Summary of the Analysis
This is a first-person account from a former internet professional who switched careers to become the manager of a “Pindou” (a bean crafting business). It provides a complete account of the “overnight success and subsequent rapid collapse” of the Pindou craft industry: fueled by the algorithms of platforms like Douyin and REDnote, Pindou-related group purchases surged by 9,018% in one year, with REDnote topic views exceeding 8.7 billion. Over the course of a year, more than 1,600 Pindou shops emerged nationwide, 97% of which were newly registered. In Shenzhen alone, there were 200 to 280 such shops, with one Pindou shop for every two McDonald’s locations. However, less than half a year later, 90% of the new shops failed to survive beyond six months, and only 20% of the industry were profitable. The price war escalated from initial prices of over 50 yuan with no time restrictions to 9.9 yuan for an 8-hour session. In the end, only the factories in Yiwu, which supplied the beans, made a steady profit, while most of the shop owners effectively spent tens of thousands of yuan to secure a job with a monthly salary of 3,000 yuan and no days off.
Detailed Breakdown and Interpretation
1. The popularity of Pindou wasn’t driven by consumers; it was artificially created by algorithms
Many people wonder how Pindou, which seems like a simple childhood activity of stringing beads, suddenly became a nationwide trend. In reality, it was a false boom orchestrated by platform algorithms. When you see a Pindou-made keychain or pendant that looks interesting on social media, you might click through, and for the next week, your feed is filled with similar content. The 8.7 billion views on REDnote and the 90-fold increase in group purchases were all the result of the algorithms repeatedly “brainwashing” users into engaging with this trend.
For entrepreneurs, the content they saw was even more misleading, featuring stories of making 50,000 yuan a month from Pindou shops, without realizing that the traffic was artificially generated by the platforms. Everyone wasn’t really interested in Pindou; instead, a mass rush led to the sudden emergence of over 1,500 shops nationwide, with a density higher than that of breakfast shops in many neighborhoods. As a result, there were more shops than there were customers willing to try the product.
2. Pindou shops were never a viable business from the start
Many entrepreneurs didn’t do the math before opening their shops. This industry had inherent flaws: the turnover rate was almost zero, as customers typically stayed for at least 2 to 3 hours, and even if a shop had 40 seats, it could only serve 40 people at most, which was nowhere near the efficiency of tea shops or fast-food restaurants. Pindou wasn’t a necessity; no one would spend hours crafting beads every day. The initial popularity during holidays was due to curiosity, and once that wore off, customers disappeared, leading to zero revenue on weekdays and even situations where both shops had zero sales on the same day.
3. The low entry barrier led to a brutal price war
The barriers to opening a Pindou shop were extremely low: you needed to spend tens of thousands of yuan to rent a small office space, purchase beans and tools from Yiwu, and you could open for business immediately. There was no need for exclusive technology or supply chains. If your shop’s beans were of higher quality, someone else could easily obtain the same goods from Yiwu at a lower cost. The price war became fierce, with prices dropping from 49.9 yuan to 9.9 yuan for an 8-hour session. Consumers didn’t care about the quality of the beans or the craftsmanship; they just went to the cheaper option. This situation is similar to how companies like Mixue Ice City can still sell lemon water for 4 yuan, even though others use imported lemons.
4. In any booming industry, the ones that always profit are the ones that supply the products
During the American West’s gold rush, it wasn’t the miners who made the real money but the sellers of shovels and jeans. The same logic applies to the Pindou industry: whether the shops were profitable or not, whether they closed after three months or were sold after six months, they still had to buy beans and tools. The factories in Yiwu, with their high production capacity, ensured a steady income. All the shop owners were competing on price, with no real opportunity to make a substantial profit. The end result was that most of the profits went to the suppliers, leaving the shop owners struggling to cover their expenses.
5. The Pindou industry illustrates all the pitfalls common in trendy startups
Many people quit their jobs, attracted by the idea of starting a “relaxed” craft business with high monthly earnings. However, the Pindou industry showed all the common mistakes: the “full seats” shown online were often from weekends, not reflecting the daily reality. The promise of low investment and high returns was a lie; anyone could enter the market, and the high initial investment meant long hours of work with little return. In the end, the monthly earnings were less than what they used to earn from their previous jobs, and they had to pay for their own social security.
In short, when everyone around you is talking about the profits of a certain business, it’s already a losing venture. Just like stocks that seem promising when everyone is talking about them, the same principle applies to startups.