- 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.
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.
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, Caijing 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) In the company's recent stock record filings, Pinduoduo said that counterfeit items had been removed.
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.
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