Pinduoduo: Using Instant Retail for ‘Self-Protection

Recent reports have revealed that Pinduoduo’s “Duoduo Maicai” is testing self-built product warehouses in first-tier cities like Shanghai, with plans to launch instant delivery services as early as August this year. Currently, Duoduo Maicai’s efforts are still in the early stages, and the company has not made significant investments in this area. It also has no plans to enter the food delivery business. In response to this, Pinduoduo stated that this does not represent the company’s strategic direction, and it has no intention of joining the ongoing battle in the instant retail sector. Whether or not it plans to join the war that started this year, the trial efforts reflect Pinduoduo’s concerns about protecting its existing market share amid recent profit declines.When Duoduo Maicai was first established, company executives linked its interests to Pinduoduo’s main e-commerce platform. In 2020, Duoduo Maicai was launched during Pinduoduo’s high-growth period, a time when the company’s financial reports consistently exceeded industry expectations. In the earnings call at the end of that year, Pinduoduo CEO Chen Lei stated that Duoduo Maicai was not an independent business unit, but a natural extension of the existing business, integrated with the Pinduoduo platform. There was a synergistic effect between the two.

He said, “Duoduo Maicai is a platform that sees very high consumer usage frequency, so consumers’ engagement with our e-commerce platform will also increase, leading to more purchases across various product categories.”Now, however, Pinduoduo’s own growth has hit a bottleneck. At one point in 2024, Pinduoduo’s market value surpassed Alibaba’s, but a year later, its market value is now about half of Alibaba’s. More concerning than the typical stock price fluctuations under normal business conditions is the erosion of Pinduoduo’s core user base by other instant retail platforms. Data shows that approximately 30%-40% of the products sold by Meituan’s Lightning Warehouse are private-label products, which contribute more than 50% of the profits. Private-label products are also a key part of Pinduoduo’s business. With the high efficiency of instant retail platforms, product overlap could lead to Pinduoduo losing its users.The trial with Duoduo Maicai in the instant retail sector might be Pinduoduo’s way of protecting its core user base. Reports suggest that Duoduo Maicai will adopt the business models of Xiaoxiang Supermarket and Meituan Flash Purchase, selecting high-quality fresh produce, branded, and private-label products from both Duoduo Maicai and the Pinduoduo platform. Pinduoduo’s business logic is to complete the “farm-to-door” process quickly and at a low cost. However, its delivery efficiency still cannot match that of instant retail. When Duoduo Maicai first launched, delivery times were long, with the option for “next-day pick-up” available to consumers.

Naturally, this shopping experience differed from instant retail.One of Pinduoduo’s key shortcomings in developing instant retail is logistics infrastructure. Alibaba and JD.com were able to quickly enter this business partly due to their years of experience in logistics and delivery systems. On the other hand, both Pinduoduo and Duoduo Maicai initially chose a light-asset model. They primarily acted as third-party platforms, setting rules and distributing traffic, but did not directly engage in product manufacturing, procurement, warehousing, or logistics, bypassing some infrastructure-building phases and investing in market expansion, such as new user subsidies. However, as the market expands and consumers demand better services, Pinduoduo has begun to increase its investments in warehousing and logistics to improve delivery efficiency and service quality.By the end of 2024, Duoduo Maicai launched a pilot program for same-city instant delivery in Shanghai, partnering with third-party delivery service provider SF Express to offer next-day home delivery, upgrading the delivery experience and seeking new growth opportunities. It is reported that Pinduoduo’s experiment with instant retail will prioritize partnerships with third-party platforms like Flash Express and SF Express. In May this year, Duoduo Maicai launched a new express parcel collection service, named “Pinduoduo Yizhan,” which supports 24-hour self-service pick-up and home delivery. This service is expanding into new cities.

The Pinduoduo Yizhan service improves the delivery time at the last mile of logistics, enhancing overall logistics efficiency.The key point of Pinduoduo’s experiment in the instant retail sector is whether it can secure a place in the highly competitive market using a relatively light-asset model, helping the company retain its user base and increase customer loyalty. Meanwhile, whether it’s JD.com, which has been stirring up the market this year, Alibaba with its increased subsidies and open traffic channels, or Meituan, which leads in market share, instant retail players are relentlessly fighting for market dominance. This will bring even greater challenges to Pinduoduo.On June 24, news reported that Jack Ma appeared at Alibaba’s Ele.me office and would attend the weekly meeting for Taobao Flash Purchase. The day before, Alibaba CEO Wu Yongming sent an internal email announcing that Ele.me and Fliggy would join Alibaba’s China e-commerce business group. According to China Business News, observers close to Alibaba believe this is a quick response by Alibaba in the instant retail battle, consolidating previously independent businesses to compete head-on with Meituan and JD.com in the local lifestyle sector.On June 23, Meituan announced that it would fully expand into instant retail. Specific actions include expanding categories for Flash Purchase and gradually expanding Xiaoxiang Supermarket into all first- and second-tier cities. This move is seen as a further commitment by Meituan to intensify its efforts in instant retail.