Analysis Of Pinduoduo’s Profit Model Under Social E-commerce

Although our country’s e-commerce business started late,its ever-increasing economic strength has laid the foundation for the rapid development of our country’s e-commerce industry.The early foreign e-commerce giants led by e Bay and Amazon did not occupy a dominant position during the domestic development period but were gradually eliminated by the Chinese market.E-commerce platforms developed from the local market have firmly occupied a major share of our country’s online retail market,such as Taobao,JD,Suning and other companies.However,domestic e-commerce platforms are also showing a competitive situation of "one superpower and many strong" at this time,and many numbers of small and medium-sized ecommerce companies are caught in homogeneous competition.Pinduoduo,founded in 2015,broke this situation.Pinduoduo is keenly aware of the consumption potential of the sinking market ignored by many e-commerce platforms.In the early days of its establishment,it took the sinking market as a breakthrough and focused on C2 M social group shopping.Pinduoduo uses We Chat,QQ and other social tools as media,through advertising marketing,large-scale shopping subsidies,sharing in the circle of friends and other methods to rapidly increase the number of users on the platform in a short period of time.Fully tap the consumption potential of the sinking market.According to the fourth quarter report of 2021,the annual active buyers of Pinduoduo have reached 868.7 million,making it one of the largest e-commerce platforms in China by users.Behind the brilliant achievements of Pinduoduo,this development model also laid hidden dangers for the later development of the company.Because of the rapid expansion in the early stage,the marketing expenses of the enterprise were too high,and the revenue and expenditure structure were deformed.However,with the gradual stabilization of the market position,focusing on research and development,reducing marketing expenses,and investing in agriculture for a long time have become the new strategic transformation direction of Pinduoduo.With the release of the fourth quarter report in2021,Pinduoduo’s third quarter operating income was 27.2 billion yuan,and the Operating profit was 6.9 billion yuan.This series of dazzling growth data also proves that the adjustment of Pinduoduo’s profit model and operation strategy has positive significance for the company’s development.Our country has a large population and a vast territory,which makes the development potential of the e-commerce market great.The national level has also paid more and more attention to the role of the e-commerce economy.In recent years,a number of policies have been introduced to guide the e-commerce economy to become bigger and stronger.The sudden outbreak of the new crown epidemic in 2019 has also increased consumers’ reliance on online retail.Because online shopping can reduce the number of times consumers go out,the feature of contactless pickup also makes shopping safer for consumers.Due to the inconvenience caused by the epidemic,many companies are increasingly relying on e-commerce to complete transactions online.At present,there are more than 3 million domestic enterprises engaged in e-commerce-related business,a large number.However,the vast majority of companies are short-lived and small in scale.Many small and medium-sized e-commerce companies do not have a clear profit model and fall into the dilemma of homogeneous competition.This thesis selects Pinduoduo as the research object,and analyzes the elements of its profit model based on the characteristics of social e-commerce.First,find out the characteristics of the elements of the profit model,and then use a number of financial and non-financial indicators to evaluate the performance of Pinduoduo’s profit model.During the research,it was found that Pinduoduo’s profit model has some advantages and disadvantages.Pinduoduo’s profit model was in line with its own development strategy and the domestic market environment in the early stage,helping Pinduoduo to expand rapidly.And accumulated a large amount of operational data for Pinduoduo to focus on agriculture in the later stage.However,while this profit model brings rapid growth to the company,it also has some shortcomings.The first is that the source of income is too single,and the development of Pinduoduo’s new business is not smooth.Secondly,when Pinduoduo began to control marketing expenses in pursuit of high-quality development,the growth rate of Pinduoduo’s operating income and the number of monthly active users began to gradually decline.Future developments bring negative signals.During the research of this case,the following conclusions and enlightenments were drawn: Pinduoduo’s early profit model played a positive role in its rapid development,but the unreasonable revenue and expenditure structure also laid hidden dangers for subsequent development.Enterprises need to pay attention to the rationality of revenue and expenditure structure and pursue highquality profitability.Today,when the government advocates the orderly development of capital,enterprises also need to be down-to-earth and abandon the thinking of "flow first".