Amazon's Recent Strategy Meeting
Mentioned More Often Than Walmart and Target
Ultra-Low Price Strategy Temu and Shein
Capturing Americans Struggling with High Inflation
Amazon User Decline
Considering Countermeasures
"Temu and Shein are threatening Amazon's dominance in online shopping."
According to the Wall Street Journal (WSJ) on the 21st (local time), citing sources familiar with the matter, Chinese companies Temu and Shein have been mentioned more frequently than U.S. retail giants Walmart and Target at recent strategy meetings of Amazon, the world's largest e-commerce company. This indicates that Chinese firms are shaking up the U.S. e-commerce market, causing even the dominant Amazon to feel a sense of crisis.
What Makes Temu and Shein So Popular in the U.S.?
Temu and Shein are companies that adopt an exceptionally low-price strategy. Temu is a subsidiary of China's Pinduoduo Holdings and promotes the slogan "Shop like a millionaire." Shein, founded in Nanjing, China, sells ultra-low-priced clothing and accessories ranging from $10 to $20. They are said to have captivated Americans struggling with inflation after COVID-19.
Both companies also spend huge amounts on advertising. Last year, Temu spent $2 billion on advertising on Meta platforms, becoming Meta's largest advertiser. Shein ran over 7,000 ads on Meta last year.
According to global market research firm Sensor Tower, Temu, which entered the U.S. market in September 2022, had 51.4 million monthly active users (MAU) in the U.S. as of January. Their performance has also surged. Pinduoduo Holdings, listed on Nasdaq, reported revenue of 89 billion yuan (approximately 16.4 trillion KRW) for October to December last year, a 123% increase, exceeding market expectations of 75.9 billion yuan. Net profit during the same period rose 146% to 23.28 billion yuan. During the same period, Shein's users increased 24% from 20.9 million to 26 million. Meanwhile, Amazon's users shrank 4% from 69.6 million to 67 million, suggesting that Temu and Shein have absorbed Amazon users.
Is It a Real Threat? Amazon Says "Measures Needed"
Amazon is struggling to devise countermeasures against the expanding influence of Chinese online platforms like Temu and Shein. It is reported that Amazon plans to build barriers against Chinese e-commerce through its massive logistics centers in the U.S. and its own streaming platform, Prime Video. They are also increasing the number of electronic products eligible for same-day delivery and plan to launch promotional campaigns emphasizing reliability and delivery speed. However, an Amazon representative told WSJ, "While it is true that the company pays attention to competitors, we obsess over customers above all else."
There are also views that if Temu and Shein establish logistics warehouses in the U.S. in earnest, they could pose an existential threat to Amazon. Amazon's core strengths are efficient delivery and easy returns. Amazon announced that over 4 billion items shipped in the U.S. last year arrived on the same day or the next day. However, Temu and Shein ship products from mainland China, so delivery can take up to about 30 days if the shipping period is long.
Because of this, the Chinese e-commerce industry analyzes that "if the disadvantage of long delivery times is compensated for, greater profitability can be achieved in the U.S. market."
Domestic U.S. E-commerce Struggles
With the rise of Chinese e-commerce, small and medium-sized domestic e-commerce companies such as Wish and Etsy are reportedly struggling. TikTok, a Chinese short-form platform facing calls for a ban in the U.S., has also been conducting promotional activities targeting users looking for discounted products since last year. TikTok has about 170 million users in the U.S. There are concerns among U.S. e-commerce companies like Amazon that Temu could recruit Amazon's Chinese sellers within the U.S. market.
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