(Bloomberg) — After several moderately successful ventures in gaming and e-commerce, Colin Huang fell ill and retired. At one point, the young entrepreneur spent a year at home thinking about his next step.
Bloomberg’s Most Read
The former Google engineer eventually founded Pinduoduo, an e-commerce platform known for selling very cheap products with massive promotions, in 2015. He quickly rose through the ranks of the world’s richest people, with his net worth reaching a peak of US $71.5 billion at the start of 2021.
Like many of the so-called Covid billionaires, his fortune collapsed as quickly as it was created, falling by 87% in the space of about a year. Huang’s decline was especially sharp as the slowdown of the global pandemic coincided with China’s abrupt crackdown on the country’s private sector.
Then something surprising happened: Huang’s PDD Holdings Inc. staged a comeback. Not as big as before, but stable, with its expansion outside China under the Temu brand helping to counteract a persistently weak domestic economy.
As a result, Huang, now 44, has become the richest person in China, according to the Bloomberg Billionaires Index. With a fortune of US$48.6 billion, he replaces Zhong Shanshan, the country’s bottled water king, who has held the top spot since April 2021.
Huang’s remarkable rise has been fueled by changes in China’s buying habits after the country’s housing crisis turned into a prolonged slowdown. He is also the first technology mogul to top the wealth rankings in more than three years, after government pressure on private companies attracted rivals such as Jack Ma’s Alibaba Group Holding Ltd. employees.
“Ma and Jeff Bezos were corporate leaders in their day, but times have changed and Huang is finding great success with a different, less visible approach,” said Brock Silvers, managing director at private equity firm Kaiyuan Capital.
PDD representatives did not respond to requests for comment.
Math prodigy
Unlike Ma, the English teacher turned Alibaba founder, Huang represents a new generation of Chinese tech entrepreneurs who began their careers with global opportunities.
At age 12, his prodigious mathematical talent earned him a place at the elite Hangzhou School of Foreign Languages, where he was classmates with the children of China’s political and social elite. After earning a degree in computer science from Zhejiang University, he left China in 2002 to pursue a master’s degree at the University of Wisconsin.
Two years after graduating, he returned to help create Google China. He founded his first company in 2007, then sold it in 2010 to start a new one that helped companies promote themselves on sites like Alibaba’s Taobao or JD.com. When an ear infection caused him to retire in 2013, he came up with the idea to create Pinduoduo.
The PDD “is not about letting people in Shanghai feel like they are living a Parisian life, but about making sure people in Anhui have kitchen paper and fresh fruit,” Huang said in a 2018 interview with Caijing magazine. “The goal is not to be cheap, but to make users feel like they got a good deal.”
Temu time
Huang largely stayed out of the spotlight after stepping down as PDD’s chief executive in 2020 and leaving the board as chairman in 2021 as Beijing began cracking down on China’s tech giants. (He said he was pursuing personal interests by researching food and life sciences, according to a letter to shareholders.)
It was at this time that PDD – and its net worth – began to plummet.
But Temu, PDD’s offering outside of China, reinforced the company’s revenue and sustained its recovery. It shot to the top of US app stores when it launched in September 2022, targeting inflation-weary Americans with cheap, off-brand products shipped directly from China. PDD reported about 248 billion yuan ($35 billion) in revenue last year, a 90% jump from 2022.
“In this economic environment, obviously people are looking for great value for their money, people are looking for low prices,” said Neil Saunders, retail analyst at GlobalData Retail. “So this is a time to shine for value retailers like Temu.”
All of this, together with China’s abandonment of the Covid-Zero policy in December 2022, drove an increase in the PDD assessment. In November, the company overtook Alibaba for the first time to become China’s second-largest internet company and the two rivals have been tied ever since.
Hours of punishment
Still, the breakneck growth has drawn internal and external scrutiny. Even after an investigation into working conditions following the death of an employee in 2021, PDD continues to require employees to work from 11am to 11pm, six days a week, plus overtime. It’s a variation on the industry’s “996” culture, which companies like ByteDance Ltd. and Alibaba have moved away from following regulatory scrutiny from Beijing.
Temu’s ultra-cheap offerings have also sparked growing frustration among some merchants and third-party sellers, who feel the e-commerce giant is increasingly squeezing them for revenue. Things came to a head in a series of public rallies this summer, when, in one case, hundreds of small suppliers shouted slogans outside a Temu office in Guangzhou to protest what they called unfair sanctions the company is imposing.
Elsewhere, US small businesses have also noticed Temu’s rapid growth. The company is currently taking advantage of a trade loophole that allows tax-free shipments of up to $800 to the US by sending small packages from its warehouse in China to individual Americans. Lobbyists are pushing for the limit to be lowered to $10.
Even so, PDD engaged in aggressive promotional campaigns, including spending millions on a 30-second Super Bowl ad for Temu. It also has eye-catching banners on its Temu website, including but not limited to: “Shop like a billionaire”.
“Right now, Temu is all about growth,” Saunders said. “Attract people to the website, make them buy. So if they get more addicted, maybe they’ll start to be more tolerant if we raise the prices a little. So I think for Temu we are in an era of land grabbing.”
–With assistance from Kristine Owram.
Bloomberg Businessweek Most Read
©2024 Bloomberg LP
