Author: Number One
Editor: Meimei
Image Source: Generated by Wujie AI
Pinduoduo's market value surpasses Alibaba, and the new round of competition in e-commerce has just begun.
If the bottleneck of e-commerce development has been reached in the past five years, it may not necessarily be the case for Pinduoduo.
On November 28, Pinduoduo released its third-quarter financial report. As of September 30 this year, Pinduoduo's revenue was 68.84 billion yuan, a year-on-year increase of 93.9%; it achieved a net profit of 15.54 billion yuan under the US General Accounting Standards, with a net profit margin of 22.6%.
After the financial report was released, Pinduoduo's stock price soared by 18% at the opening, and its market value reached 185.5 billion US dollars. Meanwhile, Pinduoduo's main competitor, another e-commerce giant Alibaba, saw its stock price continue to decline, and its market value on the US stock market has dropped to 194.3 billion US dollars, with a difference of only about 8 billion US dollars between the two.
Many attribute the rise of Pinduoduo to "cheap" and "downgrading of consumption," while some believe that Pinduoduo's "low prices" mainly come from platform subsidies and the prevalence of counterfeit and shoddy products on the platform.
If only the e-commerce business is compared, the once despised "slash prices" has undoubtedly become the actual leader of China's e-commerce. This is because Pinduoduo's main business is currently e-commerce, while Alibaba has other businesses such as Alipay, Aliyun, Ant Group, Youku, UC, and so on. Moreover, on the evening of the 29th, Pinduoduo's market value reached 192.4 billion US dollars, about 1.371 trillion yuan, while Alibaba's market value dropped to 191.8 billion.
After the financial report was released, an employee posted on Alibaba's internal network:
"At this moment, I can't sleep and dare not think. Pinduoduo's market value has directly reached 185.5 billion US dollars, only 8 billion less than our 194.3 billion, which is really shocking. That seemingly insignificant 'slash prices' is on the verge of becoming the big brother. I didn't want to post this contentless post, but after some contemplation, I decided to leave this post as a reminder and as my own encouragement. I hope to contribute and surpass with the brothers in the group. After all, it's just a scare. I hope to contribute and surpass with the brothers in the group."
After the post was published, Jack Ma, in a rare move, replied as "Partner Jack Ma":
"Very good. Please provide more constructive opinions and suggestions. Especially innovative ideas. I believe that everyone at Alibaba is watching and listening today. I firmly believe that Alibaba will change. All great companies are born in the winter. The AI e-commerce era has just begun, it is an opportunity and a challenge for everyone. Congratulations to PDD for its decisions, execution, and efforts over the past few years. Anyone can be great, but only those who are willing to reform for a better future and are willing to make any sacrifice are truly respectable. Let's return to our mission and vision, Alibaba people, let's go!"
Is AI e-commerce really an opportunity for Alibaba?
In the first half of this year, the popularity of ChatGPT led the global wave of generative AI. Former Alibaba CEO Zhang Yong once believed that all industries are worth redoing with new AI-driven technology based on large models. In the all-staff letter released by the new CEO Wu Yongming, Alibaba also established its two major strategic focuses: customer first, AI-driven.
Under this concept, Alibaba has innovated its own products. This year's Double 11 was a large-scale application of e-commerce AI on the Taobao and Tmall platforms:
In terms of merchant operations, Alibaba has launched 10 free AI tools for merchants, including "intelligent model image generation, intelligent data weekly report, official customer service chatbot," etc. At the same time, Alibaba's Alimama has launched a series of AI products such as Wanxiangtai Wujie Edition, Alimama Bailin, Wanxiang Lab, covering seven major scenarios including product operation, consumer operation, activity scenes, and store operation, with over 1.5 billion calls during Double 11.
On the user side, it has launched AI smart assistant Taotianwenwen, AI try-on, and find discounts tools to help users select and compare products. Since its launch in September, Taobao Wenwen has attracted over 5 million users, with highly active users interacting an average of 8 times per day, and some users even asking questions 4,000 times.
At the 2023 Tmall Double 11 conference, Dai Shan, CEO of Taotian Group, clearly stated that the organic integration of AI and e-commerce will definitely bring trillion-level business explosions to brand merchants.
During Double 11, after using AI materials, fast-moving consumer goods brand L'Oreal saw a 27.2% increase in click-through rate for AI high-quality materials compared to native materials; Natural Hall applied AI materials in special scenes, achieving a 115.4% increase in click-through rate; home furnishing brand Lin's Home applied the AI splicing ability of Alimama's creative center, achieving a 135% increase in click-through rate for super short video placements; after using Taobao building blocks interactive gameplay, FILA's live room interaction rate increased by 54%, and membership conversion rate increased to 30.7%.
The financial performance data for the first quarter of the 2024 fiscal year released by the Alibaba Group also shows that the daily active users (DAU) of the Taobao app increased by 6.5% year-on-year, achieving continuous high-speed growth for five months. According to Questmobile's statistics, the average daily active users of Taobao in June reached 402 million, with a monthly active user base of 887 million, ranking first among e-commerce apps. According to a Goldman Sachs report, Taobao's user activity reached 45%, also ranking first among e-commerce apps in terms of growth rate.
What does AI mean for e-commerce?
In the AI e-commerce era, the powerful capabilities of AI will completely change the interaction between consumers and e-commerce platforms, as well as the operational models of merchants.
Salesforce, the world's number one customer relationship management company, stated in its fifth edition of the "Internet Shopping Report" that the emergence of generative AI such as ChatGPT and Midjourney has had a significant impact on the retail industry and shoppers. Almost all surveyed retailers stated that generative AI can help marketers more effectively stimulate shoppers' interest and purchase desire.
At the current stage, the scale of China's online shopping user base has exceeded 1 billion, entering a stock market. The core demand for e-commerce innovation has always been to better match supply and demand, and to do so more efficiently. For merchants to achieve sustained growth, they need to continuously and accurately acquire target users and understand user needs. How e-commerce platforms handle the diverse and personalized long-tail demands of nearly a billion consumers on a daily basis is a key focus.
Taobao customer service chatbot, image source: Internet
If you have used e-commerce platforms, you have probably had the experience where after searching for certain products, the platform still recommends similar items to you after your purchase. However, when you want to browse and discover new and interesting products, the recommendations given by the platform are often repetitive.
With the support of AI, these long-tail demands can be fully satisfied. Large models can more deeply understand consumers' real intentions or broader intentions, and merchants can use AI to more accurately understand user needs, making supply and demand matching more efficient.
On the supply side, AI can help merchants achieve scalable supply production. Platforms provide AI tools to merchants, allowing them to use standardized, tool-based, and systematic tools to automatically generate product recommendations and descriptions, and even generate images and short videos. Especially now that live streaming and short videos have become the focus of e-commerce platforms and merchants to increase user activity and retention, using AI to assist in content creation will enable merchants to achieve large-scale cost reduction.
For platforms, through AI content generation, they can provide more life experience and knowledge-based content for overall users, helping users with in-site recommendations and strategy formulation, thereby increasing user stickiness and indirectly benefiting merchants. According to data from Taobao Wenwen, the proportion of non-shopping scene demands has reached 25%, covering diverse scenarios such as travel, life, and companionship. Therefore, e-commerce platforms have the potential to become the gateway to intelligent living.
The AI e-commerce era is just beginning, as Jack Ma said.
In overseas markets, just like Alibaba, Amazon has also embarked on the process of AI transformation. Similarly, as Alibaba faces the threats of Pinduoduo and Douyin/Kuaishou in China, Amazon is currently also facing the threat of Temu, SHEIN, and TikTok.
Meanwhile, in China, JD.com is also not showing any weakness and has fully equipped itself with AI intelligent customer service "Jing Xiaozhi." Within the first 10 minutes of sales on Double 11, JD Cloud's intelligent customer service accumulated over 1.88 million consultations. At the same time, other internet companies have also targeted this area. Tencent Advertising has utilized the Hanyuan large model to support intelligent advertising production; Baidu has launched Baidu Preferred intelligent assistant "Xiao You" to serve as an intelligent shopping guide for consumers; Xiaohongshu has also launched an AI intelligent note assistant to help merchants publish product notes with a single click.
In the entire e-commerce industry chain, AI is beginning to play an important role at every node.
ByteDance has recently disbanded its gaming team and formed an AI team called Flow. Pinduoduo, which has just become the leader of China's e-commerce, has also reportedly established a team of several dozen people for large-scale AI models this month. This team will explore the application of large-scale AI models in customer service, dialogue, and other scenarios, and will expand to the intelligent customer service, search, recommendation, and other business scenarios of its cross-border e-commerce platform Temu. Job positions related to large models (LLM) and (NLP) algorithms have also appeared in its official recruitment position directory.
Although starting late, in fact, before establishing the large model team, Pinduoduo had already been conducting research on AI in the e-commerce field. Pinduoduo's founder, Huang Zheng, and Chairman and CEO, Chen Lei, both have relevant work experience in AI.
Huang Zheng has been working in the field of AI since his college days and during his time at Google.
Chen Lei, in an interview with EO, once stated that Pinduoduo's opportunity lies in the fact that AI can run more beautifully in user habit analysis and product matching—by adding a richer social dimension to the vast user base and high-frequency transaction and shopping behaviors, it is building an increasingly intelligent database. This not only provides the basic data volume for AI computation but also allows for more precise learning and reduces the consumption of computing resources through the understanding of images, voice, and semantics displayed in human communication.
Clearly, the next focus for e-commerce platforms is AI, and all platforms are very clear about this.
The AI e-commerce era has just begun, and it is an opportunity and a challenge for everyone.
Whether Alibaba can regain its leadership in the AI e-commerce era by leveraging its powerful computing resources such as cloud services remains to be seen.
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