Alibaba Set to Lose E-Commerce Crown to Startup PDD in China
(Bloomberg) — China’s e-commerce landscape is set for a major shift as Alibaba Group Holding Ltd. is on track to lose its position as the country’s most valuable e-commerce firm to eight-year-old upstart PDD. This would mark a significant moment for an internet industry that Jack Ma’s iconic firm had dominated for more than a decade.
Alibaba slid as much as 1.4% in Hong Kong, putting its market value at about HK$1.46 trillion ($187 billion) and on track to close below US-listed PDD Holdings Inc.’s $188.3 billion, according to Bloomberg calculations. PDD, best known for its hit US shopping app Temu and domestic bargains trailblazer Pinduoduo, closed nearly 2% higher in New York on Wednesday.
The unprecedented shift reflects the turmoil that has engulfed Alibaba after Beijing targeted the company and its once-outspoken co-founder in 2020, kicking off a sweeping crackdown on the powerful tech sector. It also signals the rise of a new generation of disruptors like PDD and ByteDance Ltd. in social media and e-commerce.
Billionaire co-founder Jack Ma stunned employees on Wednesday when he took to an internal forum to praise PDD and exhort his company’s 220,000-plus staff to “correct course” and retake the momentum. This call to arms, coming after three years of largely staying in the background, underscored the gravity of the situation.
“On hindsight, you can say that Alibaba was resting on its laurels given they had so much of a headstart but they didn’t execute or innovate as fast,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “When anti-monopoly came up and they couldn’t use their size to compel merchants to their platforms, they were suddenly caught flat-footed.”
Alibaba, once China’s best candidate to become a trillion-dollar company, is now trading around its lowest this year, at a fraction of its peak in 2020. The company is navigating turbulence both internally and externally, as a weaker-than-anticipated Chinese economic recovery and PDD undermine its once-dominant online retail business.
PDD has captivated investors with a combination of stunning growth and aggressive global expansion. The market has chosen to overlook rising marketing costs, which have pressured margins.
This week, the company founded by billionaire Colin Huang surged 18% after reporting a stronger-than-anticipated doubling in revenue, driven by the success of Temu as well as inroads at home.
PDD’s growth far outpaced Alibaba’s, underscoring how it used promotions to woo bargain-seeking consumers at a time of economic uncertainty. During the just-concluded Singles’ Day shopping festival, PDD likely racked up 20% growth in transactions versus its rivals’ single-digit rises, Goldman Sachs estimated.
In contrast, Alibaba first explored overseas markets with AliExpress and then later international subsidiaries such as Lazada and Trendyol, but the Chinese business remains by far its biggest revenue contributor.
“One can argue that Alibaba had its chance and didn’t take it,” Ling said. “But in recent quarters, actually Alibaba’s international business has been growing very fast as well so I think they’re stepping up efforts there.”
The e-commerce landscape in China is in the midst of a major shift, with PDD on the rise and Alibaba facing new challenges as it navigates internal and external upheaval.
(Updates with second chart)
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