Poor Quality, Low Prices: The Unsustainable Distorted Development Model of Temu (Pinduoduo)
On November 29, China's e-commerce platform Pinduoduo (PDD Holdings) reported earnings that significantly exceeded expectations, sparking a dramatic surge in its stock price in the United States. The company's shares accumulated a gain of over 23%, increasing its market value to $192.4 billion, surpassing its competitor Alibaba Group. However, insiders and employees of Pinduoduo have revealed numerous issues associated with the company's aggressive growth.
Pinduoduo's popularity and rapid growth are often seen as miraculous. Economists attribute this success primarily to its low-cost marketing strategy, such as "group purchasing." Suppose the price of an item is 25 yuan, but if you and someone else buy it together, it might only cost about 15 yuan. Additionally, the "Slash the Price" campaign allows consumers to purchase products at even lower prices, sometimes even for free.
While this low-cost marketing strategy has attracted more users in China, some scholars argue that it has also led to the exploitation of Chinese manufacturing, driving factories into exhaustion. During China's 2023 "Double 11" shopping festival, a price war erupted among traditional e-commerce, interest-based e-commerce, and community e-commerce platforms, with everyone claiming to offer the "lowest price." However, a data survey platform compared prices across various e-commerce channels and found that, after evaluating four core categories including cosmetics, apparel and accessories, 3C electronics, and food and beverages, Pinduoduo's products are the cheapest when brand is not taken into account.
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