Temu’s Rapid Growth Enriches Chinese Owner as Bargain Hunters Flock In

PDD Holdings, the parent company of Temu and Pinduoduo, is witnessing an extraordinary surge in profit and revenue, surpassing market expectations as consumers from both the United States and China flock to its bargain shopping platforms for low-cost products.

In its first-quarter earnings report released on Wednesday, the Shanghai-based company revealed a staggering 246% surge in net profit to 28 billion yuan ($3.9 billion), significantly exceeding the average analyst estimate. Revenue also experienced a notable 131% increase to 86.81 billion yuan ($12 billion), outperforming expectations. Analysts attribute this growth momentum to both domestic and international demand.

The robust financial performance propelled PDD’s Nasdaq-listed shares, pushing its market value beyond $204 billion and positioning it as China’s most valuable e-commerce entity, surpassing Alibaba. PDD was founded by Colin Huang in 2015 and, despite stepping down as chairman in 2021, he remains the company’s largest shareholder, with a stake of 25%.

Temu, PDD’s international app launched in 2022, has rapidly gained traction in the US market, capturing nearly 17% of the online discount store segment by November 2023. Meanwhile, its flagship app, Pinduoduo, continues to expand its market share in China, reaching 19% by mid-2023.

The company’s success is attributed to its ability to capitalize on shifting consumption patterns in China, where consumers are increasingly seeking discounts amid economic slowdown and job market challenges. Similarly, American consumers, amidst elevated inflation, are becoming more price-conscious, driving retailers to offer attractive discounts.

While PDD’s financial results have garnered praise from investment firms, including Morgan Stanley and Nomura, the company anticipates intensified competition from rivals. Co-CEO and chairman Lei Chen emphasized the need to adapt to evolving consumer demands and regulatory expectations.

However, PDD is also facing regulatory scrutiny in international markets. European consumer groups have accused Temu of employing manipulative tactics, while South Korean regulators are investigating the app for alleged false advertising and unfair practices.

Chen assured stakeholders that PDD is actively engaging with regulatory bodies worldwide with a commitment to compliance and consumer protection, recognizing the increasing scrutiny as the company expands its global footprint.