Release the second quarter financial report of 2020. According to the financial report, in the second quarter of 2020, pinduoduo achieved revenue of 12.193 billion yuan, an increase of 67% compared with 7.290 billion yuan in the same period of 2019, higher than the consensus expectation of 12.16 billion yuan in the market. At the same time, the loss of the platform in the second quarter narrowed significantly. Under the non general accounting standards, the net loss attributable to common shareholders was 77.24 million yuan, which was 411 million yuan compared with the same period last year. < p > < p > after the release of the financial report, pinduoduo CEO Chen Lei, strategic Vice President David Liu and vice president of Finance Ma Jing attended the subsequent financial report conference call to interpret the key points of the financial report and answer analysts’ questions. < / P > < p > Barkley analyst Gregory Zhao: we see pinduoduo is also trying to meet the needs of high-end users and has begun to sell some luxury goods, including Tesla Motors. Will this business increase the revenue per user? What’s the significance for the company to enter the high-end market? In addition, regarding the year-on-year growth of sales, pinduoduo launched 618 promotion activities for the first time last year and achieved good sales. Does the very high sales base of last year affect the year-on-year growth of sales in the second quarter of this year? Chen Lei: the company’s brand product strategy is first to meet the needs of consumers and provide the products they want to buy. Our goal is not to pursue the growth of average sales per order, but to provide different types of products with different price levels, high cost performance and high quality through pinduoduo platform. The company will continue to provide consumers with more choices of products, whether they are brand products or not. As I mentioned in my opening remarks, in the next few years, agricultural products will provide more strategic value for the company, and the company will increase investment in this field, including investment in the supply chain, so as to provide consumers with better agricultural products. On the issue of sales, I would like to remind you that compared with the same quarter, considering the impact of the epidemic, the company’s sales growth in the second quarter was very good. We are very satisfied, especially since the beginning of the year, the company’s active buyers have increased by 100 million. The company’s strategy is to invest in increasing user participation and interaction, so that buyers are more willing to go to pinduoduo for online shopping. The company has accumulated 683 million active buyers. We will continue to improve the interaction with consumers and enhance the brand awareness. In the second quarter, with the recovery of the economy, consumer behavior gradually recovered. However, consumers were more cautious in spending money. On our platform, they bought more daily necessities, fast-selling products and agricultural products. During the 618 promotion activities, the company has expanded the number of promotion categories to include more products of the above categories. We will continue to support the needs of consumers in this respect. Piyush mubayi, an analyst at Goldman Sachs, what is the growth of the company’s trading service commission revenue and marketing service revenue? What is the change trend of revenue conversion rate? I noticed that in the second quarter, the conversion rate of the company’s marketing service revenue has increased to 3.2%, which may be the highest level in history. Is this level sustainable? In addition, the growth of trading services commission income slowed to 38% in the second quarter. Why? The growth rate of marketing service revenue reached 71%, which is much faster than that of this quarter’s sales. What is the reason? < p > < p > Ma Jing: the recovery of advertising business in the second quarter was faster than expected. Limited marketing activities in the first quarter have made businesses have more advertising budget. They are eager to make up for the losses in the first quarter. Higher consumption activity and better advertising services also make their investment return higher. The improvement of the company’s revenue conversion rate in the second quarter reflects the dynamic changes in the supply-demand relationship after the epidemic. The number of returned and unpaid orders has returned to a relatively normal level. If we look at the overall situation of the first half of the year, the revenue conversion rate in the first half of the year is 2.9%, similar to the level of previous years. Revenue conversion rate is not our key performance indicator. Our focus is to retain users. The company will continue to provide support for high-quality businesses and provide incentives for those who provide quality services and meet the value needs of users. < / P > < p > as for the income from transaction services, we mainly include what we previously called Commission and payment of processing fee, which is 0.6%. However, for some businesses, we have been offering more preferential rates as rewards. < p > < p > Piyush mubayi: what is the contribution of agricultural products in the total sales of the second quarter? The plan mentioned by the management that the sales of agricultural products will reach 1 trillion yuan in five years’ time. Will the proportion be about 15% to 20% at that time? What is the revenue conversion rate of agricultural products sales? Chen Lei: as for the conversion rate of revenue, I would like to add that this indicator is mainly related to the rate of return on advertising on the platform. The business activity in the second quarter was very high, including increasing inventory, which also pushed up the demand for advertising, which was beneficial to the improvement of revenue conversion rate. The situation of high activity also appears in the sellers of agricultural products. The advertising investment of these distributors also promotes the growth of the company’s performance, and their advertising investment in turn promotes the improvement of its return rate. At present, the penetration rate of agricultural products e-commerce market is still relatively low, and the investment opportunities for the supply chain are still very large, so as to enhance the potential of providing more value for consumers. The company believes that it is possible to increase the proportion of agricultural products contribution, which also depends on the investment of these businesses in advertising. The company will continue to increase investment in technology to improve quality services for all parties in the ecosystem. Alicia Yap, Citi analyst: a question about the company’s medium and long-term development. How can the company attract more brands and merchants from different industries to sell their products on the platform? With the increasing number of businesses and active buyers, how can the company balance that different businesses have equal access to consumers? How can companies serve a wider range of businesses? With the increasing number of brand merchants and brand goods, how will the trading mode of the shopping mall evolve in the future? < p > < p > Chen Lei: the company’s strategy for brand merchants and brand goods has not changed. We still need to consider what users need in the end. From this perspective, the mode of shopping together is very effective, which is why we can accumulate 700 million users in such a short period of time. We believe that this model will continue to be effective. Our business model based on product recommendation focuses on recommending easy-to-use products for consumers, rather than brand-name products. Of course, in order to meet the needs of different consumers in the future, there will inevitably be different categories and prices of goods on our platform. With the continuous improvement of the company’s recommendation technology, the company’s understanding of users will be more accurate, and more accurate to push them the products they may need and at the right price. With the improvement of consumer activity and participation, more businesses will come to our platform to demand business development opportunities. If they can provide value to users, they will also get the appropriate level of user traffic. The company will also cooperate with businesses to help businesses launch products more suitable for users’ needs through the improvement of algorithms and recommendation technology. < p > < p > Credit Suisse analyst Tina long: the first question is about marketing. In the opening remarks, the management mentioned that the company has deliberately reduced the investment in marketing. Is it because the competitors’ investment in marketing is more radical? In addition, the company has adjusted the coverage of 10 billion subsidies and joined some commodity businesses. What is the company’s marketing plan for the second half of the year? Under what circumstances will the investment in aspects be increased? Ma Jing: with regard to the marketing investment in the second quarter, we saw that our competitors had made great efforts to promote electronic products. At the same time, the company saw that daily necessities played a very good role in retaining users, and the purchase frequency of daily necessities was higher than that of electronic products, so we chose different investment strategies. In order to further improve user participation, in the next few quarters, the company will continue to invest in marketing, enhance product visibility and increase user trust. In the second half of the year, the company’s marketing investment will increase moderately, mainly in the areas with opportunities. The average annual consumption amount per user of pinduoduo is still relatively low compared with its competitors. I believe that this gap can be gradually narrowed by increasing the number of goods purchased by users on pinduoduo platform. We will continue to invest in this aspect. < / P > < p > Tina long: according to the public data, the number of packages of pinduoduo is still very large, but the sales growth is not so fast. Does this mean that the average amount per order has decreased? Could you tell us something about this? What is the trend of the amount of each order in the future? If the company allocates more traffic resources to commodity merchants in the future, will the amount of each order remain at a relatively low level? < p > < p > Ma Jing: pinduoduo is the online shopping platform that users often patronize. Because we can really save money for them, unlike many competitors, our sales volume is at a high point in the promotion activities. The relationship between pinduoduo and consumers is also relatively stable, which also reflects the position of pinduoduo brand in the hearts of users. The company will continue to devote itself to improving the purchase frequency of users, which is what we have done in the second quarter. We found that consumers were very concerned about the value of their consumption in the second quarter. They spent more money on daily necessities, such as fast-selling products and agricultural products. Therefore, the company used part of the subsidy in 618 sales promotion for businesses in these fields, which had some impact on the average consumption amount per order. In addition, since this year, the company’s active users have increased by 100 million. They have just begun to understand pinduoduo. They have been using the platform for less than 12 months, and the habit of shopping on the platform has not yet formed. < / P > < p > David Liu: in the second quarter, the sales of each category of goods increased, but as we talked about the characteristics of consumer behavior, the company adjusted its strategy accordingly. Consumers’ cognition of pinduoduo is that the company has advantages in providing high-quality and low-cost goods, so they shop more on pinduoduo platform in the second quarter. We think that the demand for products in these industries is very large, because the frequency of users’ purchase is very high, and the users’ attention is also relatively high. In the long run, the amount of each order will gradually increase, because it will take time for users to adapt to our platform and develop the habit of shopping in pinduoduo.
David Liu: our businesses are increasingly using live broadcasting to improve user participation. Pinduoduo believes that live broadcasting is not a marketing tool independent of e-commerce, but has become a part of our platform. Therefore, you can’t see a dedicated live channel on pinduoduo’s platform. Users can enter the studio to buy related products through the interface of merchants, or Collection business. Binnie Wong, HSBC analyst: the revenue conversion rate increased to 3.2% in the second quarter and may also be in the first half of the year