Alibaba Group Holding Limited
In November, Temu captured nearly 17% of the U.S. market share in discount stores, trailing Dollar General's 43% and Dollar Tree, Inc's
The rising popularity of Temu has significantly boosted PDD's revenue and stock performance, drawing commendation from Alibaba founder Jack Ma for PDD's strategic execution.
Morgan Stanley chose PDD as its top pick in China's e-commerce sector, citing its alignment with consumer price sensitivity. Additionally, Morgan Stanley removed Alibaba from its China and HK Focus List.
Recently, to PDD, an eight-year-old competitor, Alibaba lost its title as China's most valuable e-commerce company.
Launched in the U.S. in September 2022, Temu gained popularity through social media influencers, positioning itself as an affordable alternative to traditional stores.
Michael Maloof of Earnest Analytics notes that Temu's competitive pricing significantly threatens physical discount retailers.
The platform sells various items, including apparel and household goods, and will likely generate over $16 billion in revenue this year.
Michael Ashley Schulman from Running Point Capital Advisors highlights Temu's novelty and excitement as its advantages over conventional discount retail brands.
Meanwhile, U.S. dollar stores like Dollar General and Dollar Tree are facing operational challenges and a shift in consumer demand.
Dollar General has reduced its annual profit forecast three times this year due to changing shopper behavior.
Both Dollar General and Dollar Tree have seen their market shares decline, with Dollar General dropping from about 57% in January to 43% in November.
Economist Peter Earle attributes Temu's success partly to consumer fatigue with high prices and inflation.
Temu, leveraging a network of China-based manufacturers, offers a direct-to-consumer model, benefiting from a trade exemption allowing duty-free entry of shipments under $800 into the U.S. Running Point's Schulman emphasizes Temu's effective use of gamification and rewards in online shopping.
Price Action: PDD shares traded higher by 0.42% at $142.59 premarket on the last check Thursday.
