Pinduoduo’s shares fell 15 per cent in early trading as the fast-growing Chinese ecommerce group reported disappointing revenue growth in the third quarter.
The Shanghai-based company said revenue grew 51 per cent year on year to Rmb21.5bn ($3.3bn) in the quarter ended September 30, but total sales came in below the level reported in the first and second quarter.
Pinduoduo’s “top-line growth missed [expectations] by a material margin”, said Robin Zhu, of Bernstein, noting the company had also spent far less than it had previously to attract users.
Additionally, Pinduoduo’s annual shopper count rose only 19 per cent year on year to 867m, its slowest pace of user growth since it listed publicly in 2018, suggesting the discount ecommerce app is running out of new users to sign up.
“Given our current scale, our user growth will inevitably be more moderate going forward,” warned Tony Ma, vice-president of finance.
Pinduoduo’s slowing growth comes after ecommerce leader Alibaba earlier this month warned of a slowdown in Chinese consumer spending as continuing regulatory tightening forces changes at the country’s largest tech companies.
Before Friday’s fall, Pinduoduo’s New York-listed shares were already down 62 per cent from their February high. Chief executive Chen Lei and two other executives moved to sell some company shares in what appeared to be their first-ever sales on September 27. Pinduoduo previously did not respond to questions on the sales.
Chen said Pinduoduo was shifting “away from the previous emphasis on sales and marketing in our first five years”, during which the company gave away billions in subsidies to attract users, to a new period focused on research and development.
Chen added that Pinduoduo would promote a new generation of young leaders into critical positions at the company within a year. It comes after founder Colin Zheng Huang exited his formal executive roles this spring.
Pinduoduo did report its second quarterly profit since listing, but Chen said the company was putting the Rmb1.6bn profit into its charitable agricultural initiative announced in August as Chinese companies rushed to meet Chinese president Xi Jinping’s calls for “common prosperity”.
“Looking forward, we plan to do more to contribute to society,” Chen added.
The ecommerce group has poured resources into building out its farm goods business, competing with other tech companies to ferry fruits and vegetables to Chinese consumers.
But these efforts have worried Chinese authorities who fear tech companies will displace jobs. Pinduoduo and other tech groups were fined by the market regulator over their use of subsidies earlier this year.
This month, the market regulator said tech groups’ grocery initiatives were destroying the development of the existing supply chain, disrupting normal prices and putting pressure on small merchant employment, “impacting societal stability”.
The regulator pledged to continue strengthening regulation of tech platforms.
Bernstein’s Zhu said that while community group buying space had become more compliant in recent months “the regulatory overhang doesn’t go away completely”.
Chen said the company had always “fully embraced and supported the [government’s] regulatory measures”.
Meanwhile, food delivery giant Meituan reported that its quarterly net loss had widened to Rmb10.1bn in the third quarter as the company continued to invest heavily in its own grocery and retail efforts.
The loss included a Rmb3.4bn fine from China’s antitrust regulator last month for abusing its market position.