China's newest online shopping giant got its start as an online platform that offered "group buying" and connected farmers directly with urban consumers. Now Pinduoduo, which rebranded to PDD Holdings earlier this year, is worrying two of China's biggest e-commerce brands.
Richard Liu, the founder of JD.com, one of China's two major online shopping platforms, recently told staff in a post on the company's internal discussion board that that it was time for the company to be more proactive. "We need to change, or there’s no way out for our company," he wrote, according to Bloomberg.
Liu was responding to a complaint from a JD employee, listing off a number of problems with the company's operations. “I feel our brother has said it all too well,” he wrote. The billionaire tech founder told his employees not to "lie flat," referring to the Chinese slang of doing the bare minimum to get by. Liu partly blamed his own mismanagement for JD's crisis.
JD.com did not immediately respond to Fortune's request for comment.
Richard Liu stepped down as JD.com's CEO in April 2022, handing over the reins to the company's then-president Xu Lei. But Liu didn't keep a low profile for long. In December 2022, he reportedly berated e-commerce executives in an internal meeting, accusing many of withholding information from him. Then in May, Xu Lei stepped down as CEO after just a year in the job, replaced with then-CFO Sandy Xu Ran.
Liu's post echoes a similar call to action from his fellow tech founder, Alibaba's Jack Ma, who called for "change and reform" to the company on its internal forum a few weeks ago. Ma was responding to a post about PDD's most recent quarter, in which the Alibaba rival almost doubled its revenue.
What is PDD?
PDD Holdings is the owner of both Pinduoduo and Temu, the online shopping platform that's now surging in the U.S. e-commerce market. Temu officially launched in the U.S. in 2022, and quickly became the country's most downloaded shopping app, according to data from Similarweb and Sensor Tower. U.S. shoppers also spend almost twice as long on the Temu app compared to rivals like Amazon, according to Bloomberg citing data from Apptopia.
The platform is also taking market share from its fellow Chinese e-commerce platform Shein, which similarly sells low-priced items to American consumers. Temu overtook Shein in sales in May, and has since consolidated its lead, according to a Bloomberg calculation.
The company's success has now made its founder Colin Huang the third-richest person in China, according to the latest version of the Hurun China Rich List.
Alibaba and JD.com each generated about three times as much revenue as PDD in their most recent quarters. But investors are much more bullish on the e-commerce newcomer. Alibaba's shares have fallen by over 20% in 2023 thus far; JD.com's have fallen by over 55%. By comparison, PDD's shares have risen by over 60% so far this year, pushing its market cap ahead of Alibaba.
China's consumer landscape
China's economy may be starting to bounce back from an extended consumer slump for most of 2023. Retail sales in October surged by 7.6% year-on-year, a larger jump than the 5.5% year-on-year jump recorded the month prior.
However, even if Chinese consumers are spending again, Alibaba and JD.com are still struggling to bounce back from the COVID pandemic. In addition to competition from PDD, Chinese livestreaming platforms like Kuaishou and ByteDance's Douyin are taking a larger share of the e-commerce market.
Chinese consumers may be becoming more focused on value, due to the weaker economy. The consulting firm Bain said in a report before the mega-shopping festival of Singles’ Day that the underlying trend this year was a “flight to value” among consumers.
JD.com declined to give detailed sales figures after this year's Singles Day. Soon after, the company removed the head of JD Retail, its main revenue driver, with CEO Xu Ran taking direct control of the division.
