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Chinese ecommerce group PDD Holdings has reported a more than doubling of quarterly revenues, hailing 2023 as a “pivotal” year during which its ultra-cheap shopping site Temu turbocharged growth.
Nasdaq-listed PDD, which owns the fast-growing marketplace Temu that is making waves in the US and Europe, on Wednesday reported revenues of Rmb89bn ($12bn) for the three months to December, a 123 per cent increase from the previous year and far above analysts’ estimates.
“2023 represents a pivotal chapter in our corporate history,” said chair and co-chief executive Chen Lei. “We saw growing demand driven by encouraging consumer sentiment.”
Analysts estimate that Temu is unprofitable in its early stage of growth but PDD’s overall net profits in the last quarter of 2023 were Rmb23bn, up 146 per cent year on year. The company said profits had been driven by transaction fees and marketing fees paid by merchants using its platforms.
The ecommerce group, which owns the Pinduoduo marketplace, launched Temu in the US in September 2022 before expanding it to Europe and Asia. Temu threatens established players including Amazon and eBay with its knockdown prices.
PDD has broadly defied a downturn in Chinese internet stocks, with its shares rising more than 60 per cent over the past year. In the past month, the share price has been volatile, as investors have responded to the perceived danger of Temu becoming ensnared by US restrictions on Chinese internet companies.
The US House of Representatives last week voted overwhelmingly to ban TikTok, the ByteDance-owned viral short video app, if it is not sold to a non-China buyer. Some legislators are also seeking to restrict Temu and Chinese fast-fashion group Shein’s sales, citing alleged use of forced labour, or calling for the closure of a tax loophole through which they ship goods to the US without having to pay tax and duty.
Temu has undertaken a multibillion-dollar internet advertising blitz on Google and Meta to grab US market share. PDD’s sales and marketing expenditure has ballooned because of the advertising spending and subsidies to lure shoppers and merchants to Temu. Since Temu’s 2022 launch, it has spent a total of Rmb100bn on marketing and sales across its businesses, according to the PDD results.
Temu is actively recruiting Amazon and Shein sellers in China and pressuring them to slash prices.
PDD, which does not break out the financial results of its Chinese and international businesses, has also disrupted ecommerce in its home market.
It popularised a group-buying shopping model in China, where buyers band together to purchase the same products at low prices. Pinduoduo has eaten away market share from more established rivals Taobao and Tmall as consumers have reined in expenditure in response to a slowdown in economic growth.
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