The Rise of Temu’s Chinese Parent Will Reshape E-Commerce | Mint

The Rise of Temu’s Chinese Parent Will Reshape E-Commerce

Temu has 52 million monthly active users in the U.S., just a year after its launch. PHOTO: NIKOS PEKIARIDIS/ZUMA PRESS
Temu has 52 million monthly active users in the U.S., just a year after its launch. PHOTO: NIKOS PEKIARIDIS/ZUMA PRESS


PDD, the owner of fast-growing Temu, is muscling into the U.S. in a way Alibaba never did.

Move over, Alibaba. There’s a new online-shopping champion in China: PDD, the company behind discount-retailing app Temu, is now the country’s most valuable e-commerce company.

After a 78% rise this year, PDD’s market value has hit $193 billion, snatching the crown from Alibaba. Though PDD’s revenue last quarter was still less than a third of Alibaba’s, it’s growing much faster. Revenue for the three months ended in September surged 94% from a year earlier—Alibaba’s only grew 9%. That breakneck growth means the market is willing to assign a much higher multiple to PDD stock: It trades at 34 times earnings compared with 11 times for Alibaba, according to S&P Global Market Intelligence.

At home, PDD’s Pinduoduo app has outshone more established rivals like Alibaba and At a time when Chinese consumers are more price-sensitive, Pinduoduo’s reputation as the platform selling goods at affordable prices—after years of offering discounts and rebates—gives it an edge. The company has also cultivated a network of low-cost manufacturers targeting budget buyers, particularly in clothing, allowing it to maintain low prices on its platform. That’s a key difference with Alibaba’s Taobao, which has long operated primarily as a pure market—and focused less on directly building up suppliers itself.

PDD’s hybrid model gives it more direct sway over pricing—a key advantage in a more thrift-conscious China. Morgan Stanley estimates that PDD’s domestic gross merchandise value—the value of goods sold on its platform—grew 25%, year over year, last quarter, far outpacing the 5% growth for overall online retail goods sales in China.

And Temu, PDD’s international business, is flying high. It now has 52 million monthly active users in the U.S. just a year after its launch, according to data tracker Sensor Tower. The company hasn’t provided much information on how the business is doing, but Goldman Sachs estimates Temu’s GMV last quarter at $6.5 billion, more than twice the amount from a quarter earlier. The bank reckons Temu accounted for around 28% of PDD’s revenue last quarter.

Temu is likely still losing money though. PDD’s operating margin last quarter, for example, narrowed to 24% from 29% a year earlier. Even so, the firm seems to be able to afford it: Improving margins at its domestic business helped it deliver a walloping 60% growth in operating profit last quarter.

Investors are hoping the playbook PDD mastered in China will eventually work abroad too. PDD lost money for years after the company was founded in 2015, as it splashed on subsidies and rebates. But after achieving larger scale, it became profitable in 2021.

Graphic: WSJ
View Full Image
Graphic: WSJ

There are still a few big challenges waiting abroad. Consumption habits in other countries might differ from those in China. Costs like delivery and marketing are higher in developed economies too. And it is already bumping up against another low-cost champion who has mastered Chinese supply chains to muscle in on U.S. e-commerce—fast-fashion heavyweight Shein. If the sort of brutal, expensive price wars that have long characterized Chinese e-commerce migrate to the U.S. too, then margin pressure could remain intense.

Temu’s growth in the U.S. seems to have plateaued lately—monthly active U.S. users this quarter are down 6% from the previous quarter, according to Sensor Tower. But Temu’s global growth remains strong, and it has expanded to more countries in regions like the Middle East.

Chinese technology stocks have suffered over the past couple of years. But PDD’s standout growth and canny supplier strategy set it apart. If Sino-U.S. tensions or slugfests with other Chinese firms eyeing the U.S. market don’t trip it up, it could yet grow into its heady valuation.

Write to Jacky Wong at

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.


Switch to the Mint app for fast and personalized news - Get App