Chinese e-commerce giant Pinduoduo announced its second-quarter financial report for the year ending June 30 on Monday (August 26, 2024). The company reported a revenue of 97.06 billion Chinese yuan (approximately 11.34 billion US dollars), an 86% increase compared to last year. Market expectations were set at 99.99 billion Chinese yuan. The quarter-on-quarter growth rate slowed to 11.8%, with a net profit of 32 billion Chinese yuan (4.4 billion US dollars), surpassing expectations of 27.5 billion Chinese yuan and marking a 156% increase from the same period last year. Pinduoduo’s stock price experienced a 12% drop in pre-market trading in New York on Monday.
According to the company’s CFO, Liu Jun, in the financial statement, revenue growth rate decelerated compared to the previous quarter. Looking to the future, he mentioned that income growth would inevitably face pressure due to intensified competition and external challenges. The company’s Chairman, Chen Lei, stated that with the increasing competition in the e-commerce industry, the company would sacrifice some profits for long-term healthy growth. Over the next year, they plan to waive 10 billion yuan in transaction fees for quality merchants.
Reported by Bloomberg on Monday, Pinduoduo has been heavily investing in its cross-border e-commerce platform, Temu, to drive global business and help lift the Chinese economy, which has been weighed down by a prolonged real estate slump and high youth unemployment rates. However, due to intensifying competition, company executives have been reserved about Temu’s performance.
The financial statement also mentioned a firm stance on combating low-quality merchants while actively supporting high-quality merchants. According to a report by Nikkei Asia, Pinduoduo’s second-quarter sales fell below expectations due to ongoing protests by merchants against Temu for alleged unfair fines and withheld payments.
On May 13, Temu merchants started protesting outside Temu’s operational headquarters in Guangzhou. On June 29, during a demonstration, over ten merchants forcibly entered the premises, forcing all Temu staff to leave. In July, around two hundred merchants gathered at Temu’s operating headquarters to protest unfair fines, believing the increasing fines were squeezing their profits. Merchants claimed that as of July 29, they estimated a total of approximately 138 million yuan in post-sales fines and reserved funds, affecting 407 merchants.
On Monday, over a hundred merchants gathered once again in front of Temu’s office, demanding refunds of fines and payment for long-withheld sales revenue. Some merchants told Nikkei Asia that Temu had intensified fines this year. Even without photo evidence, Temu was reported to charge merchants five times the price of problematic products as fines. Merchants expressed that the reasons for fines were generally vague, such as products not meeting expectations or being too big or too small.
Since its grand debut in the United States in September 2022, Temu swiftly became one of the most downloaded applications in the US, now being one of the fastest-growing global e-commerce platforms. It boasts over 200 million monthly active users worldwide. According to Goldman Sachs estimates, Temu’s sales exceeded 4 billion US dollars last year. It has been challenging established cross-border e-commerce giants like Shein from China and even American e-commerce giant Amazon in certain sectors.
However, starting this year, Temu’s growth rate of monthly active users in the US has slowed due to increasing regulatory pressure. The US and EU are scrutinizing allegations against Temu regarding forced labor, product safety issues, intellectual property infringement, tax loopholes, privacy breaches, among others.