PDD Holdings and Temu’s challenges: weakening results, increasing competition and EU strictness

By: Trademagazin Date: 2024. 11. 25. 11:02

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PDD Holdings, the Chinese giant that operates online shopping platforms Pinduoduo and Temu, is going through a difficult period. Its third-quarter financial results fell short of analysts’ expectations, while the value of its shares listed on the US stock exchange fell by more than 10 percent. The company is also facing challenges in European markets: strict action by EU authorities threatens Temu’s positions.

Weaker results in the Chinese market

PDD’s third-quarter revenue rose 44 percent to 99.35 billion yuan (about 5,400 billion forints) compared to the same period last year, but this still fell short of analysts’ expectations of 102.65 billion yuan. Although net profit increased significantly, reaching 24.98 billion yuan (1,300 billion forints), adjusted profit (18.59 yuan per share) also fell short of the estimated value of 19.79 yuan.

The Chinese consumer market has been hit by rising youth unemployment and a housing crisis. These factors have dented consumer confidence, which has also had a negative impact on Pinduoduo’s sales. Alibaba and JD.com are struggling with similar revenue growth problems as the price war intensifies in the market.

Jun Liu, PDD’s vice president of finance, acknowledged that the growth rate has slowed due to increased competition and external economic challenges. Zhao Jiazsen, the company’s co-CEO, added that the economic stimulus measures introduced by Beijing have only partially supported the company, while the limitations of the third-party platform have prevented it from fully exploiting macroeconomic changes.

European troubles: strict EU action against Temu

PDD is under pressure not only in China but also internationally. The European Union member states have jointly taken action against Temu to ensure that the platform’s commercial practices comply with EU regulations. The Hungarian Competition Authority has highlighted the following issues, among others:

Fake discounts: Inaccurate price discounts are displayed.
Psychological pressure: Customers are manipulated by referring to limited product stocks and tight purchase deadlines.
Incomplete information: Customers are not adequately informed about the conditions for returning goods and refunding the purchase price.
Credibility issues: The credibility of customer reviews is questionable and the availability of customer service is unclear.

These issues are serious for a presence in EU markets, as European consumers are highly aware and sensitive to the law. Failure to comply with the rules can result in serious fines and long-term reputational damage.