Chinese e-commerce giant Pinduoduo posted better-than-expected results for the first quarter of this year, readying for more investments in agriculture research and logistics.
Why it matters: Facing intensified competition in China’s e-commerce market, the Shanghai-based company has become laser-focused on “digitizing agriculture” and the grocery sector.
- Investment into agriculture aligns with the government’s drive to modernize agriculture. It’s also a priority for rivals like Alibaba and JD.
Revenue beat: Pinduoduo posted first quarter revenue of RMB 22.2 billion ($3.4 billion), climbing 239% year-on-year from RMB 6.5 billion in the same quarter of 2020. The increase was primarily driven by revenue increase from online marketing services and merchandise sales.
- Revenue beat the average analyst estimate of $3.2 billion compiled by Yahoo Finance.
- Pinduoduo’s annual active buyers rose 31% year on year to 823.8 million as of March, slightly higher than Alibaba’s 811 million.
- But the company’s budget sensitive users continue to spend less than Alibaba’s. Based on its latest GMV figures Pinduoduo, had per-user spending of RMB 2,115 in 2020, compared to Alibaba’s RMB 9,200 in Q1 2021.
- The company’s net loss attributable to shareholders narrowed to RMB 2.9 billion from RMB 4.1 billion in the same quarter of last year, though the figure is significantly wider compared with an RMB 1.4 billion net loss in the previous quarter.
- Despite the revenue beat, shares of Pinduoduo dropped 5.5% on Wednesday amid regulatory concerns and lingering impact of departure of founder Colin Huang in March.
- The company’s shares have sunk by about 40% from a historic high in February this year.
Focus on ag: The discount e-commerce platform is doubling down on a pivot to agriculture, now describing itself in investor materials as “the largest agriculture platform in China.”
- Pinduoduo announced a plan to boost investment in logistics infrastructure, the e-commerce backbone that is even more critical for perishable agricultural products.
- “In building China’s first agri-focused infrastructure, our priority remains partnering existing third-party service providers first and foremost on everything from cold-chain logistics, warehousing, sorting, and delivery,” said Chen Lei, Pinduoduo chairman and chief executive officer, during the Wednesday earnings call.
- The firm also announced a partnership with the Singapore Institute of Food and Biotechnology Innovation (SIFBI) for studies on nutritional impact from replacing traditional animal proteins with plant-based proteins.
Context: China has imposed fines totaling RMB 6.5 million on five community group-buy platforms in March, including Pinduoduo’s Duoduo Maicai, for irregular pricing.
- The ongoing regulatory crackdown on Chinese internet firms casts shadows on the e-commerce company. The Shanghai Consumer Council ordered Pinduoduo to address consumer rights issues this May.