Temu owner’s shares slump as China slowdown hits sales

Overview

PDD Holdings, the Chinese owner of online shopping platforms Temu and Pinduoduo, has reported disappointing sales and profit due to an economic slowdown in China.

Disappointing Sales and Profit

PDD’s revenue reached 99.35bn yuan ($13.7bn) in the quarter that ended in September, below analyst forecasts of around 102.8bn yuan. This is the second quarter in a row that PDD misses analyst estimates, after years of fast growth.

External Challenges

PDD’s topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges. The company’s Chinese e-commerce platform, Pinduoduo, has become popular due to its focus on low-cost and heavily discounted products. However, a growing number of rivals have been adopting similar strategies, triggering a price war.

Global E-commerce Platform

PDD’s thriving global e-commerce platform, Temu, is also facing problems overseas. There’s uncertainty on potential tariff change and increasing pushback from more countries related to its ‘cheap’ prices. Additionally, Temu needed to register with the government in Vietnam before the end of the month or face a ban. In October, Indonesia ordered Google and Apple to remove Temu from their app stores in a bid to protect the country’s own retailers.

Regulatory Challenges

Temu is facing regulatory challenges globally. The EU has launched an investigation into whether the Chinese e-commerce platform facilitated the sale of illegal products that could lead to steep fines.

Economic Slowdown

Consumer confidence in China has taken a hit from a crisis in the country’s property sector and high levels of youth unemployment. PDD’s main rivals in its home market, Alibaba and JD.com, also posted underwhelming results in the September quarter.

Source URL: https://www.bbc.com/news/articles/c5yxzqdq2qqo

Published Date: 2024/11/22

“China’s retail sector is grappling with headwinds from the broader economic slowdown, with consumer confidence yet to fully recover,” said James Yang, a partner in retail and consumer products at management consulting firm, Bain & Company.

Looking ahead, e-commerce growth is expected to continue… albeit at a slower pace.