Temu (#1) & Shein (#9): Winning on PRICE

Here’s the quick TLDR on both companies:

Temu is the U.S. offshoot of Chinese e-commerce giant Pinduoduo, and has been #1 on the app store since it’s launch in Sept 2022 with over 50M downloads. Temu offers steep discounts on products from 100+ categories (not just fashion!), mostly shipped directly from Chinese factories or warehouses. Unlike Amazon, it takes 8-25 business days for products to arrive, and that’s obviously not why customers love Temu. They’ve risen to fame because of their “Team Up, Price Down” social sharing strategy, encouraging users to share the app with friends in exchange for credit to buy products (for free) on Temu — like $200 in free stuff w/o ever having to share your credit card info 🤯

Shein is a Chinese-owned company that’s become the new face of fast fashion, valued at $100Bn last year** and worth more than H&M and Inditex (Zara parent co) combined at the time. Shein is beating incumbents by making items more quickly and being more digitally savvy with customers — #SheinHaul has 12.1Bn views on TikTok and has become a go-to favorite for price sensitive Gen Z consumers. Your favorite singer could be wearing a cute dress on-stage, and the next day it’ll pop up on Shein’s site and in advertisements or influencer posts on your IG or TikTok. Their strategy is online-first, but they’ve recently been doing pop ups across the U.S. (with 2-4 hour wait times to enter the store)!

**note, Shein is now valued closer to $66Bn after it’s most recent funding round.

The Implications

In this highly inflationary environment, it makes sense that consumers are turning to low-cost alternatives like Shein & Temu — paired with the fact that Gen Zers are just starting to enter their peak spending/earning years (max 26 years old) and are generally cost sensitive.

However, these cheap products come with a price — on the environment, on storefronts here in the U.S., and even the way we shop.

• Environmental & Labor Concerns: One study found that, together, Temu and Shein import 600,000 packages per day (!) to the U.S. that are under $800, thus avoiding tariffs and inspections, potentially hiding connections to forced labor. Both companies have gotten in trouble with the law when it comes to labor laws AND hate from consumers because of unsafe working conditions / damage being done to the environment (in producing 6.3 million tons of carbon dioxide a year in Shein’s case). This will likely be a continued trend with more boycotts & awareness around the harmful practices behind these companies.

• The Way We Buy: We may begin to see more Chinese-influence in the way we shop and the products themselves — like group-buying (similar to grocery platform Weee! in the U.S. or Pinduoduo in China) to get better deals, or products with Chinese characteristics like “a rice cooker you can control from your phone.”

• Reaction from Sellers: When you look at storefronts like Amazon that take more than 50% of revenues from sellers, you might see some sellers turn to other sales channels that’ll give them a bigger share of sales/profits considering platforms like Temu offer access directly to manufacturers.

• Cementing Social Sharing: Social media & influencer marketing — be it recommendations from close friends or mass sharing on socials — has driven both of these companies into the cultural stratosphere, translating to both sales and downloads.

Temu and Shein are constantly at odds with each other in the U.S., with multiple lawsuits aimed at each other for things like unlawful competitive practices and trademark infringement… but Temu seems to be coming out on top when it comes to users and the charts.

TikTok Shop: Winning with SELLERS

Back in May, I did a whole deep dive on TikTok Shop and the future of social commerce which you can read here, documenting the arrival of the feature allowing people to buy products from small businesses within the app.

There have been 2 major evolutions to this strategy (and $470Bn opportunity):

1. Creators taking a cut: I previously detailed the importance of this channel for small businesses, but creators/influencers are starting to become sales vehicles in-and-of themselves and take a cut of each purchase they generate. This creator made 3 videos about the viral Srythm NC95 Headphones (available on TikTok Shop) totaling 10M videos, and made thousands in affiliate revenue. As you see products go viral with views + sales, more and more creators get in on the action to review products for commission.

2. TikTok selling their own products: TikTok is testing a new feature called “Trendy Beat,” which enables TikTok to sell their own products and apparel supplied by Chinese manufacturers — putting them in direct competition with Temu and Shein.

TikTok’s biggest advantage continues to be the army of creators that are incentivized to create content with commissions + billions of built-in buyers already watching TikTok videos.

I’m a perfect example, having bought things like lipgloss, sneaker cleaner, and even custom-made marshmallows directly from videos on the app. And many of the videos I’m seeing are from companies and/or influencers pushing products (chamoy gushers pop up on my FYP like every day, as do freeze dried skittles).