Chinese e-commerce company Pinduoduo has experienced explosive growth in the past few years, with its revenue growing at a breath-taking pace of 142% per year from RMB 505 million in 2016 to RMB 247 billion in 2023. Profitability has also increased markedly over the same period, rising from a loss of RMB 322 million to a profit of RMB 60 billion. What’s even more impressive is that Pinduoduo has achieved this while being asset-light. The company ended 2023 with total assets of merely RMB 348 billion, which equates to a remarkable return on assets (profit as a percentage of total assets) of 17%.
But I noticed two odd things about Pinduoduo’s asset-light nature as I dug deeper into the numbers. Firstly, Pinduoduo’s gross property, plant, and equipment per employee in 2023 was miles ahead of other large Chinese technology companies such as Alibaba, Meituan, and Tencent. This is shown in Table 1.
Secondly – and the more important oddity here – was that Pinduoduo’s gross property, plant, and equipment per employee in 2017 was merely RMB 10,591, or RMB 0.01 million (gross property, plant, and equipment of RMB 12.3 million, and total employees of 1,159). According to ChatGPT, a professional laptop cost at least RMB 8,000 in China back in 2017, meaning to say, Pinduoduo’s gross property, plant, and equipment in that year was barely sufficient to purchase just a professional laptop for each employee.
I’m not saying that something nefarious is definitely happening at Pinduoduo. But with the numbers above, I wonder if there’s something wrong with Pinduoduo’s purportedly asset-light business model.
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