Analysis of Pinduoduo's Competitive Barriers and Long-Term Valuation Support

Pinduoduo’s core competitiveness is based on algorithm-driven supply-demand matching and the C2M model, which connects directly to manufacturers by aggregating user demand, reducing supply chain inefficiencies and lowering costs [0]. In Q3 2025, Pinduoduo’s share of China’s fast-moving consumer goods e-commerce market reached 15%, surpassing JD.com to become the third-largest platform [4], and its 22.10% operating profit margin and 24.43% net profit margin also reflect the advantages of operational efficiency [0].

Regarding the ‘low price + exclusive products’ strategy, Pinduoduo can indeed provide exclusive products that meet consumer preferences through the C2M model, enhancing user stickiness. However, China’s regulatory rules that will take effect in April 2026 prohibit e-commerce platforms from enforcing minimum price guarantees and manipulating algorithms, which may impact its low-price positioning [1].

1. Differences in Moat Comparison
   : Although both Pinduoduo and Costco achieve low prices through scale, Costco’s moat mainly relies on membership fees (accounting for 73% of operating revenue in 2024), while Pinduoduo’s model focuses more on supply chain and algorithm-driven approaches; there is no direct comparability between the two [2].

2. Uncertainty of Regulatory Risks
   : New regulatory rules may lead to an increase in Pinduoduo’s average prices and a reduction in promotional activities, thereby eroding its price-sensitive user base and potentially affecting its long-term growth flywheel [1].

3. Buffering Effect of Global Layout
   : Pinduoduo’s dual-platform strategy (Pinduoduo in China and Temu globally) provides scale advantages, but regulatory headwinds may still disrupt its growth rhythm [3].

• Changes in regulatory policies may weaken the effectiveness of the low-price strategy [1]
• Recent stock price fluctuations (a 18.91% drop in November-December 2025) reflect investors’ concerns about regulatory risks and short-term profit impacts [3]
• Differences from Costco’s model may lead to overestimation of the depth of the moat [2]

• The low P/E ratio (10.75x) is lower than that of traditional e-commerce peers (Alibaba:21.2x, JD.com:18.5x), indicating potential for valuation repair [0]
• The C2M model and algorithm advantages remain core competencies, and the model can be adjusted to adapt to new regulations [0]

Pinduoduo’s algorithm-driven supply-demand matching and C2M model provide a solid operational foundation, but new regulatory rules may challenge the sustainability of its low-price strategy. Although market share growth is strong, caution is needed when comparing to Costco’s moat. Investors should pay attention to how the company adjusts its model to adapt to the regulatory environment and the impact on its long-term growth flywheel.