HONG KONG- Chinese e-commerce giants are looking to cash in on American shoppers.
Shares of Alibaba challenger Pinduoduo rose 15 percent after smashing earnings expectations. The $84 billion company’s march to foreign lands against worsening global political headwinds is a telling sign of a limited runway to grow at home.
Pinduoduo is doing exceptionally well chasing down its domestic rivals. Despite months of Covid lockdowns in its prosperous home city of Shanghai, revenue rose 36 percent year-on-year to 31.4 billion yuan, about $4.6 billion, in the three months to end June. Analysts forecast a mere 3 percent gain per Refinitiv. It puts the dismal performance of its peer group to shame. Most of the strength came from a 39 percent increase in charges on sellers for advertising and other services, underscoring the company’s ability to keep customers glued with ultra-cheap goods and playful gamification features. A slight delay in planned investments helped net profit surge an impressive 268 percent.
Boss Chen Lei is not content with the success. He’s setting his sights on the US to launch a cross-border e-commerce site next month, say Chinese media and Reuters. The aim is to emulate fast-fashion retailer Shein, the mysterious Zara challenger of Chinese origin that has perfected supply chains in the People’s Republic and gone on to excel overseas.
Pinduoduo confirmed it wants to expand internationally. The $260 billion Alibaba has tried to push into Western markets and Southeast Asia through AliExpress and Lazada. Its challenge to entrenched rivals, including Amazon.com, has had some lukewarm results.
International e-commerce was just 7 percent of Alibaba’s revenue in the most recent quarter.
The overseas push is being hatched as the US-China relationship is at a low with rising tensions over Taiwan. Pinduoduo is one of many companies that could face a delisting from New York if an audit deal between the two major economies agreed on Friday is not properly implemented. But Pinduoduo is a successful late entrant when it comes to disruption. In China, it targeted smaller cities ignored by established rivals.
There is a big prize waiting if it can repeat the trick abroad. China is home to the world’s largest e-commerce market but the United States is richer. E-commerce is 14 percent of total US retail sales, half the level than in China, and Americans on average spend roughly $4,000 online each year, double the amount of netizens in the People’s Republic, according to JPMorgan’s global e-commerce trends report.
With Beijing’s zero-Covid policy repeatedly hammering Chinese consumption and regulatory crackdowns an ongoing threat, Pinduoduo’s big American dream is a sign of the times. – Reuters
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