PDD halts development of local services offering to avoid head-on competition with Meituan and Ele.me, report says

E-commerce giant PDD Holdings has halted work on its local life services offering, avoiding head-to-head rivalry with Meituan, Alibaba Group Holding and ByteDance, whose Douyin short video app has also dipped a toe into the sector.

PDD has “completely halted [development of] the local services business”, according to Chinese media outlet LatePost. PDD did not immediately respond to a request for comment.

PDD, whose market cap overtook Alibaba in November after the firm beat revenue estimates, had planned to launch the service – which facilitates in-store orders including hotel reservations and movie tickets – in February 2024 under its community group-buying unit Duoduo Maicai, LatePost reported. Alibaba owns the South China Morning Post.

PDD had leveraged Duoduo Maicai’s business development team of around 3,000 people to sign up bricks-and-mortar outlets, such as restaurants and tourist attractions, the report said.

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However, PDD’s management has not been completely satisfied with the performance of Duoduo Maicai, which was established in 2020 in the midst of the Covid-19 pandemic. It enables residents in a community to purchase groceries and other daily essentials in bulk, bringing prices down.

Although the unit has become an industry leader, it is not profitable due to low gross margins, according to the LatePost report, which cited a PDD executive. Duoduo Maicai is nevertheless expected to remain operational despite the halting of local life services, according to Chinese news portal Sina.

Chinese Big Tech firms including Meituan, Alibaba and TikTok owner ByteDance have jostled for supremacy in a local services market expected to be worth 35 trillion yuan (US$4.9 trillion) by 2025, according to estimates by market intelligence firm iResearch.

Meituan, which merged with restaurant review site Dianping and bike-sharing start-up Mobike, currently leads the sector with a range of food delivery, taxi-ride and hotel reservation services.

Abandoning the local services market comes as PDD continues to expand aggressively overseas with its Temu app, now available in the United States, Japan and several other markets. The budget shopping platform helped drive an almost doubling of PDD’s third-quarter revenue to 68.8 billion yuan.