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Pinduoduo signals interest in developing new logistics system after generating 33% of all parcels in China

Written by Song Jingli Published on     2 mins read

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The number of active buyers on Pinduoduo has reached 823.8 million.

Chinese e-commerce company Pinduoduo said “conditions are ripe to reimagine logistics” on Wednesday in a press release after disclosing solid first quarter financial results.

“If you think about it, we have a hub-and-spoke system that was created over the past decade to concentrate parcel flows into centralized hubs, which was the right thing to do ten years ago because China is just too large a country and the e-commerce order volume was still low,” said Pinduoduo chairman and CEO Chen Lei. “But what about ten years from now? The future of logistics should not be burdened by legacy considerations that have already changed.”

With rising parcel volumes, it is now possible to develop a more flexible logistics management system and agriculture-focused infrastructure that reduces the need for multiple transshipments and enables more point-to-point deliveries, Chen said, adding that this can be achieved through the use of advanced calculations that take into consideration multiple factors, such as the timing of truck deliveries, warehouse locations, and route plans, acknowledging that creating such a system would require brand-new architecture.

“We originate many parcels, over one-third of daily parcels in China last year, and have expertise in complex technological system design,” Chen told analysts during the Q1 earnings call conference, adding that the company is already working on algorithm design, data analytics, and has applied for patents for its proprietary cold-chain logistics system.

The new system, which is still in its early phases, is aimed at minimizing the degradation in quality of agricultural products and other perishable products during transportation. It will generate routes based on information from collection and distribution points, the availability of cold-chain infrastructure, and the locations of transit points, said David Liu, vice president of strategy at Pinduoduo, during the earnings call.

Like JD.com, Pinduoduo also features a community group-buying service called Duoduo Grocery, or Duoduo Maicai in China, which the company considers an agriculture-focused logistics infrastructure system.

Liu claims Duoduo Grocery connects buyers directly to local farmers, allowing consumers to pick up items they have ordered online one day earlier at shops that now serve as collection points. Pinduoduo has also built several warehouses and leveraged third-party service providers to run the service.

Tony Ma, vice president of finance at Pinduoduo, said it is too early to tell whether Duoduo Grocery’s business model is sustainable. He declined to reveal the service’s current scale and its losses in the first quarter.

Pinduoduo narrowed its net losses from RMB 4.1 billion in Q1 2020 to RMB 2.9 billion (USD 443.5 million) in the same quarter of this year. The company’s total revenue amounted to RMB 22.2 billion (USD 3.4 billion) in the first three months of the current financial year, which represents a 239% year-on-year increase.

The number of Pinduoduo’s active buyers in the 12-month period ended March 31 reached 823.8 million, representing an increase of 31% year-on-year and a historic high.

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