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Consumers in China are hunting for bargains when they spend, the latest earnings from online retailers show.

Chinese e-commerce giant Pinduoduo posted 94% growth in third-quarter revenue, far outpacing Alibaba‘s 9% growth during the same period.

Pinduoduo, known for its bargain-priced products, said Tuesday that third quarter revenue was the equivalent of $9.44 billion – beating revenue forecasts, according to LSEG.

Pinduoduo said revenue from transactions skyrocketed by 315% in the third quarter to nearly $4 billion.

Shares of Pinduoduo surged more than 18% in U.S. trading on Tuesday.

The company also owns Temu, the fast-growing global e-commerce company. Pinduoduo management said it was able to reach consumers in more than 40 countries but described its global business as “still in a very early stage,” according to a transcript accessed through FactSet. “This will be iterative process that will be challenging, but at the same time interesting.”

In October, JPMorgan estimated that despite losses, Temu this year will generate gross merchandise volume of 70 billion yuan ($957 million) — and more than double in 2024.

Launched in the U.S. in September last year, Temu was PDD’s first major push outside of China and the app quickly found success among budget-conscious consumers.

In just a few weeks, Temu rose to the top of app stores and subsequently expanded rapidly across countries such as Australia, New Zealand, France, Italy, Germany, the Netherlands, Spain, and the U.K.

Pinduoduo’s surging revenue contrasts with far slower growth in the third quarter for Chinese e-commerce giants Alibaba and JD.com, which tend to sell higher-priced items and remain industry heavyweights.

Alibaba reported 9% year-on-year growth in the third quarter to the equivalent of about $31 billion. However, Alibaba’s net income for the third quarter missed expectations.

JD missed third-quarter revenue estimates, according to LSEG data, despite net revenue rising 1.7% in the quarter from a year ago to the equivalent of $34 billion.

Budget-conscious consumers

In another sign that consumers in China are more cost-conscious, Meituan management said in an earnings call Tuesday that consumers in China “tend to be more cautious and prefer value for money selections.”

Food delivery giant Meituan said Tuesday its revenue rose by 22.1% to $10.81 billion in the third quarter from a year ago. Adjusted net profit rose 62.4% in the third quarter from a year ago.

Despite positive results, Meituan management warned of a slowdown in growth in its main food delivery business in the fourth quarter.

Meituan’s Hong Kong-listed shares tumbled 12% on Wednesday to their lowest since March 2020, according to LSEG data. Meituan was the biggest loser on the Hang Seng Index on Wednesday.

“There are several factors affecting the order volume growth. First, the impact from current macroenvironment order volume growth, especially in workplace scenarios. Second, this year’s weather is pretty warm in October and November,” said CFO Shao Hui Chen during the earnings call on Tuesday.

“So more people return to offline consumption as compared to last year, [which] negatively impact the deliveries’ order volume growth,” said Chen. “On financial outlook, we think Q4 revenue year-over-year growth for food delivery will be slightly lower than the Q3 growth rate.”

Analysts said China’s economy is recovering but it’s going to be a gradual one. China posted 4.9% growth in the July to September quarter compared to a year ago, performing better than economists‘ expectations of 4.6%.

“Consumers have started to spend more money, but they still maintain a cautious attitude when it comes to how they are spending the money. Nowadays the consumption growth is still way below the pre-Covid level,” Christine Peng, head of Greater China consumer sector at UBS, told CNBC in an earlier interview.

— CNBC’s Ryan Browne and Shreyashi Sanyal contributed to this report.

Correction: This story has been updated to accurately reflect that Pinduoduo released third quarter earnings on Tuesday.



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