Colin Huang steps down as Pinduoduo chair

Colin Huang, the founder of highflying Chinese ecommerce group Pinduoduo, has unexpectedly left the company to explore “new, long-term opportunities”.

Huang, who steered the company to a New York IPO in 2018, said that Pinduoduo had “become a youth entering adolescence”.

He said he was resigning as chair to make way for a new generation of leaders, and that Pinduoduo “will have its own growth journey regardless of whether I am nervous, excited, or frightened as its guardian”.

Pinduoduo, valued at close to $200bn after taking a substantial share of China’s online shopping market, saw its shares fall by nearly 8 per cent in pre-market trading.

Huang said he would turn over voting rights for his 29 per cent stake to the company’s board and pledged to not sell any shares for three years. Until Wednesday, he held control of the company through his ownership of a separate class of shares with ten times the voting rights, but Pinduoduo said these would be cancelled with his exit.

In a letter to shareholders, Huang said: “It is about the right time to explore what’s next if we want the same quality and pace of growth in 10 years. As the founder of this company, I am probably the most suitable person to take on this task by stepping out of the business and the comfort zone to embark on a journey of exploration.”

The company has appointed Chen Lei as the company’s new chair. Chen took on the title of chief executive in July and was a classmate of Huang’s at the University of Wisconsin-Madison and worked alongside him on several of his business ventures before Pinduoduo.

Aside from working for Huang, Chen’s other work experience consists of internships at Google, Yahoo, and IBM — though Google says it has no information on his time at the company. Pinduoduo did not immediately respond to a request for comment.

The announcement came as Pinduoduo overtook Alibaba by annual shopper count for the first time, with 788m people buying on its platform in the past year, compared to 779m for Alibaba.

But Pinduoduo’s rapid growth has been powered by cheap deals, and it remains heavily in the red. Revenues in the fourth quarter rose 146 per cent year on year to Rmb26.5bn ($4.1bn), while it recorded a loss of Rmb1.4bn, narrowing from Rmb1.8bn a year earlier.

The company spent Rmb14.7bn on sales and marketing fees during the quarter, which include the consumer subsidies, or about 55 per cent of revenue. It marks an improvement from earlier quarters when the expenses at times exceeded revenues.

Pinduoduo has repeatedly returned to the capital markets for more funding, raising roughly $9bn from investors since its 2018 IPO. In December the company raised about $6bn in debt and equity financing as it focused on a plan to sell farm goods online. 

The grocery field has quickly grown crowded as a slew of Chinese tech companies have pushed in to take advantage of shoppers new willingness to buy daily meal ingredients from their phones following the pandemic.

“Giving the scale of our user base today, it’s inevitable that user growth will start to trend down. It’s much more important that we are focused on engagement,” said David Liu, vice-president of strategy, noting daily grocery shopping was one way to keep them engaged.

Liu said Pinduoduo could offer consumers groceries at a cheaper cost and was working on bringing them to doorsteps more quickly.

To do “grocery appropriately, we as a platform do need to become more heavy. It’s an operational heavier business. We are getting involved in warehousing, operations, delivery and logistics operations,” said Liu. 

Five years ago Pinduoduo started out in the farm goods business, building out some of the infrastructure to ferry fruits and vegetables to consumers, before running into problems and pivoting to the platform model it uses today.