Asia Tea Time - Cup 37 ☕

This week, I cover Pinduoduo, side hustles, and data hacking in Hong Kong.

Macro in Asia

Pinduoduo overtakes Alibaba as China’s biggest e-commerce company

While China’s overall consumer economy has remained subdued, Pinduoduo – also known as PDD – has bucked the trend.

Earlier this week, the upstart e-commerce company saw its market cap surpass that of Alibaba as the value of all of PDD’s shares hit over US$190 billion, overtaking Alibaba in the process. 

Why it’s happening

• Pinduoduo has been a standout success in a highly competitive online retail scene in China, with investors rewarding the company for its latest quarterly numbers that saw revenue growth skyrocket by 94% year-on-year.

• That made Alibaba’s revenue growth in its latest quarter, of just 9%, look like weak sauce.

• Pinduoduo posted third-quarter revenue of US$9.44 billion and, given its blowout numbers (with revenue from transactions seeing red-hot growth of 315%), its shares soared 18% in one day. 

Why it matters

• Alibaba has always been assumed to be the “real deal” when it comes to China’s e-commerce scene but Pinduoduo – an eight year-old company – is proving otherwise.

• Pinduoduo’s discount approach has found a loyal following in China and the eponymous app has found favour with China’s increasingly budget-conscious consumers.

What’s next?

• It will be interesting to see where the four largest Chinese consumer-facing firms go from here with regards to their business models, namely PDD, Meituan Dianping, Alibaba, and JD.com.

Tim’s Take 

Alibaba has been suffering for a while now as its revenue growth slows and the company has been caught in the cross hairs of Chinese anti-monopoly regulators.

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However, what’s really stood out for PDD has been the success of its international discount shopping app – Temu. The app was only launched in the US last year but quickly rose to the top of the app stores in the shopping category.

It’s now rapidly expanded to countries like Australia, New Zealand, France, Italy, Germany, Spain and the UK. 

Working off the same consumer appeal as Shein – the bargain-basement online clothing retailer from China – Temu offers budget prices but for all sorts of other products, from car accessories to power tools. 

Meanwhile, Alibaba has for years tried to break into international markets – via subsidiaries like Lazada – but with limited success.

The trouble at Alibaba, which has also abandoned plans to spin off certain businesses, has even seen its founder Jack Ma respond on an internal forum, praising PDD’s strategy and also encouraging Alibaba to “correct course”. It’s also perhaps a sign that the company has become complacent, resting on its laurels as the biggest e-commerce firm in China.

In the cutthroat world of Chinese e-commerce, no company (no matter how big or dominant) can be seen as a “sure thing”. Alibaba is certainly finding that out the hard way.

Tim's Money Tip of the Week

We all tend to have a day job that pays the bills and gives us the ability to have a career. However, that doesn’t mean we can’t have “hustles” on the side.

Better known as “side hustles”, in this time of increased inflation and generally higher living expenses, being creative about how we can earn extra income streams is always welcome.

That could range from freelance copywriting or design work, to online tutoring or even using your spare time to drive for one of the ride-hailing services.

With the internet at our fingertips, and work becoming a lot more global in nature, it’s also become a lot easier to find ways to make some extra cash. 

The ideal scenario would be to find something you enjoy or are passionate about and see if that can be nurtured and developed into a valid side hustle.    

Story of the Week

Reports in the press this week claimed that US-based executives of accounting giants Deloitte and KPMG have been advised not to bring their usual work phones on trips to Hong Kong.

With concerns about data hacks in China becoming more common, some cybersecurity experts are advising clients to treat the risk of being in Hong Kong as the same as Mainland China.

As you might expect, given the inconvenience, this is putting off executives from visiting Hong Kong. The city looks likely to be stuck in between the geopolitical crosswinds of the world’s two superpowers for a while yet.