Pinduoduo Shakes Off Soaring Loss to Hire 500 Fake Product Detectives

ZHANG YUSHUO

(Yicai Global) March 14 — Pinduoduo, China’s Groupon-like e-commerce firm, will shrug off its expanding loss and hire hundreds of employees to remove fake products from its platform, according to its founder and chief executive.

Pinduoduo will employ 500 people to handle copyright and quality control issues, Huang Zheng said during an earnings call yesterday.

The Shanghai-based firm made CNY13.1 billion yuan (USD1.9 billion) in operating income last year, more than six times that of 2017, its latest earnings report shows. The loss widened to CNY10.2 billion, up 18 times annually.

At CNY13.4 billion, the company’s marketing expenses outstripped its revenue, rising nine times from 2017. The purpose of the investment was to cultivate more user awareness through online and offline advertising campaigns and promotions, the report added.

The firm’s administrative spending was CNY6.5 billion last year, up 50 times, due to recruitment costs and expenses that accrued from equity incentives to employees.

The number of active users rose 71 percent to 418.5 million. Each of them increased the volume of orders on the platform by 51 percent, and almost doubled the value of their orders to over CNY1,100 (USD164) per year.

The rapid expansions of the user base and gross merchandise volume prove that Pinduoduo is creating unique value, Huang said. The company’s gross merchandise volume was CNY471.6 billion, more than doubling.

Pinduoduo’s [Nasdaq:PDD] stock price dropped 17.45 percent yesterday to close at USD25.12. The Shanghai-based firm went public last July and raised USD1.6 billion.

Major international investment banks, including Morgan Stanley, Goldman Sachs, and UBS, have given Pinduoduo’s stock a ‘buy’ or ‘overweight’ rating. UBS and Morgan Stanley both gave the equity a target price of USD37 in their recent reports.

Editor: Emmi Laine