Pinduoduo’s Q3 earnings are a rare bright spot for China’s retail outlook

The news: Pinduoduo’s revenues grew by nearly two-thirds (65%) in Q3—far outpacing that of rivals JD.com and Alibaba, making the etailer a rare bright spot in China’s otherwise gloomy retail landscape.

• Revenues from marketing and other services generated the bulk of Pinduoduo’s revenues, growing 58% year-over-year (YoY) to $3.97 billion.
• The company’s non-GAAP operating profits rose 277% YoY to $1.73 billion.

Zooming in: Like Shein, Pinduoduo’s strategy is to connect farmers and manufacturers directly with consumers. This allows it to keep prices low and lets producers react quickly to changes in demand.

But like other China-based retailers, Pinduoduo is contending with softening demand from domestic consumers as Beijing’s zero-COVID measures—and now growing protests against those measures—depress spending.

• That’s why Pinduoduo is shifting gears to focus on cross-border sales with Temu, its discount ecommerce platform, as it tries to capitalize on US shoppers’ price sensitivity.
• Almost half (49%) of US online shoppers listed affordability as a top reason for buying products from international sellers, per a Global-e survey.
• So far, its efforts appear to be paying off: While Pinduoduo declined to give specifics about Temu’s performance during its latest earnings call, the app has consistently ranked highly on both the iOS and Android app stores since its launch in September.

The big takeaway: Pinduoduo may find itself unable to deliver on international expectations as protests against Beijing’s zero-COVID lockdowns roil factories and cities.

• Apple could face a shortfall of 6 million iPhones this year as workers at its Zhengzhou manufacturing facility revolt against food shortages and quarantine restrictions, per Bloomberg.

This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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