Pinduoduo's Temu slowed significantly in the third quarter, and it rented Cainiao's Hong Kong eHub to improve infrastructure. | Exclusive

Text｜Li Xiaoxia

Editor｜Qiao Qian Yang Xuan

The overseas business of Pinduoduo, which has been growing rapidly, has started to slow down significantly.

In Pinduoduo's latest quarterly report, the transaction service revenue including Temu is 50 billion yuan, with the growth rate dropping from 234% in the previous quarter to 72%, and it is 3 billion lower than the market expectation. According to Dolphin Research, the main reason for not meeting the expectation is that Pinduoduo's main site has taken measures such as reducing technical service fees and return commission, which has reduced the commission income of the main site.

So, how did the overseas business Temu perform in the third quarter?

According to exclusive information obtained by 36Kr, the GMV of Temu in Q3 this year is around 13 - 14 billion US dollars, and the sequential growth rate has dropped to about 15% or even lower, while the sequential growth rate in the previous quarter was about 50%.

For Temu, the focus of this year is the semi-managed business. At the beginning of the year, Temu's sales target was 60 billion US dollars, and the semi-managed business was supposed to account for 1/3. This model has advantages that the fully managed model cannot compare with. For example, it can solve the problem of the richness limitation of small items that the fully managed model can only handle, which is helpful for the platform to achieve a larger volume; the platform no longer needs to bear the high cross-border logistics fulfillment costs, which is beneficial for reducing losses.

Of course, there is also a precaution for a potential risk at that time, whether the advantages such as tax exemption for fully managed packages can still be maintained. Now, with Trump taking office, the worry may become a reality.

In the past few months, Temu has concentrated all its efforts to promote the semi-managed business. The offline and online investment promotion activities of the semi-managed business have been carried out intensively, and the main target of the investment promotion is the big sellers of Amazon. The Information reported that in Shenzhen, Temu's investment promotion personnel even set up investment promotion booths in the corridors of Amazon sellers' office buildings to attract people on the spot. Because the semi-managed business requires merchants to have the ability to deliver goods overseas, Amazon merchants who have already developed a certain ability in logistics and warehousing have become the main targets for Temu to poach.

According to 36Kr, the proportion of semi-managed sales in the US region is about 30% at the highest. Behind this is that more than 1,000 employees (as of the end of 2023, the total number of Pinduoduo employees is 17,400) are all engaged in the semi-managed business investment promotion, and the natural traffic of the platform is almost inclined to semi-managed goods. Many merchants said that this has led to a significant reduction in traffic for the fully managed business.

From the perspective of investment promotion in the US region, after sparing no effort, the semi-managed business has begun to encounter bottlenecks. Almost all the Amazon sellers that can be recruited have been found in the past more than half a year, and some merchants who have already done the semi-managed business are also shrinking back. Some merchants lack experience and have difficulties in product selection and inventory preparation. In order to no longer bear the risk of product backlog, they have begun to close their stores. Another industry insider said that in November, there are signs of a decline in the semi-managed business in the US region.

In the European market, which is expected to be promising, the semi-managed business has not been very smooth from the beginning, and the investment promotion is difficult to advance. Europe accounts for about 25% of Amazon's total sales. In other words, there are not so many Amazon merchants for Temu to explore.

According to 36Kr, Temu has recently made some adjustments to its personnel, combining investment promotion and buyers. The investment promotion has narrowed from the previous full-category investment promotion for each group to only being responsible for a single category for each group. The overall structure is approaching that of the main site and Duoduo Maicai, and these changes are also conducive to achieving refined operations and maintaining existing merchants.

In addition, Temu has fully opened the registration for US sellers a few days ago, just in time for the Black Friday promotion. Previously, its recruitment of US sellers required a unique invitation code, and it hired US and European employees to contact local sellers to join the market. Temu also sent employees to Seattle in September to try to attract US merchants attending Amazon's annual seller conference.

Now, any US brand or individual seller can register for sales. The application process takes about 10 minutes, and the review is usually completed within one working day. This measure may be able to help the platform supplement a part of the product inventory.

In terms of the fully managed business, Temu is now establishing a preposition warehouse system to deal with the supply chain and customs clearance problems in the fully managed model. Merchants still prepare goods in the large warehouse in Guangdong, and then TEMU will directly allocate some inventory to the preposition warehouse based on the background data, and the goods will be directly shipped from the overseas warehouse after an order is placed.

According to 36Kr, the transportation capacity of Temu's fully managed business has always been a challenge, and the preposition warehouse may be able to solve part of the problem of insufficient transportation capacity. Insiders revealed that Temu initially used the method of bidding for transportation capacity in the market and choosing the lowest price, but problems occurred during the peak season, resulting in failure to fulfill the orders. "The sky-high price of chartered flights from China to the US during the peak season was created by Temu. A plane costs 10 million yuan for freight, which is 3 - 4 times the usual price." A logistics industry insider told 36Kr. Therefore, since this year, Temu has been supplementing the transportation capacity by cooperating with shipping companies to charter flights.

Also, according to exclusive information obtained by 36Kr, Temu will rent an entire floor in Cainiao Hong Kong Smart Logistics Hub (eHub) to use it as an export port for some air cargo. Insiders revealed that now the packages going from Hong Kong are basically transferred from the collection warehouses in the Greater Bay Area cities, and the port processing, transshipment, and distribution are completed in Hong Kong. "The eHub is only 500 meters away from the apron. It only takes more than ten minutes to send the goods to the plane. Hong Kong has sufficient flight density and route coverage, and this advantage is very important."

Amazon's counterattack is also continuing. In mid-November, Amazon's low-price store "Amazon Haul" to defend against TEMU has also been launched on Amazon recently, mainly featuring products under $20. Merchants only need to send the goods to Amazon's warehouse in China and then ship them overseas uniformly.

On the other hand, Temu is also trying to promote the POP model, that is, sellers sell goods through Temu while having greater independent management rights, similar to merchants opening stores on Pinduoduo and Taobao. However, merchants in Temu's fully managed and semi-managed models do not have this right.

In the past two years, Temu has always been presenting a story about the rapid expansion of Chinese enterprises going overseas. When the speed slows down, it may mean the end of the wild stage and the beginning of a new milestone.

Relevant personnel of Temu denied the above data and statements.