Temu-Owner PDD Sounds the Alarm: Profits Set To Take a Hit

Chinese company PDD Holdings Inc., owner of online shopping platform Temu, is worried about long-term profitability. With increased competition and a lack of skilled staff, PDD is beginning to see signs of struggle.

PDD executives see a possible downturn in company revenue and growth as rivals crowd the discount app marketplace and sales slow within its home country of China. PDD also blames inexperience and not enough specialized knowledge among employees for being unable to keep up with market changes.

“We will see greater financial impact as we will be disadvantaged against our competitors for some time to come,” said PDD Co-Chief Executive Officer Zhao Jiazhen, per Bloomberg. “Our team of staff is now limited by their past experience and suffers from lack of certain capabilities.”

In last quarter’s earnings report, PDD’s revenue reached 99.4 billion yuan ($13.7 billion), below analysts’ expectations of 102.7 billion yuan. Net income in the three-month period that ended Sept. 30 increased to 25 billion yuan, a jump of nearly 10 billion yuan from the same quarter last year.

PDD’s Temu Under Scrutiny

Temu burst onto the U.S. scene in 2022, and consumers looking for bargain-basement deals quickly signed up. Even massive online retailer Amazon took notice and has since responded with a discount shopping platform of its own.

However, Temu’s rapid acceptance and growth created speculation about PDD’s motives beyond profit. The speculation caught the eye of government regulators.

In September, the House Intelligence Committee raised concerns about the Temu app. The committee asked the FBI and Securities and Exchange Commission (SEC) to look into alleged activities related to the collection and possible abuse of consumer data.

With the potential of illegal items appearing on the app, Temu became the subject of an investigation by the European Union in October. According to regulators, Temu could be violating the Digital Services Act by allegedly not doing enough to stop the sales of illegitimate products.