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Is Temu‘s steep rise coming to an end? As it reported disappointing sales, it admits that its outlook is bleak because of increasing competition.
Sales growth slows down
At first glance, there seems little to worry about for PDD Holdings, the parent company of Temu and Pinduoduo. Its second quarter revenue of 97.06 billion yuan (12.2 billion euros) means an increase of almost 86 %, while net profits almost tripled to 32.01 billion yuan (four billion euros). Still, those figures are lower than what analysts had expected.
Moreover, a worrying trend is emerging: CFO Jun Liu says that the slower growth rate is not a one-off: she expects revenue growth to come under pressure due to increasing competition. Profitability is also likely to be affected by continued investments, she adds.
Aggressive competition
Temu faces headwinds both in China and abroad, as aggressive competitors (such as Alibaba, Amazon, JD.com and Shein) are being joined by Walmart: the American giant recently sold its shares in JD.com in order to expand its Chinese operations.
Moreover, the company fears the impact of stricter regulations. For example, the European Commission wants to remove the customs exemption for e-commerce packages of under 150 euros sent from outside the European Union. The Chinese online shop is regularly targeted for unfair competition and the questionable safety, quality and durability of its products.
The disappointing figures did not go down well with investors, who sent the share price immediately down by 30 %. As a result, owner Colin Huang saw his total worth fall by almost thirteen billion euros, making him no longer the richest Chinese, according to Forbes.
