As China’s lower-tier markets slow down, Pinduoduo’s e-commerce growth hits record low
- The firm’s fate is sometimes seen as an economic bellwether of China’s price-sensitive ‘sinking markets’
- The surge that Pinduoduo and rivals received at the onset of the pandemic has run its course, said one analyst
Pinduoduo, which last year briefly dethroned Alibaba Group Holding as China’s largest e-commerce platform by number of active buyers, reported just a 2.6 per cent revenue growth in fourth quarter last year, in a sign that consumer spending in the world’s second-largest economy is waning amid a broad economic slowdown and rigid Covid-19 control measures.
The Shanghai-based company, which leverages the social network of its consumers to promote online sales, is known for its competitive pricing, making it especially popular among China’s low-income groups. The seven-year-old firm’s quick rise has often been seen as a sign of the untapped potential of China’s “sinking markets” – small towns and rural areas where residents are more price-sensitive than those in tier-one cities such as Beijing and Shanghai.
Pinduoduo’s sluggish revenue growth came as China’s small business owners and gig economy workers, many belonging to China’s 200 million workers engaged in flexible work, bear the brunt of economic losses caused by extensive lockdowns.
The company, whose 42-year-old billionaire founder Colin Huang Zheng stepped down as chief executive in 2020, posted revenue of 27.2 billion yuan (US$4.26 billion) in the fourth quarter last year, its lowest ever year-on-year growth. In the same quarter, rival Alibaba, owner of the South China Morning Post, also registered its slowest ever revenue growth – a 10 per cent increase to 242.6 billion yuan.
“The surge that Pinduoduo and other e-commerce platforms received at the onset of the pandemic has run its course, with online shopping more normalised now,” said Mark Tanner, managing director of Shanghai-based marketing and research firm China Skinny.
Some analysts noted that Pinduoduo’s weaker growth was mainly caused by a drop in merchandise sales, which were introduced as “a temporary solution” to provide users with products that sellers on the platform could not provide. Total revenue in the fourth quarter, excluding that from merchandise sales, was 27.1 billion yuan, representing a year-on-year increase of 28 per cent.
Monthly active users of Pinduoduo rose 2 per cent to 733.4 million in the quarter ended December 31. Alibaba, by comparison, said it had 1.28 billion users by the end of last year, including 979 million in China.
The days of “70 per cent or 50 per cent revenue growth” are over for Pinduoduo, said Tam Tsz Wang, a Hong Kong-based analyst at DBS Bank. “But in the last few quarters, it achieved a net profit that we didn’t expect. Investors are also changing what they want to look at.”