Recenly as $PDD stock rallied to $85, PDD’s founder Zhenghuang has surpass Jack Ma and became the 2nd richest person in China. What does PDD do? Why the company grow so fast given it has only been founded for 5 years? And whether $PDD stock can sustain the growth, today I will share with you guys my research findings.
In just two months, Huang Zheng’s fortune soared by 28.9 billion US dollars, which is behind the fact that pinduoduo has been established for less than five years and its market value has exceeded 100 billion US dollars.
Forbes’s real time rich list shows that the 40 year old founder Huang Zheng has reached 45 billion 400 million dollars (321 billion yuan), surpassing Ma Yun for the first time, becoming the second largest Chinese tycoon, and far away from China’s Internet celebrity entrepreneurs Liu Qiangdong and Robin Li. Ma Huateng, founder of Tencent, is still the richest man in China, with a fortune of US $51.5 billion.
So, in the process of pinduoduo’s entrepreneurship, how does Huang Zheng play his insight of grasping the essence of things?
1. The essence of pinduoduo’s business model: the core competitiveness of pinduoduo is not cheap, but to satisfy users’ feeling of taking advantage of it!
Amazon boss Bezos once said: corporate strategy should be based on the same things, often ask yourself: “in the next 10 years, what is unchanged?”.
So, in pinduoduo’s business model, what is the constant nature?
Low price?
Subsidies?
That’s a big mistake.
Huang Zheng’s understanding of this is: low price is only the way to obtain users by stages of pinduoduo. Pinduoduo’s understanding of cost performance is “always beyond the expectation of consumers”. The core of pinduoduo is not to be cheap, but to satisfy users’ feeling of taking advantage of the advantage.
In other words, taking advantage of the price is an eternal human weakness, and pinduoduo is to make you feel that you are taking advantage of anything you buy. The more you buy, the more you take advantage of, the more affordable you will get.
Therefore, pinduoduo is satisfied with many aspects of a person. For example, those rich Chinese aunts may also buy high-end iPhones, but when she goes out to buy vegetables and paper towels, she will still care about the difference of one or two yuan.
For example, a middle-aged man who bought hermes bags would also spend 9.9 yuan to buy a box of mangoes, and when he made a few yuan of difference, he would also show a satisfied smile!
It is precisely because of the weakness of human nature that he is greedy for small things and cheap ones. Huang Zheng uses a few cents to spell things worth thousands of yuan to induce you to share its links with friends or circle of friends, or engage in “bargain for free”, and quickly start downloading users.
This is the essential reason why Huang Zheng is better at human nature.
In the end, what a person earns is his cognitive ability!
2. The essence of pinduoduo’s expansion strategy: first, occupy the vast third and fourth tier cities and rural markets through extreme low prices, and then encircle cities through rural areas to realize the counter attack outside the Fifth Ring Road.
At the beginning, Huang Zheng aimed at those low-income groups who were sensitive to cost performance outside the Fifth Ring Road.
If you think about it carefully, not everyone is as rich as you are. Many people live on the edge of food and clothing.
We should know that in China, nearly 43% of the population have a monthly average income of less than 1090 yuan, nearly 69% of the population have a monthly average income of less than 2000 yuan, and about 84% of the population have an average monthly income of less than 3000 yuan, and the proportion of people with an average monthly income of less than 5000 yuan is as high as 95%.
The data shows that in addition to the first and second tier cities, most of the third, fourth and fifth tier small cities in China still tend to buy cheap goods…
3. The essence of pinduoduo’s low price strategy: in one word, “pin” concentrates massive traffic into limited commodities, improves bargaining power and greatly reduces prices.
If Taobao, tmall and Jingdong are Wal Mart, pinduoduo is Costco.
Taobao, tmall and Jingdong all buy their own products and finish the business; pinduoduo always uses various methods to induce you to join the group. Spell 2 people, 3 people, 10 people, and directly bomb the links to various wechat groups. The more you spell, the cheaper.
It’s like a perpetual motion machine; it doesn’t cost a cent to promote, but gets a lot of traffic.
Then, through the combination, Huang Zheng will be able to massive traffic, concentrated in limited goods, after having the scale to negotiate with manufacturers, engage in wholesale, which greatly reduces costs.
Look, Taobao’s 9.9-yuan-9-pack-e-mail was particularly popular; pinduoduo actually achieved a lower price than 9.9-pack-post. You can see the prices of pinduoduo’s commodities, most of which are ultra-low and ultra-low; wholesale prices are not available in the market.
You wholesale 100 hangers, it directly wholesale 100000 hangers… You say whose cost is lower!
Such a price makes Alibaba, JD very uncomfortable. Now live e-commerce is also this mode, it is estimated that Jack Ma and Liu qiangdong will be more miserable in the future..
When Huang Zheng’s pinduoduo was the weakest, Jack Ma and Liu qiangdong didn’t pay attention to them and always focused on each other. Today, when pinduoduo has taken a firm foothold, Jack Ma and Liu qiangdong want to fight pinduoduo, but it’s too late.
Although PDD stock has s trong growth right now, but it just listed no more than 3 years and not a lot of financial data too look at. I usually would not invest in newly IPO stock because there would be more uncertainties without past tracking record. I’m possitive about PDD stock though and I believe there would be more interesting stories in the future. Let’s see together.
Download the awesome stock screener App:
iOS Version https://apps.apple.com/us/app/smart-stock-screener/id1501485233
Android Version https://play.google.com/store/apps/details?id=com.hithink.stockscreener
Download the awesome Penny Stock Screener App: https://apps.apple.com/us/app/penny-stocks-screener-map/id1505985895
Live Stock Market Simulator https://apps.apple.com/us/app/live-stock-market-simulator/id1515283695
