Summary of Key Points
The revenue of Pinduoduo increased by 9.5% in the first half of 2026, but the net profit decreased by 12.7%, which seems like a paradox. In fact, the operating profit increased by 13%. The main reason for the loss is due to "other net gains and losses" (the profit shifted from 3.3 billion yuan last year to a loss of 9.4 billion yuan, a difference of 12.8 billion yuan, including two fines of approximately 3.1 billion yuan, with the remaining amount not specified). Pinduoduo generates significant profits through a low-capital model (it does not purchase goods, stockpile inventory, or maintain its own logistics network), resulting in much lower costs compared to JD.com and Alibaba. Its per-person profit is 80 times that of JD.com and 6 times that of Alibaba. Its profit model is similar to that of traditional supermarkets, which earn money through rent (advertising, fees, and delayed payment terms), but it has more control over its merchants. Recently, Pinduoduo has launched its own "Xinpinmu" brand, indicating a shift towards a more capital-intensive approach, which will inevitably bring new challenges related to traffic distribution.
Detailed Analysis
1. The decline in net profit is a paradox: It's not that Pinduoduo is making less money, but rather that it incurred unexpected losses
Many people may think Pinduoduo is in trouble because its net profit decreased by 12.7%, but this is mainly due to "other net gains and losses." Last year, this category resulted in a profit of 3.38 billion yuan, while this year it led to a loss of 9.43 billion yuan, a difference of 12.8 billion yuan (equivalent to 30% of the net profit for the first half of the year). We know about two specific fines: a domestic fine of 1.52 billion yuan for "ghost delivery" services and a fine from the EU of approximately 1.6 billion yuan for Temu, totaling 3.1 billion yuan, with the remaining 6.3 billion yuan not explained in the financial report. However, the "operating profit," which truly reflects the company's operational performance, increased by 13%. Therefore, the decline in net profit is merely a superficial issue, and its core business is still strong.
2. The low-capital model is a profitable one: Pinduoduo generates substantial profits without owning inventory
Pinduoduo's revenue comes from two main sources: advertising (online marketing services) and transaction services. Although advertising revenue grew slowly (3%), transaction services grew rapidly (16.6%), driving the overall growth. The key to its profitability lies in its low-capital strategy:
- It does not purchase goods, stockpile inventory, or hire logistics staff, resulting in operating costs of only 43.4 yuan per 100 yuan in revenue (compared to JD.com's 83 yuan and Alibaba's 63.5 yuan). Its costs mainly include payment processing fees, Temu's cross-border logistics, and server costs.
- For every 100 yuan in revenue, Pinduoduo retains 56.6 yuan in gross profit (Alibaba retains 36.5 yuan, and JD.com retains 17 yuan), leaving 21.7 yuan in operating profit after deducting other expenses (Alibaba's 2.8 yuan and JD.com's 1.3 yuan).
In simple terms, while others may spend 80 yuan in costs for every 100 yuan in revenue, Pinduoduo spends only 43 yuan, allowing it to earn more.
3. High per-person profit: Using fewer employees to achieve more
Pinduoduo has only 25,500 employees, compared to JD.com's 670,000 (of which 643,000 are dedicated to warehousing and delivery) and Alibaba's 131,500. However, its revenue is 218.6 billion yuan, only one-third of JD.com's 662.1 billion yuan. This translates to:
- Per-person revenue: Pinduoduo's 8.58 million yuan (JD.com's 990,000 yuan, Alibaba's 3.9 million yuan);
- Per-person net profit: Pinduoduo's 1.56 million yuan (JD.com's 18,000 yuan, Alibaba's 270,000 yuan).
The reason for this significant difference is that JD.com has to manage procurement, warehousing, and delivery in-house, requiring more staff for each process, while Alibaba relies on heavy assets such as Cainiao. Pinduoduo, as a platform, does not need to employ as many people, similar to a landlord who earns rent from a store without managing the business itself.
4. Similar to supermarkets but with more control over merchants
Pinduoduo's profit model is similar to that of traditional supermarkets, but it has greater control over its merchants:
- Advertising = Entry fees: Supermarkets charge entry fees and display fees, while Pinduoduo sells search positions and information exposure through an auction system, forcing merchants to bid continuously, with uncertain costs each day (unlike supermarkets with fixed annual fees).
- Transaction services = Fees: Supermarkets take a percentage of sales, while Pinduoduo charges commissions and fulfillment fees, which are directly deducted from merchants' payments and are unavoidable.
- Delayed payment terms = Interest-free loans: Supermarkets delay payment for 60 days, while Pinduodou owes merchants 128.4 billion yuan in payments and deposits, which earn interest-free returns (equivalent to 27% of its operating profit).
What's more, Pinduoduo can set its own rules and change them at any time, whereas supermarkets have fixed rules that are difficult to modify. Pinduodou's top search positions are determined by algorithms, leaving merchants with no bargaining power.
5. From "renting out" to "owning the business": Why is Pinduoduo shifting towards a more capital-intensive model?
Traditional supermarkets have thrived for 30 years by charging fees, only realizing the need to start selling products themselves when the profits declined. Now, Pinduoduo is launching its "Xinpinmu" brand, investing 100 billion yuan to integrate its supply chain and produce its own products, preparing for the potential loss of future fee-based revenues. However, this shift also brings challenges: its own brands are considered "preferred" by customers, but how will it allocate traffic between its own products and third-party merchants? If it favors its own brands, merchants may leave; if not, its own brands may not succeed. There is no clear answer yet, but with such a large investment, this issue will eventually need to be addressed.
Conclusion
Pinduoduo has achieved significant profits through a low-capital model, but it is now moving towards a more capital-intensive approach. This is a natural part of its growth, but it will also face new challenges. In the future, Pinduoduo may no longer be just a platform that earns money from fees; it may also start selling products itself. Will it be able to maintain its high profit margins? We will have to wait and see.