In recent years, China's e-commerce landscape has undergone significant changes.

From the perspective of consumer behavior, the demand for both affordability and quality has become the general consensus. Against this backdrop, traditional e-commerce giants like Alibaba and JD.com, who once dominated the market, have paid a heavy price for their misjudgments and are now facing inevitable business difficulties in the new era.

From an industry perspective, Pinduoduo has emerged as a strong contender. With its low prices and "ridiculously" good after-sales service, Pinduoduo has become a preferred choice for consumers. Behind its "irresistible" products and prices, its consumer-oriented "refund only" policy without the need for returns, universal free shipping, and shipping insurance, the duopoly of traditional e-commerce has evolved into a three-way standoff.

Interestingly, perhaps because people are accustomed to the business models of Alibaba and JD.com, the Pinduoduo model has faced some criticism. The main concern is that the success of the Pinduoduo model comes at the expense of "mercilessly exploiting merchants." As more platforms begin to emulate Pinduoduo, there are fears of industry-wide "bad money driving out good."

It is expected that Pinduoduo would face such质疑. After all, on the Pinduoduo platform, the interests of merchant groups are indeed weakened or suppressed compared to users.

What is surprising is that even though some merchant groups seem to have grievances and even claim to be operating at a loss, they still firmly choose to sell on Pinduoduo. Moreover, Pinduoduo's performance remains outstanding, attracting numerous industry veterans to learn from its model.

The relationship between Pinduoduo and merchant groups cannot be simply summarized as "exploiting merchants." Digging deeper, we can discover that it is actually a true reflection of merchants' reliance on Pinduoduo.

What Pinduoduo represents is a solution for small and medium-sized merchants to survive in an environment where supply exceeds demand in the e-commerce market. While there may be debates about the merits and demerits of this solution, its greatest value lies in helping a broader range of merchant groups to better survive.

Merchants Have a Love-Hate Relationship with Pinduoduo

The fact is that merchant groups have a complex love-hate relationship with Pinduoduo.

For mainstream supply chain merchants in the domestic market, today's market environment presents a "dilemma of the times." While they may not want to choose Pinduoduo, it seems that only by leveraging the Pinduoduo model can they escape the dilemma and survive.

Currently, a large number of factories in China's supply chain are at a turning point from "manufacturing for the world" to "creating for the world." In an environment where demand is less than supply, only those who can truly capture users can survive.

Pinduoduo's growth logic is centered around attracting users, which is in sharp contrast to Alibaba and JD.com.

Unlike other e-commerce platforms that focus on the "supply side" with the goal of "making business easy for everyone," Pinduoduo is an internet company that firmly stands on the "demand side," i.e., the consumer end. Its underlying thinking is to go where the customers are. Therefore, it aims to attract consumers, and once there are customers, there will be no shortage of manufacturers. This is why Pinduoduo's after-sales service is so exceptional.

At the same time, it is understandable for merchants to follow users and choose to sell on Pinduoduo. While it may seem necessary to offer concessions or bear more after-sales costs for consumers, merchants can also benefit from the platform.

In a nutshell, once merchants choose Pinduoduo and align themselves with consumers, they can bring about massive, certain transactions for themselves. These transactions lead to cost advantages and stable cash flow, which in turn creates financing potential.

It is worth noting that in the consumer goods industry, cash flow has always been the most important factor, not profit. Merchants who want to achieve stable cash flow through Pinduoduo must inevitably give up chasing high profits, which is a cruel choice, especially in a less than ideal consumer environment.

Judging from recent developments, Pinduoduo's development model clearly has more practical significance. It must be acknowledged that Pinduoduo's existence has positively contributed to the long-term survival and development of many small and medium-sized merchants. Like Alibaba and JD.com, Pinduoduo also has the potential to represent the future development trend of the e-commerce market. Only time will tell who will ultimately emerge as the winner.

Where Are the Opportunities for "Poorly Resourced" Merchants?

It is worth noting that despite continuous criticism of "exploiting merchants," Pinduoduo's significance for merchants is not as negative as imagined. On the contrary, from the perspective of store opening thresholds, which merchants value most, it can be considered the most friendly channel for factory merchants.

With the lowest store opening threshold, Pinduoduo can be considered the only "light" for countless small and medium-sized merchants.

On the internet, there are numerous comparisons of the store opening thresholds, operating costs, traffic costs, and commission rates of the four major domestic e-commerce platforms. From most of these comparisons, we can see that Pinduoduo's overall attractiveness to small and medium-sized merchants is not inferior to that of its competitors. This is the direct reason why many merchants continue to complain but still choose to open stores on Pinduoduo.

From the perspective of small and medium-sized merchants from "poorly resourced" backgrounds, since it is difficult for them to make a comeback on other e-commerce platforms, why not take a chance on Pinduoduo? At least there is an opportunity.

Taking traffic costs, which are of utmost concern to all merchants, as an example, it is well-known that opening and operating a store is just a matter of establishing a presence on a channel. Having traffic and being able to afford the traffic costs determine the success of a business.

In terms of traffic costs, Pinduoduo is currently the cheapest among all major e-commerce platforms, and its ROI (return on investment) for advertising and traffic investments is also the highest.

According to industry insiders, the reason behind Pinduoduo's low traffic costs is the high level of modularization and process standardization in its platform operations. Most of the solutions are ready-made, and traffic composition is concentrated, mainly consisting of promotional activities and platform-wide advertising.

In contrast, Taobao's operating system has evolved gradually over the past two decades. The advantage is that it provides rich data details, allowing those with professional capabilities to conduct market analysis and innovation through comprehensive market data. However, the disadvantage is also apparent, as the threshold is relatively high for a large number of factory merchants.

For a large number of white-label merchants on the supply chain, most of them started as OEMs (original equipment manufacturers). Even if they successfully transitioned to their own brands later, they are generally price-sensitive and not proficient in sophisticated operations and brand management.

However, Pinduoduo does not require complex sophisticated operations. As long as merchants can offer lower prices, traffic will follow, and sometimes there is no need for advertising or traffic investments.

At the same time, while brand merchants on Pinduoduo may seem disadvantaged, for a large number of Chinese supply chain manufacturers caught in the dilemma of the times, operating on Pinduoduo may require thin profits but high sales volumes. While profits may not be high, there is certainly profit on Pinduoduo, and the certainty of profits is very high.

Whether to continue with the high-professionalism, high-profit, and high-risk brand approach or embrace Pinduoduo's low-profit but highly certain model, the starting points and choices of different merchants are destined to be different.

Moreover, the low-threshold traffic under the Pinduoduo model has the significant benefit of greatly improving the turnover rate of white-label factory merchants, leading to significant inventory clearance efficiency and healthy cash flow. The direct effect of high turnover rates can then drive product innovation. In this way, Pinduoduo is promoting a new virtuous cycle ecosystem centered around efficiency and innovation in the e-commerce market. Compared to the business ecosystems built by Alibaba and JD.com around brands and supply chains, Pinduoduo is starting anew.

In this process, merchants who are not adapted to Pinduoduo's low-price and user-oriented strategies will only face elimination.

In the business world, a platform that can profit most merchants is a good e-commerce platform. In this regard, Pinduoduo has delivered its own answer. Unlike in the past, Pinduoduo is now targeting a broader range of small and medium-sized merchants and ordinary consumers.

Therefore, today, Meituan, Alibaba, and JD.com are all following and learning from Pinduoduo. As making a broader consumer base enjoy better value for money becomes the mainstay of the consumer market, merchants may only survive better by embracing this trend together with Pinduoduo.

And survival is the first priority before upgrading, advancing, innovating, and prospering.