Temu is (almost) on the brink of crisis

Temu has already managed to establish itself in the West as the main competitor to Shein and Amazon, but in China, the e-commerce platform is struggling to gain traction. The shares of its parent company, PDD Holdings, have plummeted due to perceptions of low profitability in the Chinese market, caused by internal competition. The main competitor is Alibaba, which holds the lead in the B2B, C2C, and B2C sectors with platforms like Alibaba.com, Taobao, and Tmall. According to statements from PDD Holdings, the main internal issue concerns the staff, who, lacking experience, are unable to compete effectively with the e-commerce giant. Even PDD executives and leaders expect that Temu's growth will be much slower from now on than it was in the past twelve months, according to Bloomberg. Among the main reasons for this sluggish growth—unsurprisingly—is the consumer crisis in China, a factor for which PDD Holdings had already raised alarms during the second quarter, highlighting the slowdown in the Chinese economy and the uncertainties of the domestic and global market. Indeed, the platform reported revenues of 99.4 billion yuan (13.1 billion euros) in the fiscal quarter ending in September, compared to expert estimates of 102.8 billion yuan (13.5 billion euros).

Despite a shaky domestic market, Temu is still able to rely on the Western market. Or at least that seemed to be the case until a few weeks ago. Just last month, the European Union announced it would officially investigate the Chinese e-commerce platform for suspected illegal material sales, in violation of the Digital Services Act. At the same time, it remains unclear how the trade tensions between China and the United States will affect platform prices now that Trump is back in power. If Temu’s main advantage in the Western market were to be undermined, the e-commerce platform would likely lose traction and popularity among consumers. Citigroup analyst Alicia Yap has pointed out that there are uncertainties about potential tariff changes and increasing pushback from various countries against Temu's "cheap" prices. These same prices led to protests this summer by sellers outside PDD Holdings’ offices in southern China, accusing the group of exploiting sellers through its low-pricing strategies. Perhaps, all in all, Temu, rather than becoming a giant, seems to have the lifespan of a shooting star.