The cost of long-termism.

$PDD(PDD.US) $Amazon(AMZN.US)

This is a well-known and highly controversial company.

1、

He emphasizes customer-first, unconditionally pleasing consumers.

His image of "low prices" is deeply ingrained. In the early stages of development, he entered the market with low-priced products, engaging in differentiated competition with traditional players. Through large-scale procurement and burning money for subsidies, he obtained low prices and passed the savings to consumers, attracting a large number of users.

He pioneered "refund without return". When consumers purchase damaged or misrepresented goods, they can get a refund without returning the product. With this policy, he built a sizable user base in a short time. He claimed this was to reduce consumer decision-making costs and force merchants to improve product quality.

2、

His business model has sparked widespread controversy.

He claims to be a new-era e-commerce model, building a new relationship network for buyers and sellers. He emphasizes using low prices to enhance customer value, simplifying the purchasing process to the greatest extent, using platform recommendations for personalized matching, and improving supply chain efficiency.

He uses low prices to suppress competitors. His early product prices were 30-40% lower than peers, even selling below cost to capture market share by burning money. This was a key reason for their rapid market expansion.

His merchants are squeezed. He requires merchants to offer the lowest prices on his platform, or else face forced price cuts or reduced traffic allocation. He charges high commissions, which are non-refundable for returns. Merchants must buy platform ads to gain exposure.

His employees are squeezed. He hires the best employees with the strictest demands. Their working hours far exceed industry peers, with weekend and holiday overtime being the norm.

Even the government couldn't stand it. He has repeatedly faced regulatory scrutiny and guidance for pricing strategies and unfair competition. His global expansion has also encountered investigations and fines in multiple countries.

3、

He is indifferent to the capital market.

While peers aggressively paid dividends and repurchased shares to support stock prices, he stubbornly insisted:

No dividends, no buybacks.

He didn't want profits either.

He continuously invested heavily in the business, emphasizing "long-termism," and warned the market:

We focus on long-term value, not short-term profits or market reactions.

We will face a series of difficulties and challenges: capable competitors, business growth challenges, market expansion risks, and unavoidable long-term investments.

This style of company is rare in the market, and few believe in this story.

Thus, the market's feedback was: in the first three years after IPO, amid market enthusiasm, the stock price rose several times, then fell over 80% from its peak due to market downturns and the company's maverick approach, followed by prolonged volatility and decline after a rebound.

4、

The founder previously worked in secondary investments and deeply understands the importance of capital allocation.

At the time of the company's IPO, he wrote a widely circulated "Letter to Shareholders," succinctly outlining the company's business philosophy and values. The core points were:

We created a new shopping model, gaining a large customer base in a short time in a competitive market, but we are still a young company.

Our foundation is focusing on user needs and continuously creating value for users.

We focus on long-term value and will not hesitate to make bold short-term investments.

Our team is hardworking, efficient, willing to sacrifice, and passionate.

We have achieved some success, and we are excited about the future.

However, at the time of IPO, the company was not widely favored by the market. Many professionals publicly criticized its business model as a "scam" or "soon to collapse."

Oh, this company is Amazon.

Of course, almost every point above also applies to Pinduoduo.

For Amazon, after over a decade of investment, its stock price only broke previous highs after sustained profit growth in 2009. Mr. Market is very demanding.

Later, Amazon reaped rewards, with its stock price soaring and market cap surpassing $2 trillion. It became Wall Street's golden child, showered with praise.

Amazon's success hinges on: doing what's right long-term; continuously creating user value to win users; during its decade of investment, though profits were minimal, cash flow grew steadily, and the business was healthy.

This demands the same from founders and investors: Are you willing to forgo short-term gains for greater long-term rewards?

Will Pinduoduo follow the same path? This is an answer worth anticipating.