Pinduoduo Inc. (PDD), one of the largest Chinese Internet retailers, recently announced its first profit since its 2018 IPO.
After adjustments income was $69 million at the end of the third quarter of 2020. For the group, this is an essential win, although it is still unprofitable on a GAAP basis. If Pinduoduo continues to scale up the business, it is only a matter of time before GAAP profitability is achieved. Pinduoduo is comparatively a young business against its main rival, Alibaba. It appeared just five years ago, but remained able to become a strong player in this short period of time.
In recent years, Pinduoduo has been the beneficiary of momentum in e-Commerce. The company’s sales rose by 89 percent to $2.1 billion in the third quarter. The number of average monthly active users increased to 643 million annually, a rise of 50 percent year on year. And the number of annual active customers increased to 731 million by 36 percent. Pinduoduo also noted a 27 percent rise in annual cost per user, to 1993 yuan.
Pinduoduo is currently investing a lot in growth and looking for new ways to widen its target audience. In particular, the company plans to expand its agricultural production business and as part of this strategy, has introduced the Duo Duo Maicai service, which enables users to pre-order cheap agricultural products produced locally.
This new service calls for considerable investment not only in advertising, but also in logistics infrastructure. Such investments will however, pay off in the long run, as fresh food delivery is a huge business with great potential.
Pinduoduo was able to achieve considerable success during the short time of its existence by creating a multi-million audience and was able to compete with other major online retailers in China.
Pinduoduo Inc. (PDD) stock was down -5.59 percent on Wednesday at $135.90 but was still 2.66 percent up since release of quarterly results.