- Temu's profit increased by 144%
- The EU is tackling China's fast-growing e-business
- China's new strength - e-commerce
Temu's profit increased by 144%
Chinese e-commerce giant PDD Holdings, which owns the trading platform Temu, has reported a second consecutive quarter of net profit growth.
Temu, one of the fastest-growing mobile apps, only launched in the European Union (EU) in April 2023 and claims to attract an average of 75 million active users monthly in the 27-nation bloc.
The Shanghai-based firm said it earned $4.4 billion in the quarter ended June 30, a net profit that was up 144% from the same period last year.
For its part, rival Alibaba International's quarterly revenue in the three months to March rose 45% year-on-year to USD 3.8 billion.
Strong order and revenue growth on AliExpress, the company's international retail platform, drove the growth. This platform mainly trades on a cross-border model in many global markets [1].
During the quarter, the total number of orders on Alibaba International's marketplaces increased by 20% year-on-year. Alibaba International's annual revenue for the fiscal year increased 46% to a record $14.2 billion, accounting for more than 10% of Alibaba Group's total revenue.
In addition to AliExpress, its other major assets include Lazada, which focuses on South East Asia, and Trendyol, based in Turkey, which focuses on Europe and the Middle East.
China's Shein earned USD 32.5 billion in 2023, up 43% from USD 22.7 billion in 2022. It has an estimated 88.8 million active buyers, 17.3 million of whom live in the US.
Shein was downloaded 238 million times in 2023, making it the most-downloaded fashion app that year. It was recently valued at 68 billion dollars[2].
For comparison, let's look at Western e-commerce platforms. In the second quarter of 2024, Amazon's total net sales reached almost EUR 148 billion. In the second quarter of 2023, the company's net sales exceeded USD 134 billion. In the same quarter of 2023, the company's turnover was USD 1.5 billion.
eBay's annual net revenue was USD 10.1 billion in the last financial year under review, an increase from USD 9.8 billion previously.
The EU is tackling China's fast-growing e-business
European consumer groups have previously fiercely accused Chinese shopping platform Temu of using "manipulative techniques" to get consumers to spend more money, as well as breaking a key EU law on tech companies.
BEUC, a group of different European consumer organizations, has previously filed a complaint with the European Commission (EC), while 17 of its member organizations from other European countries, including France, Germany, and Spain, have also filed complaints with their national authorities.
The groups accuse the Temu platform of "failing to protect consumers and of using unlawful practices based on manipulation" - so-called "dark techniques" - and have demanded an investigation. They claim that Temu distorts and restricts consumers' ability to make "free and informed choices" when shopping online, in violation of EU law on online content - the so-called Digital Services Act (DSA).
Under the DSA, all digital platforms must immediately remove illegal content, make the use of consumer data more transparent, and ensure the safety of online shoppers.
Temu, which is owned by the Chinese company PDD Holdings, has been under pressure in Europe in previous years. German consumer groups have already warned the platform of similar problems. The platform is also under scrutiny in other parts of the world, such as Asia and the United States. South Korean regulators launched an investigation in April into allegations of misleading advertising and unfair practices against Temu.
The EU is also expected to add Temu to the list of designated "very large" digital platforms, which would make the company subject to stricter rules, such as the requirement to provide information on measures to mitigate risks regularly. Brussels has already added the Chinese e-commerce platform Shein to the list, which includes a total of 23 platforms, including AliExpress, Amazon, Facebook, Instagram, and YouTube.
As a reminder, the EC also investigated AliExpress to determine whether it violates EU rules on unsafe products and child protection.
The Commission was investigating whether the Chinese-owned online shop is properly managing the risk that unsafe products, such as counterfeit medicines and foodstuffs, may be sold on the platform.
It also scrutinized AliExpress's visitors' possibilities to report illegal material and complain, as well as to disable personal recommendations.
In addition, the transparency of the platform's algorithms and whether AliExpress checks its sellers thoroughly enough were investigated.
The EU has already launched investigations targeting Meta, TikTok and X (formerly Twitter), asking them to provide more information on their measures to prevent misinformation.
The platforms face fines of up to six percent of their global turnover for the infringements found.
China's new strength - e-commerce
China's e-commerce sector has recently reached a truly significant milestone, with more than 100 billion parcels delivered between January and August 2024. This achievement comes 71 days earlier than in 2023, reflecting the rapid growth of online shopping in the world's largest e-commerce market[3].
It is also reported that the average number of parcels delivered per person in China is 71.43 ordered online, with as many as 5,144 parcels delivered every second. The record parcel delivery rate reflects the increasing reliance on online shopping, a trend that has gained momentum in China over the last decade.
This is why China tops the ranking of e-commerce markets in terms of revenue not only in the West but also in China, with US$ 1.3 trillion a year. The United States is just behind with USD 1.1 trillion a year.
