Temu wrests online shoppers from Shein and Amazon


HONG KONG – PDD Holdings reported a stronger than anticipated doubling in revenue, as its hit shopping app Temu ramped up discounts and marketing to grab consumers from Shein and Amazon.com.

The Chinese-owned e-commerce platform reported a 47 per cent increase in net income off sales of 68.8 billion yuan (S$12.9 billion) in the September quarter, surpassing by about 25 per cent the average revenue estimate. The stock rose the most since May.

PDD’s growth far outpaced Chinese rivals including Alibaba Group Holding, underscoring how it has used promotions to woo bargain-seeking consumers at a time of economic uncertainty.

The company scored with Temu – featured with much fanfare during 2023’s American football game Super Bowl – which Citigroup analyst Alicia Yap estimates handled US$4.2 billion of transactions during the quarter and likely yielded about 13 per cent of PDD’s total revenue.

PDD has so far kept Temu’s performance under wraps.

The company’s US-listed shares have soared 90 per cent since July, while Alibaba and JD.com have tumbled. The outperformance reflects anticipation that it will continue to steal market share at home and win fans among US consumers as well.

“Although our business outside of China is still at an early stage, it has made meaningful progress since its launch a year ago,” chief executive Chen Lei told analysts on a conference call. “While we have broadened our reach, the business is still in its early stage, and we’ll face uncertainties.”

Temu is regraded as a potentially disruptive force in global e-commerce.

The site – which follows the same strategy of cut-rate pricing employed by arch-foe Shein as well as PDD’s own domestic app Pinduoduo – has expanded operations into scores of countries.

“Management commented that Temu has made meaningful progress in business expansion, helping thousands of manufacturers to reach overseas customers in 40-plus countries and regions,” Goldman Sachs analyst Ronald Keung wrote in a research note. “The company plans to further collaborate with manufacturers to connect them directly with overseas customers based upon a more flexible supply chain.”

Sales on the platform first topped Shein’s in May in the United States, when it beat its rival by about 20 per cent, according to Bloomberg Second Measure, which analyses consumers’ card transactions.

The data shows it has extended that lead every month since, and in September, it recorded more than double Shein’s sales in the country.

At home, the company is making inroads against the two market leaders, Alibaba and JD.com.

During the just-concluded Singles’ Day shopping festival, PDD likely racked up 20 per cent growth in transactions versus its rivals’ single-digit rises, Goldman Sachs estimated.

Some investors however worry that Temu’s pitched battle with Shein could end up hurting the parent’s bottom line.

JD.com rolled out a US$1.4 billion discount spree in March to capture new users, igniting a price war. Alibaba also launched a “value-for-money battle” to lure buyers and merchants.

Some analysts note that PDD’s aggressive spending – now a sector-wide phenomenon – will further pressure margins.

PDD is among the last of the major Chinese Internet companies to report earnings, some of which yielded warning signs about the health of the Chinese economy.

In November, Alibaba lost US$22 billion in market value after calling off a spin-off of its giant cloud unit, citing a tightening of US curbs on advanced chips for China.

But Tencent Holdings and JD.com both delivered solid results that mitigated investors’ concerns over an economic slowdown. BLOOMBERG



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