By G. Mudalige, Jadetimes Staff
G. Mudalige is a Jadetimes news reporter covering Technology & Innovation
PDD Holdings, the parent company of e-commerce platforms Temu and Pinduoduo, is grappling with financial setbacks as China’s economic slowdown and global regulatory challenges take a toll. The company’s US-listed shares plummeted nearly 11% on Thursday following the announcement of disappointing sales and profit figures for the September quarter, marking the second consecutive period where the firm missed analyst expectations.
The company reported revenue of 99.35 billion yuan ($13.7 billion), falling short of the anticipated 102.8 billion yuan. This decline underscores the broader struggles of China’s retail sector, which is reeling from reduced consumer confidence. A crisis in the property sector, coupled with persistently high youth unemployment, has dampened spending habits across the country. These challenges have affected PDD’s competitors, Alibaba and JD, who also reported underwhelming results for the same period.
Pinduoduo, PDD’s flagship platform in China, has historically thrived on its focus on low-cost and heavily discounted products. However, the landscape has shifted as competitors adopt similar pricing strategies, intensifying market competition and triggering price wars. Jun Liu, PDD’s Vice President of Finance, noted that topline growth moderated further due to these external pressures.
The situation is further complicated by global challenges impacting PDD’s international platform, Temu. Regulatory pushback from several countries threatens its expansion efforts. In Vietnam, authorities have warned Temu and rival platform Shein to register with the government or face potential bans. Similarly, Indonesia recently mandated the removal of Temu from app stores, aiming to protect local retailers.
In the European Union, an investigation is underway to determine whether Temu facilitated the sale of illegal products, which could result in substantial fines. Meanwhile, in the United States, President-elect Donald Trump has vowed to increase tariffs on Chinese imports. If enacted, these tariffs could significantly impact Temu’s business model, which relies on offering ultra-cheap products to consumers.
The global regulatory landscape has added uncertainty to Temu’s operations, compounded by the possibility of tariff changes that could erode its price-based competitive advantage. Alicia Yap, an equity research analyst at Citi, highlighted growing international scrutiny of Temu’s low-cost pricing model.
Analysts anticipate that China’s retail sector will continue to face challenges in the near term, with e-commerce growth likely to proceed at a slower pace. James Yang, a partner specializing in retail and consumer products at Bain & Company, remarked on the sector’s headwinds and the sluggish recovery of consumer confidence.
For PDD Holdings, the combination of domestic economic woes and international regulatory pressures signals a pivotal moment. The company’s ability to navigate these challenges will determine its capacity to sustain growth both in China and overseas. As competition intensifies and regulatory scrutiny increases, PDD faces a tough road ahead in stabilizing its operations and regaining investor confidence.
