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Pinduoduo sees potential to remake logistics with technology

Pinduoduo was considered by many to be a dark horse when it started in 2015 in the shadows of Alibaba and JD. But it was able to turn its relative late entry to its advantage by looking at online shopping anew and developing an interactive e-commerce model that rode the shift from desktop computing to the mobile internet.

Now that it has pulled ahead of Alibaba in the number of annual active buyers in China for a second straight quarter, Pinduoduo is once again casting its “fresh eyes” on an area that is ripe for a transformational shift: logistics. No longer an upstart but a platform boasting 823.8 million users, can Pinduoduo once again turn its late entry into logistics to its advantage?

Pinduoduo Chairman and CEO Chen Lei, a computing prodigy, certainly thinks so. On the conference call following the company’s first-quarter results, Chen took some time to explain Pinduoduo’s view of logistics. In short, the company had no interest in duplicating the existing hub-and-spoke logistics model but was instead designing a more responsive architecture that employs advanced algorithms and data analytics to manage parcel flow more dynamically.

“The current logistics model was developed more than 10 years ago when parcel volume was orders of magnitude smaller and packages had to be consolidated in centralised distribution centers,” Chen said. “But today, we are asking ourselves, would the hub-and-spoke model remain the best way to move parcels 10 years from now? And the answer is no.”

That is why Pinduoduo has been developing advanced algorithms and other technology to reduce transshipment and make point-to-point fulfilment more feasible, particularly for low margin and perishable agricultural products and groceries. “Not only can we further improve the efficiency of the centuries-old agriculture sector, we can help reduce food waste and lessen the amount of fuel used when transporting these fresh produce,” Chen said.

It is also looking at how to improve the economics of cold-chain logistics in China through more intelligent targeting and routing in order to improve food safety and reduce loss, a major contributor to waste and greenhouse gas emissions. China currently lags far behind countries like the US and Japan in refrigerated warehousing capacity and refrigerated vehicles on a per capita basis.

Pinduoduo has applied to patent some parts of its proprietary system and is aiming to roll it out at some point to real-life operations.

“Since we are a latecomer, our fresh pair of eyes can hopefully result in innovation,” Chen said. “We also possess some advantages in this area as we generated over a third of daily parcels in China last year and have expertise in designing complex systems,” Chen said.

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