One of China’s youngest billionaires is becoming one of the country’s wealthiest, thanks in part to the coronavirus pandemic.
Colin Huang, 40, is the founder of China’s e-commerce company Pinduoduo, or PDD, and saw his net worth grow the fastest of any billionaire in China in the past two months. He has accumulated $18 billion, bringing his total net worth to $35.6 billion last week. That sum makes him the third-wealthiest person in China, according to analysis by Forbes. He’s edged out by Jack Ma, founder of the e-commerce firm Alibaba and China’s second-richest person, who saw his net worth grow by $3 billion to over $41 billion in the same period. China’s richest person, Pony Ma, the founder of the tech and social media giant Tencent, was worth $46 billion, an increase of $7 billion.
Huang’s rapid rise to the top ranks of China’s billionaire class has come, in large part, on the back of PDD’s skyrocketing shares as Chinese consumers have increasingly turned to online platforms amid the pandemic. Huang owns a 45% stake in Pinduoduo, and the company’s Nasdaq-listed shares have nearly doubled in value since the beginning of the year, boosting the e-commerce company’s market cap from $44 billion on December 31, 2019 to roughly $80 billion today.
What is Pinduoduo?
Founded in 2015, PDD is a relative upstart in China’s e-commerce space that has been dominated by the likes of Alibaba, a Chinese e-commerce pioneer with its Tmall marketplace, and JD.com, an e-commerce company headquartered in Beijing.
PDD has made inroads in the sector by focusing on less sought-after consumers in China’s third- and fourth-tier cities and by offering unique shopping experiences.
One of the most popular features of the PDD app is a group buying function, in which consumers can order larger shipments of discounted goods from factories. After an individual customer makes a purchase, they’re given a window of time to encourage friends, family, or other users to buy the same item, resulting in a bulk purchase.
This social function relies on PDD’s integration with Tencent-owned WeChat, the nearly-ubiquitous social messaging app in China. Tencent reportedly owns a 17% stake in PDD.
PDD is also famous for ‘gamified‘ shopping. For example, if a user waters a virtual mango tree via the app for enough days in a row, PDD will send the user a free box of mangos. With these games, PDD encourages daily visits to its app and increases user engagement. The idea to closely tie shopping with gaming stems from Huang’s own experience in launching an online gaming startup before founding PDD.
A pandemic boon
PDD’s strategy proved a winning one when Chinese consumers were confined to their homes in the early months of 2020.
In the first quarter, the company reported 628 million total active buyers, up from 585 million in the fourth quarter of 2019. Alibaba, by comparison, reported 726 million total buyers in its recent first quarter results. Pinduoduo also said that daily orders have increased to 65 million since the beginning of May, up from 50 million per day before the pandemic hit China in January.
Still, the company has largely failed to crack more profitable tier-one markets like Beijing and Shanghai, where it has a reputation for selling fake or lower-quality goods. The company seems intent on changing that narrative. It recently attracted 1 million viewers to a livestream that provided a virtual tour of a warehouse that sources many of PDD’s products, an apparent attempt to shore up confidence in the quality of goods sold on the platform.
In a letter to shareholders on April 25, Huang said of the pandemic: “Nobody can come out as a winner in the midst of catastrophe.”
At the same time, PDD’s success amid the pandemic has certainly boosted his fortunes.