Chinese apps TikTok, Temu and Shein take on Amazon in US in e-commerce push during holiday shopping season
- Pinduoduo has seen early success with its Temu app, which briefly topped download charts in November, as ByteDance launched a TikTok shopping feature in the US
- The companies are trying to follow the success of fast-fashion e-tailer Shein, but analysts say taking on Amazon on its home turf is an uphill battle
Chinese shopping apps are racing to achieve a common goal: acquiring more US consumers.
Shein faces new competition from Pinduoduo’s fast-growing new app
The US, already a notoriously competitive retail environment, is now the main battleground for these Chinese tech companies that see connections with Chinese factories as giving them an edge in the fight for American wallets.
“As Shein has demonstrated, Chinese companies are shaking the apple cart and challenging Amazon on their home turf,” said Mark Tanner, the managing director at Shanghai-based market research firm China Skinny.
“Their main advantage is lower cost structures, but they have also learnt the trade in the much more advanced Chinese market, which is ahead of the US in making e-commerce less transactional and more entertainment-focused.”
“When big platforms are full of merchants, some of us will choose small platforms, so we can get to the front of the queue,” he said. “Still, Chinese companies like Pinduoduo are not well-known enough in the US. They don’t have as much traffic as [Amazon].”
Temu’s launch and its surge in the US were well-timed for the holiday shopping season, which tends to take off right after the Thanksgiving holiday on Black Friday and Cyber Monday, on November 25 and 28 this year.
The shopping festivals saw spending this year reach US$9.12 billion and US$11.3 billion, respectively, up 2.3 per cent and 5.8 per cent from last year, according to Adobe Analytics.
Temu and Shein offered discounts of up to 90 per cent for some promoted items, including accessories like earrings priced less than US$1 dollar and earbuds that cost just a few dollars.
The deals were matched with perks like free shipping and additional discounts for specific categories or orders exceeding a certain amount. Shein offered 10 per cent off for orders of US$39 and above.
TikTok already had more than 136 million users in the US as of April, according to DataReportal. Inflation has also forced consumers to tighten their purse strings and look for greater deals, which is right up Pinduoduo’s alley.
However, cross-border e-commerce only accounted for 3.1 per cent of imports and 6.6 per cent of exports, suggesting greater opportunity for growth in this area.
In less developed markets that lack a dominant e-commerce platform, Pinduoduo could find greater untapped opportunities for Temu, according to analysts at Chinese market research firm EqualOcean. Yet the company chose to try first to replicate the success of Shein in the US, following a more tried-and-true approach.
Now the companies are locked in a fierce battle that spans the Pacific.
Temu has reportedly been poaching talent and suppliers from Shein, according to Chinese media. To make it easier for Shein employees to jump ship, Pinduoduo set up Temu’s office in Guangzhou, just two subway stations away from Shein headquarters.
A Shein employee told the Southern Weekly that Pinduoduo was offering salaries up to twice that of its rival. In response, Shein hid its corporate structure on its internal messaging platforms and replaced all Chinese names with English ones, making communication at the company less convenient, the employee told Southern Weekly.
A new corporate website also placed Temu ahead of the more widely used Pinduoduo platform, sparking speculation that the company will increase its bet on the newer platform.
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But the road to dominating the US market will be an uphill battle, according to analysts and industry insiders.
China Skinny’s Tanner said Chinese e-commerce players will be challenged by a “lack of familiarity with the market and nuances between China and the US – for which there are many, [such as] familiarity and habit, logistics and infrastructure, and data concerns with Chinese companies”.
George Gu, the founder of cross-border e-commerce company Newme, said that logistics costs threaten Chinese e-commerce players’ profitability, because it is very costly to “ship small orders by air”.
He cautioned that Temu is “doing this with very high logistics costs and advertising investments … [These logistic costs] won’t change much no matter if your business is big or small.”
“For now, we will stick to TikTok,” said Gu, who founded his company in November 2020 to catch a new wave of e-commerce on the platform. “But as time goes by, we will put our brand products on all channels.”
