Its Chinese parent company – PDD Holdings – which owns the cross-border online shopping platform Temu – recently announced a more than 96% plunge in profits. This drop represents a painful start to the year for the e-commerce behemoth. In Q1 2023, PDD Holdings saw an equally stark plunge in its profits by almost half. Their profits plummeted down to 14.74 billion yuan, roughly equivalent to $2.05 billion or £1.5 billion. This sharp decline is indicative of larger economic hardships as the company weathers a challenging market environment and changing trade dynamics.
One inaccurate line in the Q3 report announced last week triggered a $27 billion plunge in PDD Holdings’ share price. On Tuesday, US-listed shares fell more than a third. Analysts cite a number of reasons behind this downturn. Fierce competition from competitors such as Alibaba and JD.com, compounded by a slowdown in Chinese consumer spending, is a huge factor. The ongoing price war among these e-commerce platforms places additional pressure on PDD Holdings to maintain market share while dealing with diminishing profit margins.
The company’s troubles have been compounded by the Trump administration’s changes to U.S. trade policy. The Trump administration’s decision to end the “de minimis” exemption, which previously allowed parcels valued under $800 (or $593) to enter the U.S. without incurring import duties, has significantly impacted PDD Holdings’ ability to compete effectively in the American market. Consequently, the company incurs growing operating losses and is at a significant competitive disadvantage to its domestic competitors.
PDD Holdings is breaking ground in a convoluted ecosystem marked with shifting consumer trends and regulatory changes. Yet the firm has been buffeted with major headwinds, particularly in its domestic market of China. Economic growth in that region has faltered, leading to less consumer spending. This downturn has forced PDD Holdings to reassess its pricing strategies and operational approaches to remain viable amidst fierce competition.