PDD Says It Needs to Invest More on Innovation, Warns Profit Levels Not Sustainable
PDD Holdings, the multinational commerce group that operates the Pinduoduo and Temu platforms, said that it’s unlikely to sustain current profitability with planned increases in technology investments amid intense industry competition.
The Nasdaq-listed group on Monday reported revenue of 35.5 billion yuan and net income of 10.6 billion yuan for the three months ended September 30. Profit in the quarter was inflated by delays in certain agricultural-related investments. The level of profitability would be lower if the investments had gone according to schedule, according to the company.
“In summary, we think the current level of profitability in Q3 is temporary and unlikely to maintain,” said Liu Jun, PDD’s Vice President of Finance, on the company’s post-results conference call. “We plan to increase our investments to further drive innovations on our platform and strengthen our core capabilities. As such, we think it’s unlikely that the profit level of the past quarter can be maintained.”
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On the Monday call, PDD Chairman and CEO Chen Lei commented on the intense industry competition and noted that the company still has “many areas to improve” even as it received positive feedback from consumers for many product categories including agriculture, consumer electronics, beauty and cosmetics.
“We need to continue to deepen our value creation, increase our R&D investment to help further improve the supply chains efficiency, support the upgrade of the supply side, and facilitate agricultural digital inclusion,” Chen said.
During the quarter, Pinduoduo worked with CCTV and professors from the Chinese Academy of Agricultural Sciences and China Agricultural University to promote agricultural technology. The platform promoted a new variety of sweet potatoes that are less prone to disease and helped it reach more consumers. The crop is now grown in many parts of China and its success has benefited many farmers.
In the annual Harvest Festival, Pinduoduo also showcased a series of new and improved wheat varieties cultivated by China Agricultural University with the support of Pinduoduo’s “10 Billion Agriculture Initiative.” A dedicated Harvest Pavilion on the platform over half a million types of agricultural products.
Pinduoduo has also launched several initiatives since the beginning of the year to support the manufacturing industry. They include a “New Craftsman” campaign to help local craftsmen and manufacturers find a bigger market for their products through e-commerce.
In the past seven years, the platform has helped to incubate nearly 1,000 manufacturing brands through technology.