A consumer walks past an advertisement of e-commerce platform Pinduoduo at a shopping mall in Shanghai. (Photo provided to China Daily)
Despite the tepid growth reported by China's major internet companies, online discounter PDD Holdings, the parent company of e-commerce platform Pinduoduo, beat third-quarter revenue forecasts as it continued to capture more value-conscious Chinese consumers.
In addition, its cross-border online marketplace Temu has witnessed a surge in popularity among overseas shoppers, experts said.
Pointing out that the country's consumer market is gradually recovering and showcasing immense growth potential and resilience, they said that Chinese online retailers should build up flexible supply chain systems and provide cost-effective shopping experiences for consumers by leveraging innovative digital technologies.
PDD Holdings' growth in the domestic market has outstripped that of competitors such as Alibaba Group Holding and JD, which can be largely attributed to the deep discounts rolled out before the Singles Day shopping spree, industry insiders said. The shares of the United States-listed company soared 18.04 percent on Wednesday, taking its market value to $184.7 billion, close to Alibaba's $195.4 billion.
PDD Holdings said on Tuesday night that its revenue jumped 93.9 percent year-on-year to 68.84 billion yuan ($9.7 billion) during the July-September period, while its net income attributable to ordinary shareholders reached 15.54 billion yuan in the third quarter, an increase of 47 percent year-on-year.
Chen Lei, chairman and co-CEO of PDD Holdings, said in an earnings call with investors that with the introduction of a series of policies to spur consumption, the company is seeing robust demand. "We can see that consumption upgrades are not only about quality but also about price, and it is the balance of quality and price that consumers care about most," Chen said.
The company's better-than-anticipated financial results can be partly attributed to the rising popularity of Temu, its cross-border e-commerce platform. Launched in the US in September last year, Temu offers discounted products shipped directly from China, and is now present in more than 40 countries in North America, Europe, Asia and Oceania.
Chen said PDD hopes to leverage the supply chain capacities it has accumulated over the past years to create a new channel that enables consumers from different countries and regions to directly purchase products from factories, providing more flexible and personalized supply chains and more cost-effective shopping experiences.
He added that the company has also continued to invest in areas such as agricultural and supply chain technology, and core research and development capabilities.
PDD's surging revenue contrasts with the slowing growth of Chinese e-commerce giants including Alibaba and JD in the third quarter. Alibaba reported 9 percent year-on-year revenue growth to reach 224.79 billion yuan during the quarter, while the net revenue of JD increased 1.7 percent from a year ago.
Seeing PDD's exceptional financial performance, Jack Ma, co-founder of Alibaba, said on an internal network of the company that he believes Alibaba will innovate in response. Ma congratulated PDD's efforts over the past few years, saying the era of artificial intelligence-powered e-commerce has just begun, which offers both an opportunity and a challenge for everyone.
Mo Daiqing, a senior analyst at domestic consultancy Internet Economy Institute, said PDD Holdings' strong financial performance indicates improved consumer sentiment and the continuous recovery of China's consumption market.
Mo said Chinese online retailers have ramped up efforts to offer steep discounts and adopted low-price strategies to obtain a new breed of users and improve user loyalty and repurchase rates. "The platform that can offer products at competitive prices, fast delivery and good shopping experience will gain an upper hand in this fierce competition," she added.
Li Mingtao, head of the research institute at the China International Electronic Commerce Center, said, "As a new form of foreign trade, Chinese cross-border e-commerce platforms represented by Temu can help establish a direct and definitive connection between manufacturers and consumers by applying advanced digital technologies such as big data, cloud computing and artificial intelligence."
He added that manufacturers can better learn about and grasp the needs of consumers via these platforms, adjust production in a timely manner, and reduce inventory, which will be conducive to improving the competitiveness of Chinese manufacturing enterprises on the global stage.