Move over, Ali. Tracing PDD’s rise to become China’s most valuable ecommerce firm
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Hello reader,
I still recall the hype around Alibaba’s (BABA, NYSE) 2014 IPO in the US, what was then the biggest public offering ever. With many believing that Alibaba would have a dominant share of the large and fast-growing Chinese ecommerce market, its share price skyrocketed.
This proved right for the next six years, and Alibaba’s shares peaked in October 2020.
Then everything changed. That month, founder Jack Ma spoke out against what he saw as backward Chinese financial regulators, who responded by halting the IPO of Ant Financial, its affiliated fintech platform.
More travails followed, as my colleague Peter traces in this week’s premium story, which tracks how Alibaba lost its crown as China’s most valuable ecommerce company to upstart PDD Holdings (PDD, NDAQ).
While PDD has certainly played the game astutely in recent years, much of the story is also about how Alibaba played a hand in its own decline.
However, don’t count it out just yet. The company’s Tmall and Taobao brands still command a sterling reputation in China, as Peter notes.
The competition between Alibaba and PDD also holds lessons for ecommerce companies in Southeast Asia, where the markets remain in a state of flux.
-- Simon
THE BIG STORY
PDD Holdings is now China’s most valuable ecommerce firm by market capitalization. But what’s behind this changing of the guard?
3 Trends to keep an eye on
Hot stocks, earnings reports, restructuring, pressure from activist investors, and more.
1?? BYD races past Tesla: Chinese EV manufacturer BYD (002594, SHE) sold 526,000 EVs in the fourth quarter of 2023, inching past US rival Tesla (TSLA, NDAQ), which delivered 484,000 vehicles in the period.
However, Tesla was still the top seller on an annual basis.
This milestone comes as both parties are cutting prices for their EVs in a fight for market share.
While BYD has secured bragging rights for now, in the long run, investors are more likely to care about profits rather than volume. After all, Apple (AAPL, NDAQ) didn’t become the world’s most valuable company by selling the most number of smartphones.
2?? TikTok’s American dream: TikTok is reportedly aiming to grow its US ecommerce business to US$17.5 billion in GMV this year.
Despite the Chinese social media giant’s response that these figures were “inaccurate,” it is likely to make a big splash in the US, where TikTok has over 100 million users.
领英推荐
TikTok Shop has demonstrated its ability to sell stuff to TikTok users in Southeast Asia, where it has forced Lazada and Sea Group’s (SE, NYSE) Shopee to increase investments to fight for market share.
Amazon (AMZN, NDAQ), the granddaddy of ecommerce players, should definitely pay attention to this latest upstart, even if, at US$477 billion, its GMV in the US is far larger than what TikTok is said to be eyeing.
3?? Barclays isn’t biting on the Apple: Analysts from Barclays (BARC, LN) have downgraded Apple’s stock?on concerns that demand for the latest iPhone will be lower than expected.
This contributed to a 3.6% fall in the company’s shares, wiping out US$107 billion in market value.
Apple has run into the law of large numbers: There are only so many people who can and want to buy an iPhone this year. With a market capitalization of nearly US$3 trillion and a P/E ratio of 30x, expectations for future outperformance are high, while not many things can move the needle significantly.
While the company is counting on its US$85 billion services business to drive future growth, this may be affected by US and EU regulatory decisions over the course of the year.
2 Eye-popping facts
Tech in Asia scours the internet to bring you head-turning numbers from the world of business.
The one you didn’t see coming
We spotlight the story that had everyone talking and social media buzzing during the past week.
Lazada layoffs ahead of potential IPO: Lazada has let go of an undisclosed number of its Singapore staff, which the company described as a step to “future-proof our business and people.”
This comes as parent firm Alibaba (BABA, NYSE) injected over US$1.8 billion?into the Southeast Asian ecommerce platform in 2023. This is also happening ahead of a potential IPO of Alibaba’s International Digital Commerce unit, of which Lazada comprises a significant chunk.
The cash injections and layoffs are a sign of just how competitive the ecommerce landscape in Southeast Asia is. With TikTok Shop tying up with Tokopedia in Indonesia and Shopee upping its sales and marketing spend, Lazada is having to run just to stay in the same place.
This round of layoffs will cut deep, with up to 30%?of staff to be let go.
Employees at the company are said to be “crying” and “baffled” by the move.
Not a great way to start the new year.
That’s it for this edition - we hope you liked it!
Happy investing and see you next week!
Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice.
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