Pinduoduo accelerates factory plan with 1 trillion yuan sales target

Pinduoduo accelerates factory plan with 1 trillion yuan sales target

Staff Writer
Staff Writer
Pinduoduo Content Team
November 4, 2020

Guangdong Danz Group became the fifth Chinese cosmetic company to join Pinduoduo’s New Brand initiative, working with the e-commerce platform to develop a brand targeting consumers in the domestic market.

Danz Group, whose stable of brands include Wetcode, Tenor, Colour Zone, Carde and Danz, is the latest homegrown company to take advantage of consumer insights from Pinduoduo to tailor products suited to the needs of the target buyers.

Pinduoduo launched the New Brand initiative at the end of 2018 to help the growth of China’s contract manufacturers to build their own brands utilizing the e-commerce company’s market insights and access. To date, Pinduoduo has worked with more than 1,500 companies, created more than 4,000 custom products, and generated 460 million cumulative orders. In the third quarter, the average custom product sales surpassed 2 million a day.

Read: How the contract manufacturer for Le Creuset created its own brand  

Last month, Pinduoduo upgraded the New Brand initiative. From 2021 to 2025, Pinduoduo aims to support 100 industrial belts, create 100,000 new brand products and drive 1 trillion yuan in sales. The company will expand the number of manufacturing partners from the original 1,000 to 5,000. More resources will be devoted to promoting the custom products. Under the new initiative, Pinduoduo will help contract manufacturers nurture their own brands, help well-known brands create subsidiary brands, support new brands and help rejuvenate heritage brands.

Read: China’s largest cosmetics producing region is now selling on Pinduoduo

For the cosmetics sector, Pinduoduo plans to help incubate 50 new cosmetic brands with more than 100 million yuan in sales, of which 10 will surpass 1 billion yuan.

China’s cosmetics industry sales surpassed 400 billion yuan in 2019, increasing more than 10% from the year earlier. Online sales rose more than 20%, and sales on Pinduoduo more than doubled.  

However, many of China’s homegrown contract manufacturers are not able to fully participate in the growth of the cosmetics industry because they make products for better-known brands, many of them foreign, which then command a hefty premium after affixing their labels.

Take Guangzhou Zhenyan Cosmetics Co. for example.

The company operates a 40,000 square meter factory with 34 product lines in Baiyun, Guangdong province, home to about a third of China’s cosmetics manufacturers. Despite seeing its customers command a big premium, Zhenyan was unable to capture more of the value because it did not have well-known brands.

“As a contract manufacturer, we produced for first-tier brands but received a few percentage points of industrial profit,” said Zhenyan Chief Executive Officer Zhang Qinglin. “Once the product is affixed with the first-tier brand, the price rises 10-fold.”

Zhenyan is another contract manufacturer that has signed up with Pinduoduo’s New Brand initiative. Through consumer insights provided by Pinduoduo, Zhenyan identified a target customer group of students and young office workers and marketed the product as a value-for-money product with good ingredients. Two of the items – hand mask and foot mask – have become bestsellers and the repurchase rate among the target group surpassed 35%, with 70% of the buyers born after 1990.

“Pinduoduo has promoted small and medium brands through its New Brand initiative, the rise of new brands, and this is helpful for changing the current cosmetics industry of small and scattered players,” said Du Zhiyun, Chairman of the Guangdong Cosmetics Association. “Through unifying resources, lowering costs of R&D, pushing China’s cosmetics industry to innovate, we can help fast-track the development of China’s brands.”

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