Jack Ma's Alibaba briefly loses China e-commerce crown to rival PDD, marks shift in industry

Alibaba Group Holding Ltd., the long-standing titan of China's e-commerce space, briefly ceded its top position to Pinduoduo (PDD), an eight-year-old upstart, marking a momentous shift in the industry, as per Bloomberg reports.

The brief switch in the stock positions occurred during Thursday's (November 30) trading session, where Alibaba's market value slipped below that of PDD. This is a significant turn for an industry Alibaba once dominated for over a decade.

Fluctuations in market valuation

During Hong Kong intraday trading, Alibaba experienced a 1.4 percent decline, causing its market value to briefly fall to around $187 billion, momentarily placing it beneath US-listed PDD Holding's valuation of $188.3 billion, Bloomberg reported.

But the Jack Ma co-founded e-commerce giant managed to rally later in the day, closing slightly higher than PDD's overnight market capitalisation.

The surprising shift signifies the challenging times Alibaba has been facing since Beijing's 2020 crackdown on the tech sector, impacting Alibaba's trajectory significantly. Further, the emergence of disruptors such as PDD and ByteDance Ltd., in the social media and e-commerce landscapes, has added to Alibaba's challenges.

Jack Ma's address to employees

In a recent internal memo, Ma urged the company's massive workforce to recalibrate and regain lost momentum. “Every great company is born in the winter. The people willing to reform for the future, and the organizations willing to pay any price and sacrifice, are the ones that are truly respected," Ma wrote in an internal forum.

Ma also praised rival PDD for "decision-making, execution, and efforts of the past years".

The co-founder has been on the low since government action and it is yet unclear if his public address was approved. However, the billionaire's unusual intervention highlights the severity of the situation and the company's need to adapt swiftly to the evolving market dynamics.

Ma's call for change underscores the urgency for Alibaba to reorient itself amidst intensifying competition. The shift in market dynamics suggests a compelling need for Alibaba to innovate and adapt, as rivals like PDD redefine the e-commerce landscape.

Industry Outlook

Wall Street reacted to these developments by issuing a rare downgrade on Alibaba's stock, with Morgan Stanley adjusting its rating and target price to $90 from $110. Meanwhile, PDD's meteoric rise, fuelled by robust growth and aggressive global expansion, positions it as a frontrunner in China's e-commerce arena.

Overall, brokers are bullish on Alibaba. It still has 44 buy ratings and 8 hold recommendations, compared to 52 buys for PDD and 3 holds for PDD.

Alibaba faces internal restructuring challenges, including shelving spinoffs and leadership transitions. In contrast, PDD's strategic prowess, exemplified by the success of its US shopping app Temu and domestic market innovations, is posing a formidable challenge to Alibaba's once-dominant position.

The Colin Huang-founded PDD has seen growth far outpace Alibaba, racking up 20 percent growth in transactions versus rivals during the recent Singles' Day shopping festival in China. In the US too, Temu has overtaken Shein in online sales marking itself as a disruptive force in the global e-commerce space.