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Explain Q4 2019 earnings: does pinduoduo's growth myth continue?

via:博客园     time:2020/3/12 21:51:33     readed:845


Article financial report of the company

Founded two years listed, four years GMV exceeded trillion yuan, grew into the third pole of Chinese e-commerce. However, pinduoduo has been controversial since its birth and boasts social media


On March 11, pinduoduo released its financial report for the fourth quarter and the whole year of 2019. According to the financial report, pinduoduo's revenue in the fourth quarter was 10.79 billion yuan, up 91% year-on-year, which was lower than the market expectation of 11.121 billion yuan. The net loss was 1.75 billion yuan, a year-on-year decrease of 28%, and the net loss rate was also reduced from 31% in the previous quarter to 16% in the current quarter.


(Graphic: Financial Reporting Company)

Is the growth myth going on?

In the fourth quarter of 2019, pinduoduo is still pursuing rapid expansion, mainly reflected in the growth of the number of users and the scale of Gmv. In the fourth quarter, the number of active users was 481.5 million, up 77% year on year. As of December 31, 2019, the annual active buyers were 558.2 million, up 40% year on year, while Alibaba's annual active buyers for the same period were 710 million, and JD's were 360 million.


(drawing: financial report to see the company)

As shown in the figure above, the growth rate of monthly live users of pinduoduo in 2019 is very rapid, even steeper than the growth curve in 2018, catching up with the growth rate in 2017 when the base number is small.

"Financial report to see the company" in "pinduoduo can rely on c2m counter attack?"? 》It is pointed out in the article that pinduoduo's annual active buyers surpassed JD in Q1 2018 and are further catching up with Alibaba.

In terms of Gmv, pinduoduo broke through the trillion mark for the first time in 2019, reaching 1006.6 billion yuan. However, the growth rate of Gmv has slowed down significantly, with a year-on-year growth rate of 113%, compared with 851% in the first quarter of 2018.


(drawing: financial report to see the company)

As of December 31, 2019, pinduoduo's annual active buyer expenditure was 1720.1 yuan, an increase of 52.6% compared with 1126.9 yuan in the same period of 2018. Alibaba's per capita Gmv in the first quarter of 2019 was 8757 yuan, and JD's per capita Gmv in the fourth quarter of 2018 was 5492 yuan. (Note: Gmv per capita = annual Gmv / annual number of active buyers)


(drawing: financial report to see the company)

It can be seen that pinduoduo still attaches great importance to the growth of users and the improvement of per capita consumption in 2019, and has paid corresponding costs. According to the calculation method of marketing expenses / new users, pinduoduo's customer acquisition cost in the fourth quarter was 184 yuan, up from 177 yuan in the same period last year.

It should be noted, however, that this calculation is not rigorous, by 2018, pinduoduo to


(drawing: financial report to see the company)

Thanks to the consumer psychology and habit grasp of Chinese low-line city consumers, relying on WeChat social circle, pinduoduo in the red sea of e-commerce. Since 2020, pinduoduo has launched

However, the reputation of this function is not good. Although pinduoduo has set up multiple privacy protection mechanisms, for example, sensitive goods can not be automatically synchronized in the dynamic, and can be manually desynchronized in the dynamic, can also manually close the address book authorization, or even completely manually close the pincircle function.

However, continuous screen guidance, private friends sent applications, so that the privacy of users can not prevent the problem. There are many lessons to be learned before, on the social road, all non-user spontaneous

Operation strategy:Control cost, RE market, narrow loss


From the perspective of operational efficiency, pinduoduo delivered a good answer in this quarter. In Q4 2019, pinduoduo had an operating loss of 2.13 billion yuan, down from 2.64 billion yuan in the same period last year. The operating loss rate was 19.78%, compared with 46.71% in the same period last year.


Pinduoduo has taken a series of measures to control spending and maintain performance growth

In terms of cost, the revenue cost is 2.03 billion yuan, the growth is mainly due to the increase in the cost of cloud services, call center and merchant support services. The gross profit rate has been stable since 2018. 81% of the gross profit rate in this quarter is a high level since the establishment of four and a half years ago, second only to Q2 in 2018.


Pinduoduo's operating costs have been high. In addition to the special situation in the second quarter of 2018, due to the increase in the number of employees and the cost of stock remuneration before and after the listing, the general and administrative expenses have increased to RMB 5.807 billion (US $876.6 million), a significant increase from RMB 6 million in the same period of 2017.

In addition, most of pinduoduo's operating expenses are spent on marketing. In the fourth quarter of 2019, the operating expenses are up to 10.89 billion yuan, including 9.27 billion yuan of marketing expenses, but the revenue is only 10.79 billion yuan; in the third quarter of 2019, pinduoduo's revenue is 7.51 billion yuan, while the sales and marketing expenses are 6.91 billion yuan. As can be seen from the above figure, pinduoduo's marketing expense rate has remained at a high level, and has declined in the past three quarters.

According to the financial report, pinduoduoPinduoduo is still using tens of billions of subsidies and advertising and other marketing expenses to exchange for performance growth, as mentioned above, it's more the repurchase rate of old users than that of new ones.

Huang Zheng, founder and CEO of pinduoduo, said at an analyst conference call


Apart from the relatively large expenditure, pinduoduo is still relatively single in its revenue model. After 2018, pinduoduo's revenue is all online marketing services for merchants, i.e. advertising, trading services, etc., excluding technical service fees or commissions from other platforms, in which the trading service fees are fees paid to third parties.

According to the public information, in the entry fee standard of tmall, the technical service fee of 6W yuan per year (the technical service fee is paid once a year, but if the annual sales volume reaches a certain scale, 50% or 100% of the technical service fee can be returned) and the deduction point of 3-5% for each transaction.

In the future, if pinduoduo wants to balance profits, there is still a lot of room for improvement. However, at present, compared with tmall and JD, the number of brand merchants in pinduoduo is still difficult to compare, and the payment ability of small and medium-sized merchants is still far behind that of large merchants, so the charging pace of pinduoduo cannot be too fast.

By the end of 2019, the customer's prepayment and deferred income were RMB 606 million, the merchant deposit was RMB 7.84 billion, and the amount payable to the merchant was RMB 29.92 billion, all of which were shown as liabilities in the financial statements.


After a series of measures, pinduoduo's net loss in the fourth quarter of 2019 was 1.75 billion yuan, a year-on-year decrease of 28%, and the net loss rate was also reduced from 31% in the previous quarter to 16% in the current quarter.

Supply chain control

A point that pinduoduo CFO David Liu revealed at a post-financial analyst meeting was very interesting,

According to the user scale of the three major e-commerce, the user penetration rate of the whole Chinese e-commerce has been very high, but the industry penetration rate is relatively low. The next opportunity for e-commerce is to leverage the supply side reform of the traditional industry, which is related to the lifeblood of the control of the supply chain of the e-commerce platform.

At the meeting of financial analysts this quarter, although many analysts want to know about the sales of categories on pinduoduo platform, Huang Zheng and David Liu are very cautious. Among them, there are only a few references to the sale of agricultural products.

CFO David Liu pinduoduo said,

Previously, pinduoduo disclosed that by the end of 2019, the number of active businesses of agricultural (by-product) products on the platform had reached 586000, with more than 12 million directly connected agricultural producers and 240 million annual active buyers of agricultural products.

Kwai Chung, including the three big business platforms including tiktok, and fast hands and jitter, are all enthusiastic about the sale of agricultural products. On the one hand, this is due to the unsalable agricultural products during the Spring Festival, which is equivalent to public welfare; on the other hand, the fresh food in the first and second tier cities is very popular, which is undoubtedly a good business opportunity to do a good sales match between them.


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