Temu: High Revenue Growth Not Sustainable Amid eCommerce Competition
The parent of Chinese eCommerce firm Temu is warning that revenue growth will eventually cool.
PDD Holdings released quarterly earnings Monday (Aug. 26) showing an 86% jump in revenue and a 156% increase in profits. But with these leaps came a note of caution from management.
“While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead,” PDD Chairman and CEO Lei Chen said in the release. “We are committed to transitioning toward high-quality development and fostering sustainable ecosystem. We will invest heavily in the platform’s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability.”
Jun Liu, the company’s vice president of finance, added in the release that PDD’s revenue growth rate slowed quarter over quarter.
“Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” she said in the release. “Profitability will also likely be impacted as we continue to invest resolutely.”
Company officials repeatedly stressed challenges facing PDD during a briefing with analysts, Bloomberg reported Monday.
“Competition is here to stay and is expected to intensify in our industry,” Chen said, per the report. “High revenue growth is not sustainable, and a downward trend in profitability is inevitable.”
As that report points out,
Temu faces competition from JD.com and Alibaba in China, and it has faced regulatory scrutiny in Europe.
The company has made a larger splash in the United States, going up against Amazon and Shein, another seller with ties to China.
In the spring, it was reported that Temu was looking beyond the U.S. for its business growth, which the company later dismissed, saying that while it was expanding into other countries, that does not mean it views the American market as less important.
Meanwhile, Temu’s battle against Shein took on a new dimension last week when the latter company sued the former, alleging that Temu encourages sellers to steal other brands’ designs and bars them from removing products from the platform, even in instances in which the merchant admits to infringement.
Temu responded by criticizing the “audacity” of Shein’s suit, noting that its competitor had faced a “mountain” of similar lawsuits accusing it of comparable allegations.
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