Pinduoduo (NASDAQ:PDD) Communication Minutes 20230927

Original link: E8%A6%8120230927/


1. Q3 Duoduo operating data

In July, the main website added 330 billion to buy food, a year-on-year increase of 24-25%. In August, it was 350 billion, a year-on-year increase of 25-26%. In September, it is expected to be 370-380 billion. Grocery shopping cost 20.4 billion in July and 22.1 billion in August. The GMV growth rate in August was actually very low month-on-month, but the loss rate was only about 3%.

On the income side, what is relatively certain is the income from promotion accounts. The income from promotion accounts was 12.1 billion in July and 11.7 billion in August. It is not easy to estimate the investment resource package for external links in July and August, but it is estimated to be 2.5-3 billion. The promotion account is the advertising promotion account that merchants recharge on the platform. It is the bulk of the entire advertising revenue, accounting for nearly 90% of the advertising revenue.

On the overseas side, temu’s sales were US$1.2 billion in July and US$1.4 billion in August, of which US$810 million was in the United States in August. The US’s share is still relatively high. AAC was 960 million at the end of August. The unit price per customer has been about 50-51 since mid-to-late August, which is considered high for the whole year. It was 49-50 in July and was as low as about 47 in Q2. Therefore, the unit price per customer is both month-on-month and year-on-year in Q3. Increase, with a year-on-year growth rate of 5%. Q3 is the highest price per customer in the whole year, and the price per customer in Q4 is likely to be lower than Q3.

In terms of current progress, the full-year GMV target of 4.2 trillion yuan is not a big problem because it was not radical but conservative when customizing last year. The total revenue of the entire promotion account increased by 44-45%, but the final growth rate will be slightly higher, because the investment resource package is expected to be much higher than last year in Q3. Last year’s Q3 was about 2.5-2.6 billion, and July and August this year add up to 25 100 million.

2. Q&A

Q: What is the proportion of natural traffic now?

A: 58-62%, which is free natural traffic, and the rest is considered paid traffic. Judging from the discount information on the business details page.

Q: For example, what is the approximate level in the first, second and third quarters and the same period last year?

A: The first and second quarters are about the same. Paid traffic was around 35% in January and February, a year-on-year difference of 8-10%. In July and August last year, it was about 30-35%. The main difference is that at the beginning of this year we allocated more free natural traffic. The subsidy is for paid advertising products, so there will be a little more.

Q: What does it mean to subsidize natural traffic to advertising products?

A: Advertising last year will not have any impact on the product score of the product. From the end of last year to the beginning of this year, the product score will be highly weighted after the product is advertised, and site-wide promotions are not included. From the perspective of merchants, site-wide promotion is all paid traffic, but from our perspective, the specific distribution logic of site-wide promotion will be divided into advertising spaces and non-advertising spaces, so we only use site-wide promotion The traffic exposed on the advertising space is calculated, which is invisible to merchants. If all the traffic promoted by the whole site is regarded as paid traffic, the proportion will be very high.

Q: If all site-wide promotion is treated as paid traffic, how much natural traffic is left?

A: It is estimated to be only about 40%.

Q: Can this 40% rate go down?

A: If all the original paid traffic for full-site promotion is used, it will definitely be able to go down. This space mainly comes from the penetration rate of comprehensive promotion which is still rising. The amount of merchants using full-site promotion is increasing. Now The growth mainly comes from those leading merchants. Large advertisers like Sunhead have a share of more than 1,000, 2,000, and soon more than 3,000. The proportion of using full-site promotion, including advertising expenses, is increasing. The proportion of consumption through full-site promotion is increasing. The higher.

But even if the whole site promotion is counted as paid traffic, 30% of the free natural traffic may be a bottleneck, because if this traffic is too low, it cannot support the operating efficiency of some long-tail supply chains on the platform, and the cost and efficiency of the traffic will also As a result, it is difficult for many small and medium-sized businesses to have opportunities to grow.

Q: The monetization rate has increased a lot this year. Have you found that there is an obvious elimination mechanism for merchants on the platform, such as some low-quality goods or middlemen being significantly eliminated? GMV has been concentrated. Is there a clear trend of concentration in industrial areas?

A: There is a trend, but I haven’t paid much attention to the industry. However, we are responsible for the operation of small and medium-sized merchants, which are merchants with a monthly balance of less than 50,000 yuan. From the perspective of monthly activity, these merchants are getting lower and lower. It is estimated that the overall monthly active merchants in September will not reach 3 million, of which the monthly income is 50,000 yuan. For the above, there will be a net increase of about 2,000-3,000 every month. Therefore, the number of merchants with a monthly balance of more than 50,000 yuan has been maintained at about 550,000, rising a little bit, but basically every month there will be a loss of about 50,000 to 100,000 merchants with a monthly balance of less than 50,000 yuan.

Q: Does that mean the difference is hundreds of thousands a year?

A: You can’t calculate it this way, because it will rise again during some events and then fall after the event, but the overall trend is downward. The highest point was in 2020. In Q4 of 2020, it was around 3.8-3.9 million. However, at that time, the number of merchants with a monthly balance of more than 50,000 was only over 500,000. Those who have lost money over the years have mainly been small and medium-sized businesses.

Q: Has the advertising payment rate of merchants increased significantly?

A: The number of advertisers is increasing.

Q: What is the approximate level?

A: The annual active advertisers are about 1.8 million, and the monthly active advertisers are 1.1-1.2 million. I don’t remember clearly about 2020, but before the site-wide promotion, last year and the year before last year, there were only about 1.2-1.3 million annual active advertisers. After being promoted on the whole site in June and July of last year, the annual active life was about 1.55 million. After the site-wide promotion was launched, the number of advertisers increased rapidly, and the main ones mobilized were small and medium-sized businesses.

Q: In terms of the price of advertising words, has there been a significant increase in competition leading to an increase in price?

A: I haven’t paid much attention to it, but I feel it is definitely increasing. In my impression, big words in popular categories are generally category big words or fourth-level category words. For example, clothing, luggage, and other categories can be priced between 50 cents and 80 cents depending on the placement strategy during normal prime time periods. There is a high probability that it will be ranked in the first and second screen advertising spaces, and the average price now may be one yuan. In fact, the quantity of keywords has not changed much, mainly the price. Nowadays, the GMV growth rate of brand stores can still far outperform the market, so prices have also been raised to a large extent.

Q: Which one is growing faster, brand or white label?

A: It depends on whether it is a brand in a broad sense or a well-known brand. If we only look at brand stores, which are flagship stores and exclusive stores, they account for close to 57% in Q2 this year and 50% last year. The absolute value is about 7% higher. The growth rate of the market is about 35%. Its growth rate may be to about 45%.

Q: Domestic sales expenses in the third quarter?

A: I don’t pay much attention to sales expenses. It is estimated to be 15-16 billion. If you include off-site promotion, it will be nearly 20 billion.

Q: Does this part include overseas?

A: This part does not include overseas. Overseas budgets are no longer within our own budget system and are allocated to them separately.

Q: How much of it does Baibu account for?

A: Nearly 18% outside the area.

Q: Can you break down the GMV of temu in the latest month? Can it also be used in North America?

A: The United States or the whole country is more clear about it, while other countries pay less attention to it.

Overall, there were a total of US$1.4 billion in orders in August, 30% of which were coupons, and the actual paid GMV was approximately US$1 billion. The actual paid gross profit margin in August was approximately 27%, with a gross profit of US$270 million. The costs are mainly logistics costs and delivery costs. The overall cost of an order is US$32, and the logistics cost is an average of US$8-9 per item, accounting for nearly 30%. The actual gross profit and logistics fees basically offset each other.

The overall loss rate is about 40%, mainly due to two aspects: one is investment, which can attract new customers and promote activity, but the US market will be much smaller, and other newly opened countries will lose a lot in August; the other is operating costs. Including after-sales, etc., relatively few.

The performance of the US market will be slightly better. In August, US GMV sales were approximately US$800 million, with an actual gross profit margin of approximately 30%. The unit price per customer was US$37, and the number of corresponding items was 5-6. Logistics costs are US$5 at the domestic end and 3-4 US dollars at the overseas end for on-site distribution. There is still US$1 from the merchant to the warehouse domestically. Therefore, the logistics cost in the entire US market is US$10, and the gross profit level and logistics costs are basically offset. However, the MAU in the U.S. market is around 80 million, which is relatively high, so there is less new recruitment. The main strategy of attracting new customers is to promote activation and repurchase. It saves money when choosing crowd packages and selling products, so the overall loss is The rate is about 30-35%, and other operating warehousing and distribution costs, including after-sales, are similar. But in the United States, we are considering opening overseas warehouses. Dada also did this before but put it on hold. The overseas warehouse project is still in progress. It is currently cooperating with an express delivery company for on-site delivery. This third-party provider only carries the risk distribution capacity of on-site delivery and does not carry the storage capacity. It is expected that there will be a rough situation before the end of the year. New ones in other countries have independent operations teams, so I’m not sure.

Q: Are overseas warehouses handled by myself or by Jitu?

A: What Jitu does is equivalent to cooperating with third-party logistics. The overseas warehouses we build are built by ourselves, that is, the domestic end directly packages large packages, and overseas does the risk distribution, so the domestic end does not need to do risk distribution. The delivery time should be shortened by 3-4 days, which will also be of great help to the after-sales end. Although there are very few returns on the after-sales end, only refunds or partial refunds are mainly used to solve after-sales problems.

Q: Does having overseas warehouses mean that the proportion of sea freight will increase and the proportion of air freight will decrease? What’s the proportion overseas now?

A: I don’t know the overseas proportion.

Q: If we want to reduce losses and improve UE, should we mainly reduce the purchase volume or the cost of contract fulfillment?

A: The first is to increase the gross profit, and the second is to reduce the budget for investment flow, that is, the purchase volume.

Overseas warehouses have little impact on reducing UE. Although it will improve the timeliness and experience of logistics, the cost of fulfillment logistics cannot be reduced much. The unit price of a product is a matter of product structure.

In terms of purchase fees, because there are so many new countries now, the cost of new purchases is high, and the purchase interest rate of the system itself is about 150%. In fact, in some newly opened countries, it is in the form of a crossed-out price, plus discounts. It is sold by superimposing coupons, so in this case it is impossible to have a too high actual gross profit rate.

Q: When is breakeven?

A: Not sure. It’s probably unlikely in the next year. Because there are several countries in Southeast Asia alone that will open in the future, and there are new plans to open in Africa, the Middle East, and even Brazil and South America. As long as this matter is promoted quickly, it is impossible to achieve an overall breakeven. Even in the US market, which accounts for 60% of the market, the loss is more than 30%. So breakeven is not yet on the agenda. This year’s original loss budget of 200 yuan was reduced to 23 billion some time ago. The impact is mainly on some marketing subsidies, operational strategies, etc., which also means that the entire order gmv this year is expected to reach 15 billion US dollars from the original 10 billion US dollars. . Loss can be accepted, but the core pursuit is GMV’s growth rate and market size.

Q: This year, some competitors, especially and Alibaba, are also offering lower prices. Pinduoduo’s proportion of paid traffic may also be increasing and prices will become more expensive. How can we maintain the advantage of low prices in the long term?

A: In the early days, low price had a big advantage, because the traffic cost and traffic efficiency were huge. Everyone was working on an open platform. Their business logic was to buy traffic and sell it to merchants at a higher price. All the price advantages were at the bottom. Traffic cost and traffic efficiency advantages. Therefore, if we want to ensure the traffic advantage in the long term, there are two aspects: First, the traffic structure. Although the traffic overlap of Taobao and Tmall is very high, our traffic platform image is more concentrated, which means that the needs of users are relatively low. In terms of being more concentrated, for example, pursuing high cost performance, this kind of portrait feature will have a greater impact on the platform’s search, recommendation, product configuration, final conversion results, the utilization efficiency of the entire traffic, or for merchants, sales efficiency and hit rate will be more Large, in this case, merchants will have a higher willingness to sell at low prices in order to pursue high sales efficiency in the short term;

The second is traffic distribution. Our platform itself considers the comprehensive score of products in search and recommendation. This product score includes three dimensions: price power, price range distribution and price star. Their total weight is 15-20%. This means that we are the platform with the highest product price weight factor based on search recommendation logic. However, low-priced products cannot be absolutely low-priced. They must also be as low as the traffic utilization conversion rate of platform users and other suitable price stars. This includes similar products, that is, among products with a similarity of more than 90%, the higher the price star rating, the higher the price star rating. The higher, the better. At this time, the weight of traffic distribution on the platform is actually more advantageous than making low-priced products on other platforms. For example, if you sell something for ten yuan, even if it is the lowest price in the country, the traffic value obtained on our platform is very different from other platforms. Therefore, in order to obtain higher traffic efficiency, merchants on our platform will be more enthusiastic about low prices than other platforms. Of course, the reason behind this is also that users on our platform demand low prices when making order decisions. According to research, this proportion is also very high. Compared with, Tmall and even Taobao, it has a greater impact. This is the underlying foundation. Traffic distribution is also the most important. On the other hand, traffic distribution affects price image display. Because users cannot compare the prices of all products and browse 8 screens on average, which is about the top 50 products, we only need to make the price range of the displayed product pool lower than that of other brands. Of course, this is also related to user demands. We show that products in this price range have high conversion rates and good traffic presentation capabilities.

But if you look at the entire market, the price comparison system has measured that about 65% of the front-end sales are lower than Taobao, and this proportion is getting smaller and smaller now.

Q: After other platforms pay more attention to price power, have you seen a significant increase in the price comparison behavior of Pinduoduo users?

A: Not paying attention.

Q: What is the proportion of exclusive users? What percentage of users overlap with JD Taobao?

A: I haven’t paid much attention to it. AAC is now at 9.6, which should have a high degree of overlap with Taobao, but this data has not been monitored for a long time. It was 85% in 2020, and it is estimated that the overlap should be getting higher and higher.

Q: The other party is adopting a low-price strategy, but Pinduoduo has not seen users open price comparisons on multiple platforms at the same time, right?

A: This matter cannot be monitored in terms of detailed data, but according to research, users are indeed more price-comparable now, because the supply chains of various platforms are now very similar.

Q: Does Pinduoduo’s supply chain have exclusive advantages for white-label products, such as agricultural products?

A: There are certain advantages. We have been working on a free production plan since the end of last year. In layman’s terms, it involves attracting investment in the industrial belt of industrial products, which has several advantages. First, our platform provides relatively good support policies to industry leaders. The support period for ordinary merchants is only 5-7 days, while the support period for our own industry belt investment or industry belt investment service provider channels is one month. During this month, the traffic support is usually about 8-10 days per product. It can be guaranteed that within a month, even if the product does not have any conversions, the platform will continue to help merchants test the payment during this period, that is, test what user tags the product conforms to and what kind of group the user portrait requires. Then the merchants also have a month to follow up. The platform needs to be adapted, obtain the platform’s accurate user labels and portraits, and create a product labeling system. There will be greater growth opportunities than ordinary merchants.

Second, we also have the support of marketing products. Because the supply capacity and commodity prices of industry chain merchants are generally relatively good, in addition to fixed sales such as nine-yuan sales and limited-time flash sales, we will give some positions to industry chain merchants. In other cases, even when screening the supply chain, the supply chain of industry chain merchants The probability of being selected is also very high.

In addition to attracting investment, we also provide various supporting policy trainings for the White Product Plan, including live broadcast guidance, weighted video production, weighted production of various content gameplays, and if the business operation capabilities of the industry leader are not good enough, we will provide him with an on-site operation team. We will provide greater support than other platforms, especially for industrial products.

The focus on agricultural products is also strong, but not as big as before. Nowadays, the marginal benefit of the flow of agricultural products is worse, so the support is not as great as before, but the investment is still very large, such as the production area warehouse, including the linkage with grocery shopping and Kuai Tuantuan.

Q: What is the current average commission rate of Baibu?

A: It was 2.7% in August and about 2.65% in Q2. However, agricultural products are still not collected now. Others are collected, with the highest rate being 4.5%.

Q: Japan’s progress?

A: Not sure, except for the United States and overall.

Q: In terms of product supply this year, are there any obvious category changes?

A: If we look at the GMV distribution of orders, the changes are quite large. In the past, fresh fruit has always accounted for 17-18%, but this year’s Q1Q2 includes July and August, the fresh fruit gmv is only about 15%, Q2 is only 14.5-14.6%, and July and August are slightly higher, only 15.1%-15.2%. This Categories have dropped dramatically. There are not many categories that have increased. The biggest one is beauty and personal care, which has not increased much from the previous quarter. The main reason is that last year’s Q1 including the previous one has been around 8%, and this year it is almost 9-10%. Digital appliances also experienced certain growth, up about 1% from last year. The fluctuations in the main category itself are actually not large, but the fluctuations in its first-level or second-level categories are sometimes very large. For example, cosmetics in beauty and personal care have a year-on-year growth of 70-80%, and skin care, especially men’s skin care, has a year-on-year growth of 50-60%.

Q: The GMV ratio originally increased from 8% to 10%, and coupled with the 25% increase in the market, its actual growth is close to 50%. In fact, the change is huge.

A: The changes are also huge, but we have to look at them this way. Last year’s Q2 was already 9.3%, this year’s Q2 was 10.1%, and last year’s Q1 was only 8.2%. It can be seen that the growth rate of beauty and personal care has been rising since last year’s Q2, but from 9.3% to 10.1%, this year-on-year increase The speed is actually average, their year-on-year growth is about 40%, but the broader market is almost 35%.

Q: Advertising revenue has increased rapidly this year. Is there any quarter-on-quarter change in the take rate of the entire platform from the third quarter?

A: The take rate should still be at a relatively high level in the third quarter of this year. The take rate is mainly advertising revenue. Last year, Q3 site-wide promotion contributed 4.7 billion. In July this year, it was 6.7 billion. In August, it was about 6.1 billion. Site-wide promotion consumes a lot of money, which means that it mobilizes merchants’ advertising, including the cost ratio of advertising. Improvement, coupled with the fact that the growth rate of brand merchant advertising is much higher than that of the broader market, this is the main difference between the take rate in Q3 this year and last year.

Q: How much faster do brand merchants grow than the market?

A: Taking Q2 as an example, the brand in the broad sense of flagship stores, specialty stores and specialty stores has a GMV of 57%, but last year it was only about 50.2%, an increase of nearly 7%, with a growth rate of 45%, while the market growth rate was only 35%. .

Q: Temu’s breakeven in the United States?

A: I never mentioned this.

Q: How much do the two dimensions of increasing gross profit and reducing purchase volume budget contribute to profitability?

A: It is difficult to raise gross profit because to maintain business volume, we must rely on promoting activity and repurchases. The main thing is to reduce the purchase budget, which is estimated to be 60-70%. This is a short-term perspective. In the long term, Temu is positioned in the mid-range and light-high-end market. In the future, the category supply chain structure will be improved, the product premium space will be higher, the proportion of branding will be higher, and the actual gross profit margin will be increased. Now the markup rate of the cross-border merchant system is another 150%, but because it is mainly in the customer acquisition and drainage stage, the gross profit margin of 150 cannot be directly sold at the front desk. In this way, the growth efficiency of the customer acquisition and drainage scale is very poor, so the line is crossed The price is generally set at 80-100%, leaving the platform with a gross profit margin of about 60%. Half of it is also excluded due to the stacking of various coupons, and the final paid gross profit margin is actually only about 25%.

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