Temu owner Pinduoduo says first quarter net profit to triple, ET BrandEquity

Chinese e-commerce giant Pinduoduo announced on Wednesday that its first-quarter net profit more than tripled. Temu's parent company continues to strengthen its competitiveness in domestic and overseas markets.

Pinduoduo is one of China's leading online retailers, largely due to its success in reaching rural consumers with a diverse range of low-priced products.

Since its launch in September 2022, the company's overseas platform, Temu, has grown rapidly and become one of the most popular online shopping sites in the United States, boosted by a marketing strategy that featured multiple primetime Super Bowl advertisements.

Pinduoduo announced that its net profit for the first three months of 2024 was $3.88 billion, up 246% from the same period last year.

The Shanghai-based company added that first-quarter sales were about $11.2 billion, up 131% compared with the same period in 2023.

Temu entered the EU market last year, and its shopping app has averaged about 75 million monthly active users in 27 EU countries.

But the rise of the shopping app has been met with ups and downs. In March, promotional campaigns in the UK and France backfired due to data privacy concerns.

South Korean regulators launched an investigation into Tem in April over alleged misconduct including false advertising and poor product quality.

Earlier this month, European consumer rights groups accused the company of using manipulative sales tactics and lacking transparency about traders on its platform.

– A 'pivotal' year –

Despite the setback, Pinduoduo remains a modern competitor to established e-commerce giants such as Amazon in the US and Alibaba in China.

Within China, Pinduoduo has been increasingly successful with its low-cost products as consumers cut back on spending due to a slowing economy and high youth unemployment.

The company said in March that its annual profits would nearly double in 2023, the year it briefly surpassed Alibaba, the owner of Chinese e-commerce giant Taobao, in market capitalization for the first time.

In pre-market trading on the Nasdaq on Wednesday, Pinduoduo stock rose about 8%.

As of Tuesday, the company was valued at about $202 billion, significantly higher than Alibaba's $209 billion.

And Pinduoduo co-founder Chen Lei suggested there's still room to grow.

“Our global operations are still in the exploration stage and there is a lot of room for improvement,” he said.

Pinduoduo executive officer and co-CEO Zhao Jiazhen said this year will be a “pivotal year” to “deepen the implementation of our high-quality development strategy”.

“We will focus on improving the overall consumer experience, strengthening our supply chain capabilities and cultivating a healthy platform ecosystem.”