Pinduoduo's Price Wars: E-commerce Giant Faces Tough Competition and Profit Pressures

PDD Holdings' revenue beat expectations but faced profit declines due to increased competition and investments. To boost domestic consumption, major e-commerce companies have resorted to price wars. Pinduoduo's international platform, Temu, is pivoting strategies to maintain competitiveness amidst challenges from global players like Amazon.

PDD Holdings, the parent company of China's e-commerce platform Pinduoduo and the international platform Temu, reported surpassing revenue expectations despite a drop in net profit due to heightened competition and strategic investments. The company's U.S.-listed shares rose by 1%, driven by its focus on bolstering spending to sustain growth.

Amid China's efforts to boost domestic consumption amid economic challenges, leading e-commerce players such as Pinduoduo, JD.com, and Alibaba have initiated aggressive pricing strategies, spurring a price war. Notably, PDD Holdings has been increasing investments in merchant support and U.S. presence through its subsidiary, Temu, impacting its profit margins.

Temu has shifted towards a 'fully-managed' model to exert greater control over product selection and pricing in the U.S. market. However, competition from Amazon remains intense, affecting profit stability even as PDD's revenue rose 7% to 103.98 billion yuan in the last quarter.

(With inputs from agencies.)