Temu has changed the world of online shopping. Its rapid growth means it rivals Amazon in many markets. But this week, shares of its owner PDD Holdings have fallen the most on record after it warned that revenue growth would inevitably trend downwards amid rising competition and an economic slowdown. The biggest threat to Temu, however, may be changing regulations in the US and Europe.
Chinese-owned ecommerce platform PDD’s US depositary receipts fell nearly 30 per cent in New York on Monday. The company faces aggressive competition from rivals such as ByteDance’s TikTok and Alibaba. PDD’s sales of Rmb97.1bn ($13.6bn) for the June quarter missed expectations. Its rapid revenue growth, more than doubling in recent quarters, is proving unsustainable.
Profitability should start taking a hit, too. A big part of PDD’s rapid growth has been thanks to its ultra-low pricing strategy. As local peers started following PDD’s strategy, it has had to splurge on marketing and advertising to keep customers. This is reflected in its nearly 50 per cent increase in operating expenses in its latest quarter, while general and administrative costs more than tripled due to staff-related expenses.