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Pinduoduo's Elegy

via:博客园     time:2021/4/8 20:52:20     readed:120


Wen / Ge Ding

Source: brocade (ID: jinduan006)

E-commerce giants have had a lot of bombs in the past two months

Put together a lot. 1. In the year of 20q4, 788 million buyers surpassed 779 million of Alibaba; 2. Founder Huang Zheng announced his resignation (resigned as CEO in July 20 and chairman in March 21); 3. PR team laid off a large number of employees.

Alibaba. 1, make complaints about Taobao's sales volume; 2, Hu Xiaoming resigned as CEO, 3, Tucao's organizational culture, "Ali" is hot.

2021 is the watershed of Internet companies, and the last wave of traffic dividend is drained by covid-19. Its sequelae is gradually emerging: the elegy of star sea valuation method has been played, and those investors who lightly say that the pattern at this moment is the end of the industry and use it for valuation deduction are caught off guard by the recent collapse of concept stocks.

All the joy of cruelty will end in cruelty. All the value waiting that can be stopped is bound to find excess returns in the invalid market.


Figure 1: creative director of robot anti killing paradise; source: Western world


Path map

We say that pinduoduo and Alibaba swamp are fighting each other mainly from the perspective of industry map and route. The growth path of e-commerce platform collecting traffic tax is as follows:

The first stage. Low price goods, rapidly expand the user base, such as Taobao and pinduoduo.

The second stage. For example, Alibaba upgraded from Taobao to tmall.

The third stage. Low level integration of software and hardware, from connecting traffic to improving efficiency to building infrastructure to improving industrial efficiency. For example, Ali indirectly obtained warehousing through offline retail, and became a rookie in logistics infrastructure. For example, pinduoduo began to change the layout of warehousing and logistics.

The fourth stage. High level software and hardware integration, industrial Internet, chip making, using AI, cloud computing and other technologies and means to build software and hardware integration platform, deeply optimize and upgrade the b-end business model.


Figure 2: flywheel of Amazon and Ali; source: Southwest Securities


Hand to hand combat in swamp

1) Pinduoduo attack at elevation

In 2020, pinduoduo's non-GAAP net loss was 2.97 billion yuan.

Over the same period, Alibaba's non-GAAP net profit was 168.06 billion yuan.

The most important strategy of pinduoduo's brand upgrading is 10 billion yuan subsidy.


Figure 3: pinduoduo 10 billion subsidy, source: Founder Securities

2) Alibaba returns to low price

In the fourth stage of Ali's development to the above-mentioned path map, the strategy is to give up low-cost businesses and reduce the weight of Taoke in the main search.

First of all, what is Taoke? It is Taobao's off-site marketing product. In Taobao, through train, diamond booth, rush shopping, cost-effective gathering and daily special price are used for on-site marketing; in off-site marketing, online purchase flow can be carried out through Taoke. In those years, rebate net, rebate bond and other channels all rose with Taoke.

The merchants drain the low-cost products (9.9 yuan for package mail or something) outside the station by Taoke, and the Gmv will be charged to the flow lever of the main search inside the station (the goods are at the top of the search), so as to obtain free flow and sales inside the station, and the money lost by the low-cost goods outside the station will be earned inside the station.

Unfortunately, in the process of Ali brand upgrading, Taoke's weight in the main search was reduced, and the game could not go on without internal traffic matching.

Until Q4 in 2020, Ali, whose number of buyers has been blocked by pinduoduo, finally can't sit still and begins to strategically adjust the weight of Taoke's sales in search. This is to regain low-cost products and focus on pinduoduo.


From the perspective of competition, pinduoduo and Ali are like fighting hand to hand in a swamp. This is the fate in the innovator's dilemma: low price, new scene competitors, and constantly hollowing out the leading players. The two companies still have to fight each other. Judging from the competitive situation, Jingdong has a better way to go.


Eat bran and swallow vegetables

As mentioned above, pinduoduo's profit improvement (PS: see the figure below for the net profit of non-GAAP in recent three quarters), and we think that this profit improvement is just a fake.


Figure 5: pinduoduo quarterly profit statement, source: wind financial terminal

Why is the profit improvement of pinduoduo false? This should be combined with the logic of the industry.

Entering the second half of the Internet with high penetration rate, the transaction logic of collecting traffic tax on the platform will become weaker and weaker. The mode of shallow connection to earn channel fee will give way to the mode of enabling supply chain to earn money to improve efficiency. For example, if the platform increases the monetization rate to 5%, then businesses will speed up their escape from the platform. But if the platform can improve the efficiency of businesses or producers, such as fresh food, you can reduce the consumption rate from 40% to 20%, and the other party will be happy to give you 10%.

If you want to empower businesses, you can't just rely on algorithms. You have to focus on all aspects of the supply chain for a long time. This is the third stage of the growth path of e-commerce: integration of low-level software and hardware.

Examine the cash flow statements of the three e-commerce platforms:

1) Jingdong's 60 billion yuan infrastructure. In the past 10 years, the capital expenditure of Jingdong has been around 60 billion yuan. From the perspective of investment increase, it began to give strong support to supply chain finance in 2015.


Figure 6: cash flow statement of Jingdong; source: wind financial terminal

2) Ali bought the infrastructure. Different from Jingdong, Alibaba's approach is to sweep off-line retail, Gaoxin retail, Yintai department store, etc. the 2014-2018 fiscal year is a period of high incidence of sweeping goods. The so-called new retail makes up for the last 1km, and what it buys is essentially infrastructure construction. Of course, the rude behavior of mending the short board has a certain effect on the performance, and the new retail lowers the profitability of its retail business. In addition, Ali's capital expenditure is also very high, but the majority is cloud computing IAAs, which is not closely related to e-commerce business.


Figure 7: Alibaba's cash flow statement; source: wind financial terminal


Figure 8: pinduoduo's cash flow statement; source: wind financial terminal

It can be said that pinduoduo still has a long time to run short of money. In the past, it used to be delicacies, such as abalone, but in the future, it will be investment to eat bran food.

The above business model changes of hand-to-hand fighting in swamp and capital expenditure short board will drive the change of valuation logic.


Elegy of valuation

1) Star sea valuation

In 2020, the total retail sales of consumer goods will reach 39.2 trillion yuan. Assuming that the CAGR of the total retail sales in the next ten years is 3%, the market scale will reach 52.7 trillion yuan.


Figure 9: Gmv data of social retail and e-commerce from 2016 to 2020

At present, Kwai Ali Jingdong three GMV accounts for 29% of the social zero, taking into account the rapid hand shaking and other direct broadcast goods, the next three years in the three years, the market share reached 60% tiktok, which accounted for 15% of the total, GMV is 7 trillion and 900 billion, monetization rate of 3.5%, income is 276 billion 600 million yuan, net profit rate 30%, net profit is 83 billion yuan, according to the ratio of earnings per se, market value is the "market" is the "market". It's more than $260.6 billion, the highest market value in Duoduo's history.

2) The flaw of gaomai

From the perspective of the future, pinduoduo and Ali are the companies in the second and fourth stages of the growth roadmap respectively. Pinduoduo is backward in all aspects when they fight for bayonets. Can the low-cost customer acquisition advantage from 0 to 1 support the development of the next decade? It's difficult.

Business model level.As explained above, pinduoduo and Alibaba are fighting hand to hand, and the situation is not clear.

Organizational culture.

Science and technology.There is a simple measure. Last year, there were only a few patents that were spared a lot. If the well-developed ones do not invest in R & D in the next 10 years, they may have no future.

Companies like pinduoduo can only look at their valuations over the past three years at most. In 2020, the revenue will be 59.5 billion yuan. In the next three years, the CAGR is expected to be 40%, the net profit will be 10%, the price earnings ratio will be 40 times, and the market value will be 100 billion US dollars. We think pinduoduo is overestimated.


Figure 10: PDD share price, source: wind financial terminal

3) Learn from history

It's dangerous to overvalue a company from stage 1 to 10, especially when you have big brother on your head. Looking at the history of foreign business, there are many examples of a good start being overturned

Today, salesforce is a powerful listed company in CRM (Customer Relationship Management) software field, and the latter is even the stock code of the former. But who knows that before the rise of salesforce, Siebel was the son of choice in the field of CRM, one of the fastest growing companies in the history of American business.

In the CRM software market, Siebel has won many large multinational enterprises with the strongest life cycle payment ability from the beginning, and expanded its business from SFA (pre-sales automation software for Sales Department) of CRM to customer service, marketing, Bi and other fields. In 2000, its revenue exceeded US $2 billion, and its market value was US $50 billion in 2001. The salesforce station of that year was like a minion.

But then the situation changed, and salesforce led the change of subscription system (who can guarantee that there is no next mode to subvert today's rational subscription system? As women's version of Buffett said, the deep learning of Software 2.0 will subvert everything in the past), covering Siebel Small and medium-sized customers who despise, and through prepaid cash flow and other advanced business means, Ge now beat Siebel step by step.

In any case, we should not overestimate the value. The result of buying real bubbles is always a burst of bubbles.

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