The competent department put forward the slogan of "strengthening industry self-discipline and preventing vicious competition". For the current Chinese economy, this slogan is very timely, because for any industry, there are natural limitations to involution. Blind involution cannot take off to the sky, but can only bring the whole industrial chain to the bottom. Intriguingly, after this slogan was put forward, some people believed that it was aimed at Pinduoduo. After all, over the past years, there has been a prevailing view that Pinduoduo relies on inducing or even forcing merchants to compete internally to satisfy consumers, and internal competition is its core competitiveness. On various social media platforms, there are numerous articles accusing Pinduoduo of internal competition, so there is no need to elaborate here; many people really believe it.

However, the above statement cannot explain one question: Why haven't merchants left Pinduoduo yet? Far from leaving, thousands of merchants are still joining Pinduoduo's domestic main site, Duoduo Maicai, and Temu every day, as well as shifting their operational focus from other e-commerce platforms. Retail e-commerce is a highly market-oriented industry, and merchants focus on profitability. Loss-making businesses have limits. Pinduoduo is not the only mainstream e-commerce platform, and with various content platforms deploying in e-commerce, it has even more competitors than in previous years. If merchants are oppressed, why don't they vote with their feet?

Some believe that it is because Pinduoduo still has traffic dividends and the support of the WeChat ecosystem. The problem is that content platforms such as Douyin, Kuaishou, Xiaohongshu, and WeChat Moments also have e-commerce traffic dividends. Domestically, Pinduoduo is not the only platform that can leverage WeChat traffic resources; internationally, it is far from being the only cross-border e-commerce platform. In terms of functionality and gameplay, there is nothing that Pinduoduo can do that other platforms cannot. Recall that in 2019, when a securities firm published a research report titled "Pinduoduo May Not Survive Beyond Three Years," the logic was as follows: "Everything available on Pinduoduo can be purchased elsewhere; all functions of Pinduoduo are available on other platforms. What reason do users and merchants have to choose Pinduoduo?"

Three more years have passed. Today, let's not talk about users but instead focus on "why merchants choose Pinduoduo." This is a puzzling question for many people, but the answer is essentially as follows: simple rules, low costs, traffic allocation rules that favor small and medium-sized merchants, and strong organizational efficiency.

The merchant entry rules on the Pinduoduo platform are straightforward, with minimal document requirements and rapid review times. Simply comparing the entry processes and requirements on the merchant entry pages of mainstream e-commerce platforms makes this clear. In recent years, under competitive pressure, Taobao and JD.com have also simplified their entry rules, but Pinduoduo remains the simplest. Accompanying this simplicity are low costs: merchants can "enter with zero yuan," and the deposit calculated based on transaction amounts is extremely low. The basic technical service fee rate on Pinduoduo's main site is only 0.6%; for products participating in the Hundred Billion Subsidy program, the technical service fee rate varies from 1.4% to 4.4% depending on the category. Anyone who has done retail e-commerce should be aware that the above fee rates are undoubtedly lower than the average levels of other platforms.

More importantly, there are traffic allocation rules. According to a senior e-commerce practitioner friend of mine, "On Taobao and Tmall, white-label and small-to-medium-sized merchants compete with big-brand merchants for traffic; on JD.com, they compete with self-operated products for traffic. Only on Pinduoduo do they occupy a central stage." Pinduoduo's product recommendation mechanism prioritizes price as the most important indicator, giving priority to displaying low-priced products and encouraging explosive sales of white-label single products. Some may ask, what if "cheap is expensive"? Pinduoduo's "refund only" rule is designed to address this situation, with the goal of protecting user rights. More than one friend has told me that they saw some particularly low-priced products on Pinduoduo and were skeptical, but the "refund-only mechanism" gave them confidence to place an order, and their experience turned out to be good. Over time, they developed trust in low-priced products on Pinduoduo.

Incidentally, on August 14th of this year, Pinduoduo introduced a "refundable technical service fee benefit" for merchants: for product orders generated through in-station activities, if a user initiates a refund, the platform will fully refund the basic technical service fee to the merchant. Prior to this, Pinduoduo had already introduced refundable technical service fees for resource positions and promotional software services. Starting this month, for any order canceled or refunded by the user, regardless of the stage of the order at which the refund occurs, the merchant can enjoy a full refund of the technical service fee. This not only reduces the burden on merchants and eliminates their worries but also highlights a fact: Pinduoduo believes that its own interests are aligned with those of merchants and has no intention of ensuring its own interests by squeezing merchants. According to Chen Lei, Chairman and Co-CEO of Pinduoduo, the platform adopts a policy of "support and governance" towards the merchant ecosystem, with the fundamental goal of achieving sustainable prosperity.

For small and medium-sized merchants and industrial belt merchants, the cost of acquiring traffic on Pinduoduo remains the lowest among mainstream platforms, whether relying on natural traffic, paid advertising, or private domain scenarios. When live streaming e-commerce emerged on platforms like Douyin and Kuaishou, many people believed it would disrupt Pinduoduo due to overlapping product positioning. However, facts have proven otherwise. Merchants understand accounting better than anyone else. The explosive sales of single products in live streaming e-commerce heavily rely on paid advertising, and the cost of advertising is becoming increasingly expensive. It can only serve as a "side dish" rather than a "main course," which is too luxurious. No platform is perfect, and while Pinduoduo may have many flaws, it is the most suitable platform for a wide range of white-label and industrial belt merchants, and this should remain the case for a long time to come.

We must also discuss an issue that many investors and media outlets have raised based on Pinduoduo's financial report data: the conclusion that Pinduoduo's monetization rate (i.e., merchant burden rate) is already comparable to that of Taobao. This conclusion is misleading because a significant portion of Pinduoduo's revenue, particularly from transaction services, comes from Temu's fully and partially managed cross-border e-commerce business. This business is highly complex and involves significant logistics costs, making it inappropriate to compare its monetization rate with domestic retail e-commerce platforms. Pinduoduo has not yet publicly disclosed detailed data on Temu, so we cannot accurately split the numbers. However, to my understanding, the scale of Temu may be significantly larger than what capital markets have estimated. In other words, the monetization rate of Pinduoduo's main site has been significantly overestimated, and the cost burden on merchants is not as high as perceived.

Another easily overlooked point is Pinduoduo's strong organizational efficiency and resulting execution capabilities. E-commerce is a meticulous operation that requires attention to detail, and platform operators must work tirelessly to resolve issues with high efficiency and seriousness. A laid-back or detached team cannot succeed in e-commerce, which explains why many content platforms have struggled to make significant inroads into e-commerce. Pinduoduo's organizational combat effectiveness is unmatched in the domestic internet industry. The decline in organizational efficiency and the emergence of "big company disease" that are common on other platforms are, at least for now, absent from Pinduoduo. From multiple iterations of the main site's functions to the rise of Duoduo Maicai and Temu's sweep across the ocean in just two or three years, these are all manifestations of Pinduoduo's organizational efficiency. To reiterate: no platform is perfect; the key lies in who can solve problems faster. Merchants are willing to stay on Pinduoduo because they believe the platform can address their concerns, and history has repeatedly proven this point.

If you use Pinduoduo frequently, you may have noticed a phenomenon: although Pinduoduo remains a platform dominated by low-priced white-label products, the proportion of branded products is also increasing, especially domestic trendy brands, which are growing at a significant rate. It is no longer unusual to purchase high-end, design-conscious products on Pinduoduo. I discussed this phenomenon with friends in the e-commerce industry two years ago. Their viewpoint was that "people's needs cannot be unilaterally reduced to 'consumption downgrade' but rather a fusion of diverse needs. In some areas, there is active downgrade, while in others, new consumption demands emerge due to interests. Just like the recent trend of 'affordable alternatives to luxury brands,' it's not necessarily that consumers who originally bought luxury brands have downgraded to smaller brands but rather that consumers who couldn't afford luxury brands have 'upgraded' to affordable alternatives. Therefore, I believe that Pinduoduo satisfies not only the low-price demand for 'consumption downgrade' but also the partially upgraded demand for emerging vertical categories and 'affordable alternatives.' Since these two types of demand come from the same group of people, their requirements for platform operation and traffic allocation are nearly identical."

I believe the above statement not only perfectly explains the positioning of the Pinduoduo platform but also supplements the answer to the question of "why merchants stay on Pinduoduo." Here, merchants see not only a huge demand for low-priced products but also the possibility of "moving up" in some vertical categories. As the saying goes, "A soldier who doesn't want to be a general is not a good soldier." For small and medium-sized merchants with a certain level of product originality and brand management capabilities who hope to achieve breakthroughs, Pinduoduo is undoubtedly a favorable scenario for upward mobility. Of course, they can also strive for upward mobility on other platforms, but those platforms tend to be overcrowded with "vested interests," making it potentially more challenging to stand out than on Pinduoduo.

Merchants inherently understand that blind internal competition holds no future. No force can compel merchants to stay on a platform that is detrimental to them and offers no hope. Pinduoduo is not such a platform. As for how to end internal competition on a societal level and create a favorable environment with reasonable profits at all levels, it is a complex topic that cannot be solved by a single e-commerce platform alone. In fact, the stage provided by Pinduoduo for small and medium-sized merchants and industrial belt factories has alleviated rather than exacerbated the internal competition in China's manufacturing sector, a fact that we must fully recognize, and I believe most merchants would agree.