Pinduoduo is not a conventional company. It born within the fully saturated Chinese e-commerce market, which thought to be dominated by Alibaba and JD.com. In a short time of three years, Pinduoduo broke through the fierce competition and reached the daily active users of 47.72 million, exceeds JD.com’s 33.6 million, and obtained a customer base of over 300 million Chinese. It makes people wondering, what kind of magic does Pinduoduo has that makes it done something that’s “impossible”. Alibaba’s Jack Ma once said: “With a telescope, I can’t even find my competitor.”, now the monopoly world has ended.
Leaving Business Model, Company’s Outlook, and Valuation in the future, I will start with the soul of Pinduoduo(Core Value): Ben Fen(本分) - adhere firmly to one’s own duties and principles.
Defined by the IPO documentation, Ben Fen obtains several layers of meaning:
- Be honest and trustworthy.
- Discharge our own duties and responsibilities regardless of others’ conduct.
- Insulate our minds from outside pressures so that we can focus on the very simple basics of what we should be doing.
- Never take advantage of others even when we are in a position to do so.
- Self-reflect and take responsibilities with problems arise instead of blaming others.
Specifically for Pinduoduo, the management’s Ben Fen is to relentlessly focus on value creation for our consumers. We may not always be understood, but we always do things out of goodwill and do no evil."
Having this kind of Core Value ensures Pinduoduo put 100% attention on doing the right thing, and do them in the right way. This would lead to Pinduoduo in higher probability taking immediate actions when things go wrong, providing good customer experience, making good long-term strategic decisions, attracting like-minded people who are also Ben Fen and building a sustainable healthy company.
Three examples to illustrate Ben Fen:
- During an interview before PDD’s IPO, Pinduoduo’s founder and CEO Zheng Huang talked about his intention of doing IPO Pinduoduo in this early stage. “Duo to our unique business model and large scale, Pinduoduo has already become a social phenomenon. As our responsibly increases, we would like to put ourselves under stronger supervisions… In addition, our company will become more transparent and credible after revealing everything inside our company through a credible procedure and institution. ” It is incredibly rare for a company to do IPO mainly for a stronger supervision. I am holding great respect toward Pinduoduo management team.
- The IPO offer price was set to $19 dollars per share, but since the market demand for Pinduoduo’s shares was higher than expected, Pinduoduo obtains a right to raise the offer price by an additional 20%. As the initial price range was between $16 to $19, Zheng Huang decided to stay at $19 per share. “Investors can’t do anything if you raise the price, as the demand is so high,” Zheng Huang said, “It would generate quite a lot of money, but it is also the time to prove our core value:’Never take advantage of others even when we are in a position to do so’.”
- During Pinduoduo’s first year operation, the company sent one operations manager to jail for corruption. In addition, the company fired one-third of the operations managers with similar conduct.
Other than Tesla (NASDAQ: TSLA), Pinduoduo is the only company that makes me greedy. I am currently holding PDD as 10% of my portfolio, looking to increase to 20% or more in the near future.
Disclosure: I am/we are long PDD.