Chinese retail site Pinduoduo worth nearly $24 billion after IPO amid product quality concerns

When the mother of Pinduoduo CEO Colin Huang used her
son’s shopping app to order a batch of mangoes, she discovered
that two were rotten.
Shutterstock

• On Thursday, Chinese e-commerce site Pinduoduo raised
  $1.6 billion in its initial public offering.
• The site, which features remarkably low-priced
  products, has become popular with Chinese users.
• However, The New York Times recently discovered that
  numerous products listed on Pinduoduo’s website were of poor
  quality. 

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In three short years, e-commerce site Pinduoduo has emerged as one of
China’s fastest growing shopping startups, with
as many as 55 million users accessing the site per day. 

Now, Pinduoduo’s CEO and founder, former Google
engineer Colin Huang, has taken his company
public. 

Pinduoduo
raised $1.6 billion in its IPO, and after shares popped
36% upon their debut on the Nasdaq, the company is now worth
almost $24 billion.

Pinduoduo’s biggest advantage is its competitive, remarkably low
prices: On the site, Chinese users can purchase anything from
toilet paper to snacks to iPhones for a fraction of their usual
cost. For instance, a package of 32 rolls of toilet paper is
listed on Pinduoduo as 12.9 Chinese Yuan, or less than $2. A
product described
as “breast enhancement cream” is listed at around $1.60.
A pair of men’s
“genuine leather” loafers is yours for less than
$15.  

The company is able to list products at such aggressive prices
because of its crowdsourced sales solution, a shopping approach
that’s a mashup of Costco, Groupon, and MassDrop. Using the site,
large groups of users can opt in to buy products directly from
manufacturers. By cutting out the middle man and selling
wholesale, Pinduoduo can advertise anything from clothing to
electronics to furniture at remarkably low rates. 

On
Pinduoduo, shoppers in China can buy products at unusually low
costs.

While Pinduoduo might consistently deliver on pricing, there’s
one area where it seems to be falling abysmally short of the
mark: Quality. 

A recent report from The New York Times found that the
app has a reputation for delivering cheap, poorly-made products:
Sometimes, the quality of the items Pinduoduo delivers is so bad
that some shoppers simply throw the items in the trash upon
receiving them, the Times reports. 

Of the most egregious defects
the Times discovered in products listed on Pinduoduo were a
T-shirt delivered with a hole in the side, a cheaply-made
wardrobe advertised as being made from real wood, and a knockoff
smartphone sold in the guise of an iPhone 7. 

Even Huang’s own mother, who was described as an avid user of the
site by Chinese
magazine Caijing
in April, has received less than satisfactory quality from
the products she’s purchased on her son’s site. When she ordered
a batch of mangoes using Pinduoduo, Caijin reports that some were
already rotting upon delivery.

Several products listed on Pinduoduo’s site have faced legal
inquiry, as well. Just days before the company’s IPO,
The New York Times reported that a diaper company called
Daddy’s Choice was suing Pinduoduo, alleging trademark
infringement. 

According to Forbes, the Daddy’s Choice lawsuit is just one
among more than 200 lawsuits leveled against the company, which
include a mix of customer and merchant disputes
that have amassed since 2017. (Pinduoduo didn’t immediately
respond to Business Insider’s request for comment on either the
number of lawsuits brought against the company or the quality
complaints described by the Times.)

With Pinduoduo’s public offering, Huang has promised to improve
the quality of the products listed on his site. In a
recent Medium post in which he described Pinduoduo as “a
combination of Disneyland and Costco,” Huang suggested that
taking his company public could only benefit its overall quality.

“[W]ith public scrutiny and regulatory supervision, we may
grow better and stronger,” he wrote.