PDD, the parent company of e-commerce platform Temu, released its unaudited fourth-quarter financial results on Thursday, reporting total revenue of RMB 110.61 billion ($15.3 billion), up 24% from RMB 88.9 billion ($12.27 billion) in the same quarter of 2023. Despite the growth, the company missed market estimates.

Why it matters: PDD’s slowing growth highlights the challenges of sustaining rapid expansion in a highly competitive e-commerce market. The company also faces increasing regulatory uncertainties overseas, with potential policy shifts that could affect Temu’s global operations.

Details: PDD Chairman and Co-CEO Chen Lei addressed concerns over policy risks, such as tariffs, that Temu faces overseas. During the earnings call, he noted that the external environment is changing at an accelerated pace, competition remains intense, and macro policies related to Temu’s business could also shift.

• PDD’s revenue from online marketing services and other streams in Q4 was RMB 57.01 billion ($7.87 billion), up 17% year over year. However, this growth rate slowed compared with the previous quarter, when online marketing and other service revenue increased by 24%.
• Revenue from transaction services reached RMB 53.6 billion ($7.39 billion), up 33% from a year ago, but this was a significant slowdown from the 72% year-over-year growth recorded in the prior quarter.
• These figures indicate that while PDD maintained growth, the company’s advertising and commission revenue saw a deceleration even during the traditional peak season for e-commerce sales.
• PDD’s total cost of revenue for Q4 was RMB 47.8 billion ($6.59 billion), up 36% year over year, mainly due to higher fulfillment and payment processing fees.
• Total operating expenses in Q4 rose 19% year over year to RMB 37.22 billion ($5.14 billion), driven by increased sales and marketing expenses.
• So far this year, US-listed PDD’s stock has risen 29.74%. As of market close on March 19 (Eastern Time), the company’s shares were trading at $125.92 per share.

Context: In February, PDD’s e-commerce platform Temu began preparations to enter the South Korean market and build a logistics network.

Amazon has instructed some Chinese cross-border merchants selling goods on its site to stop listing lower-priced products on rival platform Temu, according to a report in the South China Morning Post today. The apparent move comes amid the US site’s growing competition with the budget retailer owned by Chinese e-commerce giant PDD Holdings.

Why it matters: Temu has been attracting US consumers with its aggressive pricing strategies. The pressure on merchants to keep prices competitive on Amazon underscores the challenges the American e-commerce giant faces in protecting its market share against emerging competitors in the global retail landscape.

Details: Temu has seen rapid growth in its market share in the US in recent years, and it was once again the most downloaded free app in the country in 2024, having first taken that title last year in place of TikTok, according to a list of top apps and games across the App Store released by Apple. This surge in user numbers is largely driven by its aggressive pricing strategy, which has in turn forced Amazon to take action. Last week, after Anker, a power bank and charging brand, removed its listings on Temu, rumors emerged about Amazon pressuring Chinese sellers to list exclusively on its platform.

• The two official Anker stores on Temu’s US site, “ANKER Certified Refurbished Official Shop” and “ANKER Official Shop,” are currently listed as temporarily on hold, with all products removed. According to the stores’ homepage, the two hubs have sold a total of 19,105 items and accumulated 3,708 followers.
• ​​Amazon’s local office recently informed the managers of top-selling Chinese brands that they should not list identical items at lower prices on Temu. The policy followed Amazon’s increased monitoring of pricing on Temu, with penalties for sellers found to offer more expensive products on Amazon compared to Temu, including being removed from Amazon’s “Featured Offer” program.
• The “Featured Offer” program prominently displays products at the top of product pages, making them more visible and accessible to customers.
• ​​Amazon responded to enquiries from a reporter from Chinese media outlet The Paper, stating, “The claim that Amazon requires sellers to exclusively sell on our platform is inaccurate. Sellers have the freedom to determine their own sales strategies and can set prices for their products on Amazon and other sales channels. In fact, regardless of where sellers choose to sell, Amazon supports their success through our multi-channel strategy, including solutions like Multi-Channel Fulfillment (MCF). Sellers set their own prices on Amazon and use the optional tools provided by us to offer competitive prices to consumers.”

Context: For Temu, the strategy of offering extremely low prices has proven to be a double-edged sword. On the one hand, it draws in consumers, as the platform markets itself with slogans such as “Shop Like a Billionaire.” On the other hand, such pricing practices raise questions about the platform’s legitimacy and ethical standards. 

• While Temu’s parent company, PDD Holdings, has not faced significant moral scrutiny in China, it’s a different story in the US. In China, consumers and businesses are more closely aligned in terms of values and local economic realities, with fewer political considerations, making ideological resistance less pronounced. However, the very same approach might not resonate as well with global consumers, especially in markets like the US, where concerns over pricing and sourcing are more amplified. This ongoing tension between affordability and ethical concerns is now becoming a key point of contention in Temu’s growth strategy.