What: Chinese e-commerce giant PDD Holdings faces domestic market pressures as competitors Alibaba and JD.com outperform expectations, while regulatory challenges threaten Temu's global expansion.

Why it is important: This performance signals a critical shift in China's e-commerce landscape, where established players are successfully defending their market share through strategic investments and merchant retention, while cross-border expansion faces increasing regulatory scrutiny.

PDD Holdings, operator of Pinduoduo and Temu, has reported disappointing quarterly revenue of  YEN 110.61 billion, falling short of market expectations despite aggressive discounting and government stimulus measures. The company faces robust competition from industry leaders Alibaba and JD.com, who have both exceeded revenue forecasts. While Temu's international expansion has shown promise with its rock-bottom pricing strategy attracting cost-conscious shoppers in major markets, the platform faces significant challenges from potential changes to the US de minimis policy, which currently exempts imports under USD 800 from tariffs and customs procedures. The company's co-CEO Chen Lei acknowledged the accelerating changes in the external environment and fierce competition, announcing plans to explore new business models and innovative localised supply chain solutions. Despite these challenges, PDD's shares rose 2% in early trading, buoyed by better-than-expected adjusted profits of USD 2.75 per ADS, benefiting from favourable currency exchange rates and higher interest income.

IADS Notes: The challenges facing PDD Holdings mirror broader industry trends observed throughout 2024-2025. In March 2025, competitor JD.com reported substantial profits of USD 1.4 billion, while February 2025 saw significant regulatory pressure with Trump's elimination of the de minimis rule. The competitive landscape intensified as companies adapted their strategies, exemplified by Alibaba's January 2025 partnership with Shinsegae. The industry's regulatory challenges became evident when Temu faced suspension in Vietnam in December 2024, while established players like JD.com strengthened their position through strategic investments, including a USD 141 million commitment to digital transformation in September 2024.

Intense competition impacts Temu parent PDD Holdings’ revenues