How worried should Amazon be about Shein and Temu? | Mint
Dirt-cheap products and marketing splurges are catching clicks
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Chinese e-commerce firms Temu and Shein making waves in the American market.
- Temu, an offshoot of Pinduoduo, and Shein are spending heavily on digital ads to win over American shoppers.
- Temu was the most downloaded app in America, Britain, France, and Germany in 2022.
- Both companies offer low-priced items, with Temu selling products like electric toothbrushes and sunglasses for about $1 each.
- They keep costs low by dealing directly with Chinese factories, charging lower fees to merchants, and shipping products from warehouses in China.
- Temu is focused on market share rather than profit, while Shein is looking to raise more funds through an IPO.
- So far, Temu and Shein have only made small inroads into America's e-commerce market, with Amazon still holding a dominant share.
- Amazon is taking the threat seriously, cutting merchants' fees for clothing priced under $15 and mirroring its Chinese rivals' supply-chain services.
- Shein poses a bigger threat to fast-fashion labels, while Temu may compete with eBay or Etsy.
Challenges and Potential for Temu and Shein in the American Market
- Temu and Shein face competition from American incumbents and each other.
- TikTok Shop, a marketplace launched by TikTok, may pose a challenge to Temu and Shein.
- Geopolitics, such as alleged links to forced labor, may also hurt their prospects.
- Americans' willingness to shop at Temu may be waning, potentially due to the novelty wearing off.
- Increasing market share from zero to 1% is more difficult than raising it from 1% to 5% for new e-commerce firms.
- Once a brand is familiar, it becomes easier to sell customers more products and more expensive ones.
- Despite the challenges, Temu and Shein may have already overcome the hardest part of establishing themselves in America.
Temu and Shein's Expansion in the American E-commerce Market
- Temu and Shein are investing heavily in digital ads to attract American shoppers.
- Temu's app was the most downloaded in several countries in 2022.
- Both companies offer low-priced items and keep costs low by dealing directly with Chinese factories and charging lower fees to merchants.
- Temu focuses on market share while Shein aims to raise funds through an IPO.
- Amazon remains the dominant player in America's e-commerce market but is taking the threat from Temu and Shein seriously.