Pinduoduo is one of the fastest-growing consumer internet companies in China, achieving close to 800 million active buyers in just six years. It is also the country’s biggest agriculture platform, handling some $42 billion of agriculture orders in 2020. It has now set sights on becoming the world’s biggest grocer.
Chen Lei, the Chairman and CEO of Pinduoduo, is banking on the continued blurring of boundaries between the online and offline worlds to open up new opportunities. So confident is Chen that the mobile internet will transform the way people interact and behave, that when Pinduoduo started in 2015 the team built a mobile-only technology platform.
His judgement has proven right so far. The surge in online grocery shopping is one recent example. In China, shopping for groceries at traditional wet markets is an entrenched habit. Households would do their shopping daily, buying just what they need for the day or next couple of days. That changed with Covid-19 as shopping in crowded markets became a potential health hazard.
The lockdowns and subsequent changes to daily routine have pushed more consumers in China to order groceries through mobile apps. Some analysts estimate the online grocery market could be worth more than $120 billion by 2023.
To cater to this new demand for fast and affordable groceries, Pinduoduo introduced Duo Duo Grocery, a next-day service that offers a curated list of produce and groceries from local farms and suppliers to consumers in the same region. Consumers place their orders through the Pinduoduo mobile app before 11 pm and pick up their orders after 4 pm the next day at collection points located near their homes. The whole process shortens the time for produce to reach from farm to table from a few days to less than 24 hours.
“We saw six years ago that mobile is the only way to go. Therefore, we are the only major consumer internet company in the world that is mobile only. The mobile internet fundamentally transforms the way humans interact with each other,” said Chen, who was the chief architect of Pinduoduo’s mobile platform. “This mobile revolution is now tearing down the walls between the physical and digital worlds. Being a mobile-only product in this new age, we are well-placed to benefit from the opportunities thrown up by each behavioral change.”
“One such change sweeping the world is agriculture and grocery. Pinduoduo started with agricultural products, with the vision of offering consumers the “Costco + Disney” experience of more savings and more fun,” he said. “We are now the largest agriculture platform in China and we hope that Pinduoduo can one day become the largest grocer in the world.”
To achieve the goal of becoming the world’s largest grocer, Pinduoduo is investing in building an agriculture-focused logistics infrastructure that it sees as a stumbling block to meeting two key and contradictory consumer demands: speed and cost. In other words, consumers want both speedy delivery but also low prices. Most e-commerce platforms, including Amazon, charge extra for expedited shipping.
An additional problem is that the current express delivery logistics system in China is designed by and large to handle sturdy manufactured goods, which can withstand rougher handling and days on the road, often under harsh weather conditions. Fresh produce fares much worse under such treatment and spoilage rates are much higher, especially during the summer months.
Pinduoduo sees the solution as an agriculture-focused logistics infrastructure that is suited to handling fragile perishables. Another important part of the equation is shortening the time from farm to table, which is achieved by Pinduoduo’s proprietary technology in predicting and matching local supply with consumer demand. The more accurately Pinduoduo can pinpoint what is available in terms of supply, and match it with nearby demand, the less time the produce spends reaching the customer, resulting in less spoilage and deterioration in quality.
There’s an added advantage in this model for farmers who produce leafy greens and other fragile farm goods. Local-to-local commerce has the potential to put these farmers closer to consumers, giving them an added option to selling solely to wholesale buyers like supermarkets. By removing the inefficiencies from the supply chain, farmers stand to gain more for their toil, while consumers save on their grocery bills.