PDD Holdings Inc. (PDD) Earnings Call Transcript & Summary

Thank you, operator. Hello, everyone, and thank you for calling us today. Pinduoduo's earnings release was distributed earlier and is available on the IR website at investor.pinduoduo.com as well as through GlobeNewswire services. On today's call, our CEO, Chen Lei, will make some general remarks on our performance for the third quarter of 2020 and our strategic focus going forward; our VP of Strategy, David Liu, who will then elaborate further on our specific strategic initiatives; our VP of Finance, Tony Ma, will then take us through our financial results for the third quarter ended September 30, 2020. Before we begin, I would like to refer you to our safe harbor statement in the earnings press release which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to GAAP measures. Now it is my pleasure to introduce our Chief Executive Officer, Chen Lei. Lei, please go ahead.

Hello, everyone. Thank you for joining us on our third quarter results announcement. Pinduoduo turned 5 years old last month reached another milestone on this incredible journey. This year, we continue to deliver strong user growth and built trust and engagement with consumers. We are facilitating more sales every day with the support of our users, merchants and business partners. For the 12 months ended September 30, 2020, Pinduoduo's revenue yield of 731 million active buyers and generated nearly RMB 1.5 trillion GMV. During our fifth anniversary campaign in early October, the peak daily order volume surpassed 100 million, driven by increased demand for agricultural products. Strong consumer activities continued into Q4. We attribute this growth to our continued focus on user experience. We saw better engagement metrics as we offered more selection, more competitive value and more fun and interactive features. In Q3, we observed increase in the frequency of visits in number of categories visited and average daily time spent, this contributed to our average annual spending per user increasing from RMB 1,857 in Q2 to RMB 1,993 in Q3, despite a net add of another 48 million active buyers. Fueling our growth and scale today it still feels like we started yesterday. We recognize that Pinduoduo's achievement today benefited from a growth and evolution of China's Internet, the development of the retail industry and increased consumption power. We always believe that it is the consumers who make enterprises, not other way around. This is why from the beginning, we have built our platform with the principles of people first and benefit all in mind. Over the past 5 years, we witnessed the growing support for the new interactive mobile commerce experience that we championed. Our mobile platform has become a mainstream online shopping app, opening rank first on various stores. This is because of China's Internet base rose more vibrant consumers have become more sophisticated and want to enjoy the benefits of being served by more than 1 platform. We are constantly looking out for more options for better value and differentiated experiences. Our message is clear and straightforward, continue to serve customers and lead their changing preferences. This relentless focus on serving consumers has enabled us to attract more than 700 million users in record time. We also continue to be guided by the principle of being more open. We are committed to being an open and fair platform for our service providers and merchants. We are pleased to see an increasing number of enterprises choosing to work with Pinduoduo. In the past 5 years, more brands have joined hands with Pinduoduo to offer customized designs and value for money SKUs for our users. At the same time, more OEMs have used our platform to gain direct consumer exposure. Some of them have even launched their own brands, leveraging on the consumer insight, which they get from Pinduoduo. Lastly and most importantly, Pinduoduo has also become China's largest online platform for agricultural products by enabling direct selling from farms to the dining tables. We are mindful that with scale there comes responsibility to improve transparency and inform our stakeholders of our progress in managing environmental, social and governance matters, we recently issued our first ESG report. Our top social responsibility efforts are guided by the goal of promoting digital inclusion. By bringing more people into a digital economy, we believe local communities can benefit from new jobs and new market opportunities and share in reward of greater productivity and convenience. As we look forward to our next phase of our journey, we remain steadfast in our vision of offering consumers a greater selection of value for money products through a fun and interactive discovery experience. We continue to observe closely how consumer behaviors are evolving and evaluate how technology could help. We are committed to adapting to trends and pushing for innovation. We are prepared to invest capital and resources in our platform, supply chain and ecosystem to realize this vision. There remains a lot we can do, particularly with agricultural products. Post pandemic, we have noticed that consumer habits of grocery shopping in a wet market or supermarket are shifting. Many of our users have shifted to online channels for their daily staples. We saw a surge in orders for agricultural products in the first half of the year, not just for fruits and other root vegetables that can be easily transported but also for leafy vegetables and delicate foods. We started to ask ourselves if more could be done for our users, especially given our familiarity with the sector of China's largest online agriculture platform. The more we learn about industry, the more we realize how much more we could do. The current logistics network is optimized to deliver 30 manufactured goods but not agricultural products. Today, Pinduoduo can leverage existing logistics networks to transfer certain produce such as apples and potatoes across China within 2 to 3 days. Some merchants have even found ways to transfer eggs with minimal damage. As a result, we have made it possible for consumers across China to enjoy some agricultural produce in good time and at good prices. However, in July and August, where more users started to buy leafy vegetables on our platform, our company rate increased significantly. Many packages sustained some damage from heat and poor handling. It was a less brag that we could luckily meet our user's expectation. We realized that we were only at the very beginning of our path to create new value in China's agriculture supply chain. One of the key factors and a critical roadblock is building a logistic infrastructure just for agricultural produce. Therefore, we decided to be more hands on and launched the Duo Duo Maicai channel. We get the localized information on agricultural produce available nearby, identify and sourced from qualified vendors create a list of products to be offered daily. Aggregate daily orders provide the liquidity to fulfillment services to enable to pick our locations and handle aftersale services. Each step in the whole supply chain and logistics workflow needs to be perfectly executed at the line to ensure great value to our users. Of course, many aspects of Maicai operation to leverage the existing e-commerce know-how of Pinduoduo but others require significant development. It is not just about matching demand with supplier. But matching demand with the most suitable supplier, deliver next day at attractive price to our users. We are committed to drive a new infrastructure build for agriculture products for all consumers and farmers in China. Our management team believes that Maicai is highly aligned with our long-term vision for China's agriculture industry. It's something that touch our heart as we started Pinduoduo with agriculture produce. It's now a natural extension of our mobile commerce platform and integral part of our highly-engaged ecosystem. For cities, where the function is available we feature Maicai on our main app. We want to offer our users the option to purchase a curated natural SKUs at lower prices and picked out locally the next day. At the same time, they can continue to enjoy the fun and interactive experience and discover other category of value providing product. The insight we gain enable from our main app enables us to better cure a product for Maicai which in turn provides us a better understanding of what customers value in deciding how to buy their daily essentials and staples. As we invest in infrastructure of agriculture produce. We are also developing technology and deploying talent to tackle the challenge that Maicai brings. We believe that it will pay off for the long-term value of Pinduoduo. As we mentioned last quarter, Pinduoduo is interested in partnership and investment opportunities in the whole value chain and infrastructure of agriculture goods. We are committed to help farmers more and consumers save more. We will continue to leverage insight we have gathered for the past 5 years to make agricultural value chain more efficient and to benefit all. And now let me ask David to share some details on our recent initiatives.

Thank you, Lei. Pinduoduo has built one of the world's largest online communities in the past 5 years. By focusing on bringing consumers more savings and more fun. As user behaviors evolve, we have also adapted to meet and exceed their expectations. 5 years ago, we started our team purchase model, which led users pin and save together as they browse. 2 years ago, we started our new brand initiative which enabled capable manufacturers to launch their own brands with products tailored to our users' preferences. And now we are pushing ahead on an even bigger user need, fresh, affordable agriculture products. We never choose to do what is the easiest, but what is right. We have made important progress on our new brands initiative this past quarter. We launched a new brand initiative as part of our C2M effort to help capable merchants and manufacturers gain invaluable insights of their target customers, design and manufacture tailor-made products for our users and leverage our interactive channels to sell with more accurate prediction of the price and quantity they can potentially achieve. It is an in-road into reverse and just-in-time manufacturing, which can potentially solve inventory and supply chain inefficiencies that have been troubling retail sector for decades. Seeing the results we started helping these capable and proven merchants and manufacturers to establish their own brands and started teaching them, not just about the new channel we have created at Pinduoduo, but marketing tools and tips tailored to the increasing number of users we have accumulated. Even though brand making takes time, we hope that with our help, these new brands could become national or even global brands one day. China has been the world's factory over the past 20 years. It has largely been following the conventional workflow of receiving orders, making products, contacting quality control and shipping them out to brands globally. Manufacturers do not have full insights of how brands plan their production and sell cycle, which means their revenue and potential are always kept by brands. COVID has forced many of these capable manufacturers to turn back to the domestic market. We see a great market opportunity that these manufacturers could become important brands in the next 10 years. We are happy to see to that to date, we have worked with more than 1,500 companies, launched more than 4,000 SKUs and generated over 460 million cumulative orders. This quarter, we are pleased to provide more marketing support and expand the program's coverage to 5,000 companies. We are targeting to offer 100,000 customized C2M SKUs with aggregate GMV of RMB 1 trillion by 2025. To facilitate that, we plan to continue our investments in technology to enable them. We have created a unique prediction model taking into users' changing behavior on Pinduoduo platform in different regions of China. We plan to make it more user-friendly to our merchants and manufacturers to take advantage of the insights we have and are constantly gaining. Further, we are exploring more software services to make it easier for merchants to streamline their operations, such as raw material analysis, inventory prediction, supply chain tracking, partial industrial automation. You would have already seen the reduction in product cycle for apparels. It is possible to have a style or model designed, manufactured and displayed to consumer in just 15 to 20 days. We hope to offer such capability to our ecosystem partners in the future and extend it to other categories. Besides C2M effort, we recently launched a new function Duo Duo Maicai. It is another area where we believe it will pay off in the long term. We view the entire agriculture value chain in 3 parts: production, transportation and consumption. What we have done in the past 5 years was to connect farmers directly with our users, i.e., the consumption part. No doubt, our efforts have created efficiencies, cut unnecessary intermediaries and helped farmers earn more end users save more. But we have not addressed other fundamental roadblocks such as the lack of a dedicated logistics infrastructure for agriculture products, farm productivity and food safety. When Pinduoduo started, we operated our own fulfillment network. So we have some experiences in this. But what we need to build now is of a totally different scale. It is an infrastructure buildup. Leveraging our prior experience, we are working closely with warehousing service providers, delivery fleets to meet the demanding next-day delivery requirements. Sometimes we have even -- we have to even step in, design and manage the warehouse workflow ourselves. We also plan to explore more demand-driven, localized cold chain options at reasonable cost in order to deliver a better consumer experience. We are already investing in people and warehouse and fleet management systems. When needed, we are willing to invest in key players in the warehousing and cold chain logistics sectors to accelerate the improvement of the entire agricultural value chain. With more localized supplies being fulfilled more efficiently, we can meet users' daily consumption needs with better quality produce in shorter time. In addition to logistics infrastructure, we are making bigger R&D investments in product curation, sourcing and demand aggregation to further enhance our understanding of user needs and curation accuracy. We take into account the mode of our consumer engagement from Maicai and its impact on pricing and convenience. By improving our ability to predict demand, we can work with the local top distributors of agriculture goods to source directly from upstream farmers cheaper and faster. Over the past 5 years, we have already accumulated substantial insights for agricultural goods, which can give us a kick start as we fine-tune Maicai. Another important area we have not done enough is in production. As a technology company, populated more than half by engineers, we see an important role for technological solutions for food production and have started to explore various investments in Agritech. We believe there's a huge market opportunity for small agriculture to address challenges in food supply, food safety and labor shortages. We are well placed to facilitate the adoption of Agritech given the demand visibility we have and our access to a vast community of agricultural producers. We will explore the commercial viability of new Agritech solution our potential partners have. To -- for more interest in innovation, we initiated the smart agriculture competition this year, which gathers top minds in AI and agronomy worldwide to develop growing methods that can generate the highest yield while economizing on inputs such as labor. The tech competition fits 4 teams of AI growers against 4 traditional foreign teams in growing strawberries. The winner will be determined based on profitability, reliability, scalability and technical merits of the Agritech solution they have deployed. Through this competition, we hope to inspire more young farmers and researchers to develop localized smart agriculture solutions. By working with the winner to implement their solution on to an actual farm, we hope to demonstrate that they are Agritech solutions suitable for smaller scale Chinese farms, and we plan to standardize the solutions for broader deployment across China. We see a bright future for agriculture in China. We generated RMB 136 billion of GMV in this category in 2019 and expected to hit RMB 250 billion this year. Consumers have counter identified PDD as the go-to platform for agriculture goods. Our aim is to lead the industry in innovation and be a driving force of agriculture infrastructure buildup. Our efforts in agriculture and in manufacturing sectors seek to create long-term structural changes that will improve our users' experience and contribute to the value creation of the industry. They are not the easiest, but they certainly are the right things to do. We believe that our hard work will pay off in the long run. Now let me invite Tony to walk through the details of our third quarter results.

Thank you, David. For the 12 months ended September 30, 2020, our GMV increased 73% to nearly RMB 1.5 trillion from RMB 840 billion a year ago. As a result of continued growth in our user base and increase the spending per user. Our average monthly active users in the third quarter increased by 74.6 million from the previous quarter to 643.4 million or an increase of 50% from a year ago. Our annual active buyers for the 12 months ended September 30, 2020, grew 36% year-over-year to reach 731.3 million. This represents a net add of 195 million in the past 12 months. The annual spending per active buyer in the 12-month period ended September 30, 2020, increased 27% to RMB 1,993 from RMB 1,567 for the same period in 2019. The increase in annual spending per active buyer was moderated by a significant number of new users added, who contributed less than 12 months of purchases to our GMV. Our strategy of investing in user engagement contributed to increase in user activities in Q3 and higher average spending per active buyer. During the third quarter, China continued its recovery from pandemic. Consumer behaviors continue to normalize, resulting in pickup in online -- off-line retail activities. Compared to the year-over-year increase of 22% observed during the high seasonality of Q2 according to MDS data, the value of physical goods sold online in the third quarter grew slower in Q3 at 17% versus a year ago. Pinduoduo's GMV growth continued to exceed the industry and saw in contrast a pick up on GMV growth rate in Q3. For the 9 months ended September 30, 2020, total parcel shipment volume in China continued to grow rapidly at 27.9% from the same period last year. In comparison, the value of physical goods sold online only grew 15.1% during the same period. This suggests the average value per parcel is decreasing which is consistent with the strong demand we have observed in Q2 and Q3 for lower ticket value items like household necessities and agriculture products on our platform. We continued our promotions and support to our users in these categories because they are what many of our consumers needed. This high-frequency category have helped us to accelerate trust building and engagement with our users, which translated to better response and conversion for other promotion activities that we conducted on the platform. Our total revenues in the September quarter were RMB 14.2 billion, representing an increase of 89% from RMB 7.5 billion in the same quarter last year. The increase was driven primarily by the strong momentum in online marketing services. Our revenues from marketing -- online marketing services and others was RMB 12.9 billion, up 92% from a year ago. Our transaction service revenue increased 66% to RMB 1.3 billion. We continue to see strong merchant advertising activities in Q3, which will attribute attractive merchant ROI due to higher user engagement on our platform and more compelling advertising products. The implied monetization rate, defined as total revenues divided by GMV for the last 12 months ended September 30, 2020, was 3.0%, which is the same as the comparable period last year and up from 2.9% for the 12-month period ended in Q2 2020. Now moving on to cost. Our total cost of revenues this quarter increased 78% from RMB 1.8 billion in the same period last year to RMB 3.3 billion this quarter, translating to a gross margin of 77%. Total cost of revenues increased mainly due to the increases in bandwidth and server costs, staff costs and other expenses directly attributable to the online marketplace services and other revenues. Our total operating expenses this quarter were RMB 12.2 billion as compared to RMB 8.5 billion in the same quarter of 2019. Our sales and marketing expenses this quarter increased to 46% to RMB 10.1 billion from RMB 6.9 billion in the same quarter of 2019. On a non-GAAP basis, our sales and marketing as a percentage of our revenues was 69% as compared to 89% for the same quarter last year. Our priority this year is to improve user engagement. And gain more mind share with consumers. We continued our sales and marketing investment in Q3 towards this priority, wherever, we saw opportunities that meet our internal ROI hurdles, users who have been on our platform longer tends to shop more frequently on our platform. Purchases across more categories and spend above our average spending per user. We attribute the increase in average annual spending per user in Q3 to our efforts in prior quarter to invest and build engagement with our rapidly expanding buyer base. And our investment in our users this quarter will continue to position us well for the long term. General and administrative expenses were RMB 368.6 million as compared to RMB 436.6 million in the same quarter of 2019. The G&A expenses in Q3 2019 included a certain one-off expenses related to our initiatives to alleviate rural poverty. We did not incur such expenses this quarter. An increase of 60% from RMB 1.1 billion in the same quarter of 2019. The increase was primarily due to an increase in headcount and the continuous recruitment of talented engineers and an increase in R&D-related cloud services expenses. On a non-GAAP basis, our R&D expenses as a percentage of our revenue was 10% in Q3. Technology is fundamental to our operation, and we plan to increase our spending on engineering talent and technological capability going forward. Some of our key R&D initiatives include developing our demand forecasting system for agriculture, database for C2M manufacturers and logistic planning system. As a result, operating loss for the quarter narrowed to RMB 1.3 billion on a GAAP basis compared with operating loss of RMB 2.8 billion in the same quarter of 2019. Non-GAAP operating loss for the quarter was RMB 339.8 million compared with RMB 2.1 billion in the same quarter of 2019. For the quarter ended September 30, 2020, we record a net nonoperating income of RMB 475.6 million compared with RMB 465.2 million in the same quarter in 2019. The increase primarily reflects the net impact of higher interest income, offset by the loss on fair market value change from long-term investments. And interest expenses from amortization of our outstanding convertible bonds. We have excluded the fair market value change and the convertible bond amortization in addition to the share-based compensation in our presentation of non-GAAP metrics. To sum up, the net loss attributable to ordinary shareholder was RMB 784.7 million on a GAAP basis as compared to net loss of RMB 2.3 billion in the same quarter of 2019. Basic and diluted net loss per ADS were RMB 0.66 on a GAAP basis, compared with RMB 2.0 in the same quarter of 2019. On a non-GAAP basis, we record a net income attributable to ordinary shareholders of RMB 466.4 million compared with non-GAAP net loss of RMB 1.666 billion in the same quarter last year. Non-GAAP basic and diluted net income per ADS for RMB 0.39 and RMB 0.33, respectively, this quarter as compared with non-GAAP net loss of RMB 1.44 in the same quarter of 2019. And total MI side is still a young initiative and its contribution to our results in Q3 is immaterial. We operate my under a 3P model. We recognized transaction service revenues for facilitating the sales and incurred logistic costs under cost of goods sold and incremental sales and marketing expenses. That completes the profit and loss statement for this quarter. Our net cash flow generated by operating activities in this quarter was RMB 8.3 billion as compared to RMB 2.6 billion in the same quarter of 2019, primarily due to an increase in online marketing services revenues, our operating cash flow has been positive on an annual basis since 2017. As of September 30, 2020, the company's cash reserve comprising of cash, cash equivalents and short-term investments was RMB 45.6 billion as compared to RMB 41.1 billion at the end of December 2019. We allocated most of our cash reserves to highly liquid short-term investments to receive better cash yields and maintain flexibility to restore and deploy capital strategically as necessary. This concludes our prepared remarks. Operator, we are ready for questions. Thank you.

[Operator Instructions] First question comes from the line of Thomas Chong of Jefferies.

Can you comment about our strategies in community group purchase and how we see the competitive landscape going forward? And how big is the addressable market?

Thank you for the question. So first, I want to clarify a misconception and now many people have. Duo Duo Maicai is not really a community group buy business. And yes, this location based and our customers pick up their purchase from the places close to them. But I believe it's different from prior community buying models we have been seeing in the past 7 years. To us, I cannot comment on the difference because we really don't know what others are thinking or doing, but we can speak for ourselves. So for us, Maicai, I think, is a natural extension of our current business given our know-how of the agriculture sectors and its ecosystem players. And we are doing Maicai because we see -- we saw this new emerging customer need that our current infrastructure and the platform cannot meet. And we sense a strong need from our users now ever since the first half year of this year. Actually, they want to buy fresh grocery more conveniently and more frequently. And our existing offering of agricultural produce, I think, cannot meet users' new preferences. It's about fresh and the next day consumption need. So as I just said, we are not running Maicai as a stand-alone business. It's an integrated offering with our existing platform. Users actually can choose different services. And service offered can be next day pickup or door-to-door delivery with 3 to 5 days delivery time. But we think this is a very important need for our customers. So we are committed to invest in the infrastructure to make this happen, to make a whole package about deliver the consumer need from farm to their home faster and cheaper. And in terms of landscape, I think we need to think about it in twofolds. First is, for Maicai stand-alone, and I do believe that a significant portion of certain consumers in the future will complete their grocer shopping totally online. And just like this change for buying daily grocery online. I think it's very similar talk to what we saw 5 to 7 years ago with the apparel category. And I think no 1 today would have imagined then -- no one could have imagined then that a significant number of consumers who are using online shopping to choose, to try out, purchase and return codes. That is exactly what we are seeing today. So in terms of grocery shopping, I think a similar thing happened. The ARPU is about this synergy between Maicai and our main e-commerce platform basically, us -- Maicai has a high purchase frequency. So our user will have a higher engagement with our platform. So that way they can pick other -- the full spectrum of category of products from our e-commerce platform.

Next question is from the line of Joyce Ju of Bank of America.

Congrats on very strong results this quarter. I would like to take this opportunity to get more colors on the -- your strategic new initiatives, Duo Duo Maicai, as we all know, like you mentioned in the opening remarks, you guys actually choose the 3P marketplace model to conduct this business. And we all know like in this business front, probably, we have seen 1P model, 3P model. Could you elaborate a little bit more in why the platform decided to do so? And is there any like special advantage or like key advantage we have seen like why we particularly choose this model and how we are differentiated compared to other major players or new entrants in this market? And secondly, also, I think a lot of like industry experts are kind of common. This is a business actually heavily relied on the supply chain. While from our company perspective, like we typically in a more light business model. So we don't really have like heavy off-line investment for infrastructures before. So are we going to spend a lot of money to actually invest for like logistics or supply chain? How big will be the CapEx related? And also on the investment front, I also would like to know, like what's the plan for the sales marketing budget investments to acquire like new users for this business?

Joyce, thank you for that question. It's very comprehensive. Let me point out a few things. So first of all, as Lei has mentioned in his remarks, we see Duo Duo Maicai really as a natural extension of our e-commerce model and our emphasis on agriculture. What we have seen is that as the country emerged from COVID-19, consumers' behaviors are changing and how they are looking to address their needs for daily groceries are evolving. And what we have seen is that users are now increasingly looking for -- to be able to buy more things online. They are trying to identify an alternative venue to wet markets and supermarkets, and they want to delivery time to be quick, so next day. And also, again, continue to be great value. So looking at this equation and looking at the use cases that PDD e-commerce platform addresses on a stand-alone basis, we recognize that there are certain deficiencies. For example, the next day kind of logistics delivery isn't something that PPD's platform to date have been optimized for. So the extension to Duo Duo Maicai for us is very natural. We can't really comment how another players decision to enter into similar businesses. And like they are more like a community purchase or not. But from our perspective, what we see Duo Duo Maicai is really addressing this different way of engaging with consumers, fulfilling their different type of usage patterns and needs. And again, you're right to point out that we do think that this will require a much better infrastructure, tailored specifically for the agricultural produce, agriculture products. So we are prepared to go heavy in building or accelerating the development of this agriculture infrastructure. To date, what we have been doing is investing in people. So we have teams on the ground working with third-party service provider today. But in some instances, we have gotten involved in establishing the SOPs for the warehouses to getting involved in the workflows. We are also investing -- we have already invested in warehouse and fleet management systems and we are looking for ways to continue to optimize that, leveraging the technology platform we have for the main from our e-commerce platform. But specifically, though, we do think that there will be scenarios where we would need to make certain investments in order to facilitate development in infrastructure, including potentially a build-out of a more localized cold chain operation that is demand driven and therefore, can be most cost efficient. We are looking to leverage existing services provider to do this. But in some instances, we may need to develop certain test cases and do it ourselves. Let me pass there and let Tony address the question regarding sales and marketing on Duo Duo Maicai.

Yes. As David just mentioned and also Lei mentioned in his remarks, Duo Duo Maicai to us is a natural extension from our main e-commerce model. So we will budget our sales and marketing investment in Duo Duo Maicai the same way as we invest in our e-commerce platform. And the guiding principle is we focus on the long-term ROI we can generate from the business, not instead of the short-term profitability.

Got it. May I have a like one more quick follow-up as just on may we get colors, like what's the current overlap between like suppliers for our main PDD marketplace and Duo Duo Maicai, like in terms of like agricultural fresh produce like suppliers?

Joyce, I'm actually not quite sure whether the question is meaningful. The reason I say this is we offer Duo Duo Maicai as an integrated part of our e-commerce platform. The merchants who work with us in the multi-scenario can also be merchants online. So it really depends on their capabilities. And whether they can work with the localized scenario in Maicai. And of course, they can -- they're more than welcome to continue to dispatch nation wide to working with the delivery forces on our platform. In fact, I will say that the credibility we have as China's second largest e-commerce platform by users give us incredible leverage with merchants, and we see a lot of merchants looking to work with us in a localized scenario as well.

Next question is from the line of Eddy Wang of Morgan Stanley.

Congratulations on the very great results. So yes, I also have a follow-up question on Duo Duo Maicai as well. So basically, can you share with us -- we understand that we just started business in August, but would appreciate if you can give us more color on how is the growth momentum of the Duo Duo Maicai business in the past 3 months? And if you look at these AOV and the ASPR user of this business-wise, if we compare -- I understand that it's much integrated into our agriculture for that business. But if compared with the AOV compared with the user frequency wise, how is Duo Duo Maicai in the past 3 months compared with your -- the users' behavior of the agricultural product purchase? Yes.

Sure, Eddy. Thank you for that. As you rightly pointed out, that Duo Duo Maicai is still a very new business for us. So we are also fine-tuning our operations. So we are not going to be able to comment on the specifics, but you will note that the Maicai function is now available across most of the provinces in China. And we featured an entry way for Maicai on the main app itself very prominently. So we are seeing good momentum, good user pickup and great adoption. Then in particular, I would say that the visibility on the main app is also helping to drive traffic to the Maicai business itself. You also asked about the AOV. I think it's fair to say that in Maicai multi-scenario is catered or it's meant to address the daily grocery needs of the consumers on our platform. So naturally, this lends itself to a higher frequency, purchasing and engagement on the platform. And it is also true that the AOV today for those orders are lower relative to the AOV, average AOV on our platform today. However, it is compensated by much higher frequency. The way we are looking at the Maicai business is also continue to serve the consumers well. The frequencies will increase. And as we build out the infrastructure over time, the AOV will also increase. So we do see a tremendous amount of potential in this business. And for now, we are just focused providing them the best experiences for the daily grocery needs.

Next question is from Piyush Mubayi of Goldman Sachs.