that adopt similar models of Pinduoduo. More rivals like Alibaba-backed Suning are reportedly joining the battle.

When this tiny virus was dropped into our world, it acted just like a catalyst in a test tube, accelerating the formation of a whole new world. Inevitably, some dimensions of the previous world are being restructured, some rules are being rewritten. The impact of this sweeping force will fundamentally and permanently change the world we are in now. Just like what I explained in the previous shareholder letters about PDD’s formation, new models are bound to emerge and grow in a whole new setup. We are indeed seeing the phasing out of some as new ones emerge. It is the time of reestablishment.”

—Pinduoduo founder and CEO Colin Huang in the letter to investors

Details: Included in Pinduoduo’s 2019 annual report released Saturday was a letter from its founder and CEO Colin Huang which sought to reassure shareholders about the company’s long-term growth prospects.

  • Different from the previous public letters that mainly address the company’s operations and strategies, Huang explained this time his thoughts on the Covid-19 pandemic as well as the history of time, mentioning the theories of big thinkers from Newton to Einstein.
  • By predicting a new world setup, he believes new models will prosper the most. He predicts old models will be phased off, without mentioning the company’s rivals by name. 
  • The company has recorded  RMB1.01 trillion ($144.6 billion) of gross merchandise volume from 585.2 million active buyers in 2019. That’s RMB1,720 ($247.1) of annual spending per active buyer, up 53% year on year from RMB 1,127 in 2018, the company’s 2019 report shows. 

Results may vary: Public reception of Huang’s letter has been mixed. While some appreciate Huang’s philosophic thinking, others complain the letter is missing the point and offers no valuable detail for investors.

When Einstein wrote down his famous E = MC2, he elegantly (in some sense also arrogantly) depicted a physical world in his mind. However, what he did not explain in his theory of relativity is the relationship between the human mind and the physical world, nor the relationship between energy and information.”

—Pinduoduo founder and CEO Colin Huang in the letter to investor

Context: Pinduoudo posted weaker-than-expected revenue for the fourth quarter of 2019 in March. The company expects disruption caused by coronavirus outbreak will have negative impacts on its Q1 result.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.