In last Thursday's trading, Pinduoduo’s shares rose 12.56% and closed at 39. 96 U.S. dollars, with a market value of 46.448 billion dollars, making it the fourth-largest Internet company in China, after Alibaba, Tencent and Meituan. This time, the rise in share price has once again enabled Pinduoduo to surpass and win second place in e-commerce.

Pinduoduo has achieved three breakthroughs to, and its core data has completely exceeded

In the past two years, Pinduoduo users were criticised as "Greedy for petty gains", but now, the fast-growing Pinduoduo has successfully captured the hearts of 400 million users.

In terms of the user base, Pinduoduo is gradually widening the active users' gap between itself and Last year, when Pinduoduo went public in the United States, its user base was already reaching’s. At that time, people were still questioning the speed of Pinduoduo 's overtaking. According to the first financial report released by Pinduoduo after the listing, it had a breakthrough for the first time in terms of active users.

Until June 30, 2019,'s active users had increased to 321.3 million within 12 months, with an increase of 10.8 million in Q2. Pinduoduo’s total users has now surpassed's 160 million, which has become the key for Pinduoduo to take the second position in e-commerce.

As for GMV, Huang Zheng disclosed in an internal speech: Pinduoduo's actual GMV in the latest quarter has exceeded
Pinduoduo has become China's third-largest e-commerce platform in just three years (calculated by GMV).In September 2016, there were only 100 million users in Pinduoduo and the GMV was only 1 billion yuan per month. However, in January 2017, the monthly GMV exceeded 4 billion yuan. In 2018, the GMV of Pinduoduo broke through 471.6 billion.

Why can the share price of Pinduoduo have such a high rise? What is the outbreak point of its business model?

Pinduoduo's business model now has huge growth potential and it is widely recognised by investors

Why can Pinduoduo attract more investors in the capital market?

1. Pinduoduo has an absolute competitive advantage in the sinking market (markets in cities and towns below the third line), which has huge consumption potential.

On July 23, QuestMobile, a domestic authoritative data company, released the semi-annual report of China’s mobile internet. The report showed that in June, Pinduoduo's monthly activity in the sinking market increased by 72.2 million year on year, up to 59.4% year on year, ranking first in e-commerce and second in the whole network.

In the e-commerce industry, the user community in the sinking market has become the fastest-growing group. This market has huge potential for user consumption. Pinduoduo has established a firm foothold here with a low price model. In the future, it will still have a very high growth rate in this market.

2. Pinduoduo has taken a different road from Alibaba and - the de-centralization mode makes it more favourable for customers.

With social e-commerce mode, Pinduoduo has opened a way out in the sinking market with the de-centralization mode. In the early stage, this is conducive to Pinduoduo avoiding the positive competition with Ali and so that it can quickly acquire users through the social fission of WeChat acquaintances. This innovative business model is the key for it to gain a firm foothold in the industry. It has activated a large number of incremental demand and new consumption channels, including those in tier-2, tier-3 and tier-4 cities where e-commerce is still not very developed, especially a group of middle-aged and elderly consumers.

3. From bottom to top, Pinduoduo gradually penetrated the markets of the first and second-tier cities

Pinduoduo began to penetrate into the first and second-tier markets. According to the data released by the National Bureau of Statistics on July 31, 44% of the new users of Pinduoduo come from tier 1 and tier 2 cities. The proportion and penetration rate of users from tier 1 and tier 2 cities are both increasing. This will further improve Pinduoduo's profitability because the attraction of low prices to consumers is not divided into cities.

Pinduoduo's ability to penetrate into tier 1 and tier 2 cities shows that its impact is improving in these big cities, and the public opinion evaluation by users in this market is also turning in a good direction. This is mainly due to Pinduoduo's increasing investment in the control of product quality and minimizing fake products problems.

4. Pinduoduo wants to become "Costco+ Disney", mainly using C2M mode to expand its position in agricultural products

CEO Huang Zheng said that Pinduoduo should be Disney +Costco, which implicates that Pinduoduo should become an interesting platform with cheap products.

Many people think that the success of Pinduoduo lies in group purchase and low price, but the core is the C2M business model behind its products. This is an unprecedented internet business model and is also the point that investors should pay attention to most. From the supplier's point of view, C2M model allows suppliers to produce in large quantities in a planned way, reducing the corresponding fixed costs, especially for agricultural products.

At present, Pinduoduo is gradually improving the shopping experience of users, and the variety of products on the platform is further expanding. Its C2M model still has the potential to be a huge driving force for its development.

The soaring share price has boosted Pinduoduo’s confidence, but it faces great future challenges

At present, there are still many problems in the development of Pinduoduo. If it fails to deal with these risks, its future stock price will be affected.

1. Ali and are making great efforts in the sinking market, and the threat to Pinduoduo is increasing.

For Pinduoduo, it will be more difficult to hold onto this market share.

2. Pinduoduo is still at a loss stage, and the inability to make profits will be questioned by the market.

In Q2, Pinduoduo's net loss was 1,003.3 million yuan. At present, Pinduoduo is still implementing a loss subsidy mode to improve users’ re-purchase rate. 

3. It is very difficult to go from bottom to top for Pinduoduo, and it is not enough to capture the user attention in tier 1 and tier 2 cities.

For Pinduoduo, although it has a lot of user growth in tier 1 and tier 2 cities at present, we can see that it is not very easy for this part of users to grow. On the one hand, Ali and are still the preferred platforms for consumers, on the other hand, Pinduoduo lags behind in terms of brands and products. For users in tier 1 and tier 2 cities, they value brands, quality, and categories more, so Pinduoduo still needs to further expand its product competitiveness.

* The article does not make investment suggestions. 

By @美股研究社 (U.S. Stock Research Institute)