The cross-border online discount shop Temu appears to be the silver bullet for parent company PDD Holdings, as it inches closer than ever before to overtaking its main rival, Alibaba Group, in market capitalization (market cap).
Shares of PDD Holdings soared 18% on November 28 after its third-quarter revenue beat forecasts. The company, which also owns domestic e-commerce platform Pinduoduo, saw its revenue climb an astonishing 94% year-on-year to hit 68.84 billion RMB (9.62 billion USD), compared to the predicted 54.59 billion RMB.
“PDD’s overseas initiative Temu was the major driver for revenue growth,” an analyst at 86Research told Reuters, but domestic earnings also outstripped growth at Alibaba and JD by a “large margin”.
Temu launched just last year, piggybacking off a persistent cost-of-living crisis to deliver ultra-affordable goods to consumers in 48 countries globally. It has now come to epitomise the rise of third-party China-based sellers in global cross-border e-commerce, a phenomenon that has been called “Made in China, Sold by China, Marketed by China, Delivered by China”.
As of November 29, Alibaba Group’s market cap is 189.97 billion USD, whilst PDD Holdings’ is now sitting at 187.28 billion USD after stock prices leapt on November 28 and 29. By contrast, Alibaba’s market cap took a plunge recently after the much-anticipated IPO of its cloud computing arm was cancelled. This subsidiary, one of five set to be spun off since the restructure announcement, is the group’s most valuable offering to investors as it houses the company’s efforts in artificial intelligence.
Now, Alibaba Group is finally seeing PDD as a serious threat. Co-founder and former chairman Jack Ma went so far as to respond directly to discussions among Alibaba employees about the impending equaliser. In an internal company letter seen by Forbes, Ma wrote, “Today, everyone at Alibaba is watching and listening now. I firmly believe that Alibaba will change and amend itself. All great companies are born in a winter.” All eyes are on China’s e-commerce giants as they brace for stiff competition – in overseas battles as well as at home.