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Investing.com -- Shares of PDD Holdings Inc (NASDAQ:PDD) climbed 3.8% as the company is employing a strategic shift in its business model for its online retail platform, Temu, according to Bloomberg News. Moving away from its initial strategy of selling inexpensive Chinese imports, Temu is now set to focus on goods provided by local American merchants exclusively.
The decision by PDD Holdings to transition to a "local fulfillment" model is expected to mitigate the impact of tariffs on its operations, potentially allowing the company to maintain competitive pricing for its American customers. This pivot aligns with the current retail environment where companies like Shein and Alibaba (NYSE:BABA) Group Holding Ltd. are facing challenges due to increased import taxes and the elimination of the de minimis tariff exemption for small parcels.
In recent years, Temu, similar to Shein Group Ltd., gained rapid popularity in the US market by offering a wide range of low-cost products. However, the rise in tariffs under the Trump administration, aimed at reducing the trade deficit with China and prompting a trade deal, led to increased prices for such e-commerce giants. By recruiting US-based merchants, Temu aims to avoid these tariffs and continue offering affordable prices to consumers.
The company’s move to local sourcing comes at a time when trade tensions and tariffs have forced many retailers to reconsider their supply chains and business strategies. For now, PDD Holdings’ proactive approach has been met with approval from investors, as evidenced by the uptick in its stock price following the announcement.
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