David Rosenthal: belief

Transcript context

…Right. The platform can be much more opinionated on where it drives its traffic, and that can be really really good if you’re a supplier on the platform. It’s bad in the sense that you don’t get to build that direct connection with the audience, so it’s less reliable. What’s the positive Eye of Sauron? When it looks favorably upon you, it can buy a whole bunch of stuff all at once. Think about Amazon. You’re selling a commodity-type good on Amazon. You’ve been on it for a long time. You have a certain skill. You have 10,000 reviews for your product. A new entrant wants to come in and compete with you in that same category and they have two reviews. Who’s going to get most of the purchases? That’s not a problem on Pinduoduo. On the supply side, who did they start attracting with all of this demand that they can channel? It’s actually manufacturers themselves. We alluded this to earlier in the episode. What they end up doing—and I think part of what makes the economics of this whole thing work—is it’s not distributors, retailers, and the traditional people who are going to sell on Alibaba and JD who are successful on Pinduoduo. It’s the actual factories and manufacturers themselves. They now don’t need any branding, distribution, or anything like that. They can just go directly to PDD—even though they have no brand—and know that it’s going to work. That is a big collapsing in the value chain that they’ve been able to accomplish. Yeah, 100%. I have to pull forward the tech theme now or a playbook item because we’re talking so directly about it. One of the biggest takes away from this whole thing is they successfully disintermediated both traditional retailers and brands. By not only being entirely internet-based but also social network-based, they were able to bring that scale of buyers, of demand directly to the brand, which is normally the job to be done by that retailer. The brand can sell in big chunks to their wholesalers, and then it can get chunked down smaller and smaller from there.…

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