In a landmark development for China’s tech landscape, Alibaba Group faces a momentous shift as it is poised to lose its position as the country’s most valuable e-commerce firm to the eight-year-old upstart Pinduoduo (PDD Holdings), Bloomberg reported on Thursday.
As Alibaba’s market value dipped to about HK$1.46 trillion ($187 billion) in Hong Kong, PDD Holdings closed nearly 2 per cent higher in New York, reaching $188.3 billion. This shift marks a significant departure from the dominance that Jack Ma’s Alibaba has held over the Chinese internet industry for over a decade.
Jack Ma, Alibaba’s billionaire co-founder, took to an internal forum to acknowledge the rise of PDD and called on Alibaba’s vast workforce to “correct course” and regain momentum.
Ma’s rare public address underscores the gravity of the situation and the challenges Alibaba faces in the wake of Beijing’s 2020 crackdown on the tech sector. Bloomberg cited Vey-Sern Ling, Managing Director at Union Bancaire Privee, who commented on Alibaba’s situation, stating, “On hindsight, you can say that Alibaba was resting on its laurels given they had so much of a head start but they didn’t execute or innovate as fast.”
Alibaba, once considered China’s prime candidate to become a trillion-dollar company, now navigates a tumultuous period. Its stock is trading at its lowest point this year, signalling a stark contrast to its peak in 2020. The company is presently grappling with internal upheavals, including a proposed breakup plan and the reversal of the spinoff and listing of its $11 billion cloud arm.
Meanwhile, PDD has captured investor attention with impressive growth and aggressive global expansion, even as rising marketing costs pressure margins.
This week, PDD reported an 18 per cent surge in its stock following a doubling in revenue, propelled by the success of its hit shopping app, Temu. During the Singles’ Day shopping festival, PDD outpaced Alibaba with an estimated 20 per cent growth in transactions compared to its rivals’ single-digit rises, according to Goldman Sachs. PDD’s strategy, particularly with Temu, mirrors a disruptive force in global e-commerce, challenging Alibaba’s more traditional approach to overseas markets.
While PDD’s meteoric ascent has been driven by its aggressive promotions and disruptive strategies, Alibaba is not conceding defeat. “One can argue that Alibaba had its chance and didn’t take it, but in recent quarters, Alibaba’s international business has been growing very fast as well so I think they’re stepping up efforts there,” Bloomberg quote Ling as saying.
(With inputs from Bloomberg)
