Temu continues to expand its presence around the world, with a focus on the United States. Photo/123RF
opinion
It's been years since Alibaba founder Jack Ma left the Chinese e-commerce giant, but he can still move the stock price.
Ma's encouraging note to Alibaba boosted stock prices this week.
— has been declining since 2020 — by 6%. However, since Ma's departure, the situation in China's e-commerce sector has become increasingly complex.
Alibaba has been the undisputed leader for almost a decade. But Tem's owner, PDD Holdings, has shaken up the industry. PDD Holdings overtook Alibaba in December to become the most valuable domestic e-commerce group.
As Temu continues to expand its presence around the world, especially in the US market, regaining that position will be a difficult task.
A Congressional investigation released in 2023 found that e-commerce platform Temu and Chinese fast fashion group Shein send about 600,000 packages to the United States every day.
Global demand for products from these platforms is creating capacity shortages for airlines and carriers and increasing air freight costs.
By consolidating individual sellers in China and providing direct mail to customers around the world, Temu achieved global growth and gained the scale to compete with multinational corporations.
Temu's model of low operating costs and low spending on warehousing and inventory gives the company an advantage.
PDD stock has increased 70% in the past year.
By contrast, Alibaba's stock price has fallen by a quarter, even though the company has a number of promising business segments, including cloud and logistics. His second biggest rival in Temu, JD.com, is similarly no match. He has been slow to adapt to changing shopping trends. The company's stock price has fallen by a third over the same period.
Participating in PDD is not without risks. Under pressure from U.S. lawmakers, competitors are tightening rules for vendors on their platforms.
Mr Temu's Chinese roots mean investors cannot ignore the potential risks of broader geopolitical implications. Additionally, a loophole that exempts shipments to the US from import duties with a fair retail value of less than US$800 (NZ$1340) is a key part of Temu's success.
PDD's stock price reflects these risks. The company trades at just 14 times forward earnings, a steep discount to global competitors and less than half that of Amazon. But despite their modest valuations, Alibaba and JDCom remain laggards, trading at a multiple of around 9x.
There may be no competition from TikTok in the U.S., as TikTok and its shopping platform TikTok Shop are under regulatory scrutiny in the United States. Alibaba has delisted its Cainiao logistics unit, which investors had hoped would bring in fresh capital to counter PDD's rapid growth.
For now, the gap between PDD and other sectors is likely to widen.
Author: Rex Opinion
© financial times
