How we bet on the man who went from Zero to US$ 15 Billion sales run-rate in 18 months
In 2017, it is quite impressive to see how Amazon is frightening the world, and how a lot of people interpret each of its move as the end of hope for any competitor present in the targeted field. After each quarterly results announcement, the US retailers suffer blows, and give the impression to be happy to be still alive, but without any hope. As another example, the news of the Whole Food acquisition by Amazon was enough to salvage Blue Apron IPO. In silicon valley, every company has to currently pass successfully the Amazon test to get any dollar of funding : check that you will never be on the way of the guessed unknown future plans of the new Dr Doom. No Hope in that way !
However, it’s quite striking to see how the customer experience in e-commerce is currently close to how people used to buy online in the beginning of the century. The user is in front of a single interface, searches for some products, fills his basket and pays to be delivered. It has always been the same basic process since the beginning. Things have been made more efficient, but without a real breakthrough in the last 15 years — a century in the mobile internet world.
If no King Size disruption in happens in the US e-commerce, one should look in China, who is now leading the charge about innovations related to e-commerce. Our thirst for real ambitious new ideas made us connect there with Colin Huang. Colin is an exceptional Chinese entrepreneur, who has studied engineering and data science both in China and in the US, and has worked for google before creating successful startups in China. When we met, Colin was on the verge to release on the market a disruptive experience for e-shoppers, offering them the possibility to buy together on mobile, socializing about what to choose in a interactive way, while enjoying also cheaper prices inside a gamified experience.
The socialization of mobile commerce invented by Colin was based on leveraging the wechat community, in PinDuoDuo app or directly on wechat. The idea was to onboard a critical mass of buyers and merchants, to offer to each of them a unique and improved experience. People can have access to various offers, discuss with their friends or anybody else about the products, and benefit from discounts if they buy together. The experience is gamified and lead to impulsive buying, creating on mobile the digital experience that one would find in a giant farmer market. The merchants could find their own interest by having at the same the possibility to sell to groups (with smaller acquisition costs per unitary transaction), marketing differently towards small groups, and having access to social feedbacks at scale directly from the buyers.
This new e-commerce experience corresponded so much to what we believed should drive e-commerce : mobile, social, impulsive, with friction-less payment, and with gamification to find a pleasure to buy. One very incredible point was also that Colin was a repeat entrepreneur with a unique blend of experiences in e-commerce, modern search, and gaming on Wechat. On paper, if there was a man able to do it, it should be him !
The Cathay Innovation team in China had been exchanging for a while with PDD, and we booked a table with Colin in a restaurant in Shanghai, along with Lijun and Nicolas , who had worked a lot on the case along with Lanchun, to see if we how potentially back the company. Before the lunch, I believed that I would spend some time discussing more about some details or metrics, but this didn’t happen at all. Most of the time was spent in fact in exchanging about the common points of Buddhism, Quantum Mechanics, and the algorithmic structure of the Internet. In Quantum mechanics, the world is seen in a probabilistic view, and the experience changes the nature of the world, while in Buddhism the outcome of your actions and your interactions with the universe depend at the same time of what you do, your past actions, and the state of the universe. Those common points have driven various thinkers to consider the existence of a striking parallel between science and spirituality, and how there could eventually be a common concept integrating them as the different faces of a same reality. And the internet can be considered also as a virtual universe where the outcome is also at the same time dependent of what you do, what you did in the past, and of what happens in the whole virtual universe. Arguing about some common points, we had a very nice conversation about that, and the way the power of an actor can modify the outcome of the internet experience. This chat led me in fact to wish more than any metric (which in fact didn’t exist anyway at that time for PDD) that we HAD to be part of Colin journey, as we were lucky enough to meet an ambitious man of action who was also a deep thinker and philosopher with a vision to accomplish.
Shortly after meeting also with Mingpo Cai, Colin gave us his agreement for us to be part of the show, while the amazing rise of PinDuoDuo started as if this company was operating in a zero gravity world. Practically without buying traffic, the company on-boarded very quickly millions of people and ten of thousands of merchants on his platform. While, at the very beginning, PDD was selling only fruits, it very quickly successfully started selling everything, from lipstick to televisions, including even luxury articles or even cars. Finally, we had the proof point of the universality of the platform when some members of the team in China went in vacation from Shanghai into Tier3 cities to spend some time with their families, and reported that some of their relatives were already using PDD. We grew to less than US$ 10 million run rate to more than US$ 15 Billion yearly run rate in less than 18 months, becoming in a blink the third e-commerce company in China, and the fastest growing e-commerce platform ever on the planet. PDD recently has maintained steadily in the top 10 most downloaded apps in China, all categories, and some days even is number 1.
All of this is so fast that it must be considered only as a great start, and we believe that the best is yet to come for PDD. The rise happened because one exceptional person, with a real sense of the mission that he wanted to accomplish, decided that he could re-invent what was considered as e-commerce in the most competitive and advanced ecosystem on earth in that field. To do that, he offered at the same time to the shoppers and the merchants the kind of new experience that they were deserving in the age of the mobile internet, and the adoption popped up as irresistible. This is showing us again that anything is possible and can happen in the tech world when someone like Colin Huang has decided to stand up with a true vision.
I am often asked these days “why a social commerce platform as universal as PDD doesn’t exist in the Western world ?”. I guess that the response is that we know now that Amazon can potentially become old fashioned commerce very fast after the inflection point, and that Facebook seems now a bit too lazy to fully empower its social capabilities to do it. It probably won’t go through the pure mobile play seen in China, as the Western ecosystem was built on more closed platforms, and with more resistance to new innovation from existing industries. But I am sure that fear, regulation and walled gardens are not a long standing defense anymore against innovation, and that a new way to network ecosystems will appear and change the commerce world as we know it