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E-commerce firm Pinduoduo pushes more resources to support merchants as coronavirus fallout hurts sales

Pinduoduo narrowed its net loss in the December quarter to USD 251.6 million, beating analysts’ estimates.

Photo: Provided by company with the press release

Chinese e-commerce services provider Pinduoduo expects its first-quarter earnings to take a hit because of the coronavirus outbreak, but remains hopeful of a positive turnaround after the health crisis subsides.

The Shanghai-based company announced plans on Wednesday to direct more resources to support frontline relief efforts, stabilize prices of essential goods on its platform, and help its merchants and business partners during the economic downturn caused by the virus.

“Today marks one month since the resumption of work for most of China,” said Pinduoduo founder and chief executive Colin Huang Zheng in a conference call with analysts, following the release of the firm’s financial results for the quarter ended December 31. “Our merchant operations and logistics have resumed, and are gradually returning to normal.”

Without elaborating, he added: “We’ll continue our subsidies program to support their recovery.”

That increased support for merchants on Pinduoduo’s social commerce platform has gained urgency as businesses across China have struggled since the Covid-19 outbreak, which prompted the central government to put a number of communities on lockdown, extend the Lunar New Year holiday, and restrict travel and transport.

“The disruption caused by the outbreak will have a negative impact on our results for the first quarter of 2020, but our expectations for the long run remain unchanged and even more positive,” Huang said.

Pinduoduo, which has gained a big following in China with strategies such as offering consumers deeper discounts on mostly generic products if they buy in groups, also competes against larger e-commerce players Alibaba Group Holding, and JD.com. Alibaba is the parent company of the South China Morning Post.

“Delays in logistics have dealt a big blow to Pinduoduo’s business [this first quarter],” said Liu Dongliang, an independent internet industry analyst. “Efficient logistics and punctual delivery are key for e-commerce companies to deliver consumer satisfaction.”

Nasdaq-traded Pinduoduo reported that its net loss narrowed to RMB 1.7 billion (USD 251.6 million in the December quarter, compared with RMB 2.4 billion in the same period in 2018. That beat the RMB 2.6 billion consensus estimate from analysts surveyed by Bloomberg, as the company posted higher online marketing and transaction services income as well as average monthly active users during the quarter.

It recorded a 91% increase in fourth-quarter revenue to RMB 10.8 billion, up from RMB 5.6 billion a year earlier, but missed analysts’ consensus estimate of RMB 11.1 billion.

“We have observed the broad adoption of digital services by consumers during the outbreak, which bodes well for the future of e-commerce in China,” Huang said. “We have seen rising consumer engagement on Pinduoduo, and I am confident that our platforms will be better prepared for the future.”

This article first appeared in the South China Morning Post.