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Pinduoduo (PDD): Factors That Can Drive E-commerce Retailer High

Over the year, online retailer Pinduoduo Inc. (PDD) has risen more than 308 percent. The group displayed rapid sales growth and expansion in promising business areas throughout the last year. Any of Pinduoduo’s growth variables are long-term.

After Alibaba and JD.com, Pinduoduo is China’s third-largest e-commerce site. Its difference from rivals is the ability for consumers to collaborate and to make mutual transactions.

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Pinduoduo has been establishing a lucrative segment for the selling of agricultural products in recent quarters. At the same time, also in this category, the organization embraces the community purchasing feature, which decreases the total cost per unit of output. Cooperation with Pinduoduo is also advantageous for growers, as it helps users to get a higher return. Pinduoduo sold fresh items worth 136.4 billion yuan ($19.3 billion) in 2019, or about 14 percent of the overall amount of goods sold on the site. The retailer’s last year planned to double the figure.

Pinduoduo also aims to extend the features of its new Duo Duo Maicai (“more grocery shopping”) software, which enables consumers to buy items online and either pick them up the next day from nearby retailers or wait 3-5 days for home delivery. The Maasai app has not produced substantial sales so far, but it enhances the fast-growing agricultural market of the group and links the ecosystem to more consumers and local stores.

For small-town locals, PDD has long been recognized as a discount shopping retailer. However, through aggressive promotion in major cities like Shanghai and Beijing, the company is gradually getting rid of this image. Furthermore, by subsidizing their exclusive offers on the website, the retailer draws higher-end brands. Market spending on Pinduoduo is increasing as a result. The average annual spending per active user rose from 894 yuan ($137) to 1,993 yuan ($305) between 2018 and 2020.

An antitrust proceeding against Alibaba is potentially one of the drivers of Pinduoduo’s traction. Via exclusive sales, the biggest Chinese retailer has long tied consumers to the site. Regulators’ interference in China, however, is likely to change this trend and push Alibaba to encourage sellers to comply with other retailers. This suggests that more sellers will be drawn by sites like Pinduoduo.

Pinduoduo thus works in a favorable climate that enables it to improve its leading advantage, penetrate new markets, and attract a new consumer base. Pinduoduo’s sales will rise by 84 percent year-on-year this year, and by 55 percent year-on-year, according to Wall Street analysts.

Shares of Pinduoduo Inc. (PDD) were down -3.62% to $161.2 on Friday, January 15.

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