Pinduoduo,
the world’s largest e-commerce platform and China’s second busiest online
marketplace, has announced its plans to sell $145 billion worth of agricultural
produce in 2025.
The bold claim came shortly after it was announced that Chinese consumers had
bought $58 billion worth of agricultural produce online in 2019 – a 27%
increase, according to the Chinese Ministry of Commerce.
The platform, founded in 2015, began its journey to startup fame as a
business-to-consumer e-commerce platform for fresh produce. In 2017, the group
transitioned to its current business model – serving as a digital marketplace –
and has enjoyed meteoric growth in the past three years. It is now valued at
$114 billion and recognised as one of the globe’s largest unicorns.
Now more valuable than HSBC, the Chinese startup, which finds itself competing
with Alibaba and J.D.com, wants to accelerate the
digitisation of Chinese agriculture.
According to the research firm, iiMedia, the sector’s sales are still dominated
by wet-market and supermarket sales, which account for half and one-third of
all produce sales in China respectively.
The firm’s new CEO, Chen Lei, believes the group’s “pin buying” or
group-buying approach can help standardise China’s growing practices and bring
economies of scale to small farms, which is the country’s main farming method.
Pinduoduo, which has its roots in agricultural production but also trades
alcohol, cosmetics, and electronics, cuts out the middleman and creates a more
‘customer-to-manufacturer’ environment which promotes affordability. The platform
has more than 600 million users.
Chen Lei told the media that Pinduoduo uses consumer demand to create scale and
draws on consumer insights to help farmers maximise quality and yields.
‘Pin’ or group buying aggregates consumer demand, matches consumers with
batches of agricultural produce, and bypass several steps by going truly
farm-to-table, according to Pinduoduo.
Pinduoduo
still counts agricultural goods as its main product, while it has also sought
to digitise the sector further by bringing in experts to train and inform
farmers about robotics, drones, the internet of things and low-powered data
transmission.
Unlike Amazon, Pinduoduo has no warehouse of stock and no logistics fleet of
its own. The company makes no commission from sales while it relies heavily on
advertising and promotions which account for 90% of its revenue.
Some analysts have questioned whether the five-year-old company can be profitable
but Xiaofemg Wang, a Singapore based analyst with Forrester, says that if
Pinduoduo can diversify its range by offering premium goods, the company can
rebrand itself as a marketplace for premium goods as well. The company has begun
offering promotions with global mega-companies like Apple and Tesla.
