Colin Huang Adds $4.5 Billion in Wealth as PDD Shares Surge
Comment of the Day

September 01 2023

Commentary by Eoin Treacy

Colin Huang Adds $4.5 Billion in Wealth as PDD Shares Surge

This article from Bloomberg may be of interest.

PDD in recent years has used promotions to grab market share from more established Chinese rivals including Alibaba Group Holding Ltd. and Inc. In an attempt to replicate that success abroad, it created Temu, which was introduced with much fanfare during this year’s Super Bowl.

Since it launched last year, Temu has exploded into one of the top US apps, targeting cash-strapped Americans with cheap unbranded products shipped directly from Guangzhou, China. In just seven months, the app has been downloaded 50 million times.

The roll-out hasn’t been without hiccups. Temu is burning through money and squeezing its suppliers in a bid to take on Inc. It’s also involved in lawsuits with rival Shein over antitrust matters.

Eoin Treacy's view

The question Temu is exploring is where the interchange between price and convenience resides. Amazon delivers convenience better than anyone else and charges a premium. Target, Wal-Mart, or Costco supply cheaper products, but nowhere near the same level of convenience. Temu supplies bargain basement prices that appear too good to be true. It does not have in-country fulfilment centres, so convenience is not measurable, and returns will inevitably be problematic.

PDD is breaking on the upside because consumers appear willing to wait for deliver if the price is undeniably cheap. With China/US trade restrictions focusing on technology widgets, the wider product space is likely to be unencumbered.
The UK’s ASOS is up against Shein in attempting to capture the online low price garment market. The share hit a new three-month high today, but it is very unclear how successfully the company can compete. Nevertheless, it has potentially priced in a lot of the bad news during the decline from 6000p to 450p.  

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