China’s PDD Holdings is the latest company feeling the effects of the country’s COVID recovery.
On Monday (March 20), the eCommerce firm released quarterly and full-year earnings showing its revenues increasing, driven primarily by online marketing and transaction services.
However, PDD — which owns shopping platforms Pinduoduo and Temu – said that increase was offset somewhat by drops in merchandise sales, down 29% for the company’s fourth quarter and 97% for the year.
As PYMNTS noted earlier this month, consumer spending in China hasn’t surged the way many anticipated following the relaxation of the country’s pandemic restrictions.
Recent comments from the heads of eCommerce companies Alibaba and JD.com indicate consumer spending hasn’t bounced back from the downturn caused by COVID.
JD.com CEO and Executive Director Lei Xu said March 9 that China’s recovery so far is “imbalanced” and that consumer spending may not ramp up until the second half of the year. And Alibaba CEO Daniel Zhang said in February that China’s consumer market has been lukewarm and that online sales remain slow.
The Chinese government said earlier this month that its economic growth target for the year is 5%. Officials later said they expect consumer consumption to be a key driver of growth, though it is still restrained.
Non-Chinese companies had also been banking on a return of consumer spending in the country. For example, McDonalds and Starbucks are both opening new locations in China in anticipation of renewed demand.
“I remain more confident than ever that we are still only in the early chapters of our growth story in China,” Starbucks Interim CEO Howard Schultz said last month.
Meanwhile, PDD’s earnings show a 56% increase in sales and marketing expenses, “mainly due to the increased spending in promotion and advertising activities,” the report said.
The company spent big on advertising recently, purchasing a pair of Super Bowl ads for Temu that aired during the game last month.
As PYMNTS wrote soon after the Super Bowl, Temu has been operating in the U.S. since last year as part of PDD’s first overseas expansion but garnered a national audience to promote its increasingly popular online shopping app.
The company is now considered major competition for fellow fast-fashion brand Shein, though its product-line up goes beyond clothing to include things like groceries, home and garden products and pet supplies.
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