Updates share movement

May 27 (Reuters) - Chinese e-commerce group PDD Holdings reported a sharp fall in its first-quarter profit and revenue that missed market estimates as lingering economic weakness dented demand at its domestic business, sending the company's shares down 10% on Wednesday.

Retailers in the world's second-largest economy have been struggling to attract consumers as a prolonged property crisis and concerns about jobs and wage growth have hammered spending power, crimping demand at companies such as PDD.

PDD's domestic discount marketplace, Pinduoduo, is also facing stiff competition from rivals JD.com 9618.HK and Alibaba 9988.HK as well as other off-price retailers such as ByteDance's Douyin, which have all rolled out steep discounts to lure customers.

PDD, which also operates the Temu e-commerce platform internationally, has been investing heavily in its supply chain network in a bid to improve delivery speeds and expand product categories, to attract more shoppers.

In March, PDD said it would invest 100 billion yuan ($14.8 billion) over the next three years to build a new self-operated brand, called Xinpinmu, integrating Pinduoduo's supply chain resources with Temu.

Those investments have driven up expenses at PDD, dragging down its net income attributable to ordinary shareholders 15% to 12.5 billion yuan in the quarter ended March 31.

PDD reported total revenue of 106.23 billion yuan in the quarter, falling short of analysts' average estimate of 109.33 billion yuan, according to data compiled by LSEG.

"As we head into the next decade of our journey, supply chain investments will be our core strategic priority ... We will commit significant resources to building the first-party brand business," PDD co-CEO Jiazhen Zhao said in a statement.

Temu, meanwhile, has emerged as a popular platform for shoppers to buy everything from shoes to homeware at low prices, capturing demand from lower-income households globally.

While growth remains strong in many of the markets that Temu operates in, the company's low-cost model of shipping cheap goods to customers directly from China is facing growing regulatory scrutiny.

Temu's model until now has relied on duty waivers for low-value parcels in many jurisdictions.

The U.S. scrapped the duty-free exemption on parcels worth less than $800 last year and the EU has agreed to end its duty-free allowance on parcels under 150 euros ($174.57) from July this year, raising questions about the feasibility of the current model.

($1 = 6.7812 Chinese yuan renminbi)