According to Apptopia data shared with CNBC, Temu surpassed Instagram, WhatsApp, Snapchat and Shein on the US Apple App Store in just 17 days after its launch.
Stephanie Reynolds | AFP | Getty Images
Temu and Shein have made waves in the United States by riding an online marketing craze by offering consumers cheap goods from China, whether it’s a $3 pair of shoes or a $15 smartwatch.
The rise of discount shopping apps and China’s ByteDance’s TikTok Shop has created new competition for U.S. e-commerce companies Amazon, eBay and Essie.
Some industry experts say their growth is largely the result of a trade loophole, the so-called “de minimis exception,” which allows packages worth less than $800 shipped from China to enter the U.S. duty-free. David Zapolsky, Amazon’s top public policy executive, called it a “worrying trend” that should be further scrutinized by regulators around the world.
“I think there’s a problem with the extent to which some of their business models are subsidized,” Zapolski said in a recent interview with CNBC, where he spoke extensively about Chinese companies. “On a tactical level, for the sticker price that you can show There are some rules with sales prices but I don’t think they are always enforced.”
As Amazon joins forces with Meta, eBay and etsi. Investors will be watching for any comments and discussion of Temu and Shein’s impact on the e-commerce market advertising expenditurewhich has helped drive Meta’s recent expansion.
The tech earnings season got off to a bad start last week. Late Tuesday, letter reported a slight beat Revenue, but YouTube ad sales fell short of expectations, causing the stock to fall 5% on Wednesday. Tesla share Plunged 12% That day, it was the biggest drop since 2020 as profit missed expectations and auto revenue fell for the second straight quarter.
This week’s calendar also includes content from apple and Microsoftalso Intel, Qualcomm, clogged and break.
In its Thursday report, Amazon expects the company’s revenue to grow about 11% to $148.6 billion, according to LSEG. However, net profit is expected to rise 63% year-on-year, reflecting the company’s huge profits cost-cutting initiativesincluding eliminating tens of thousands of jobs.
While retail is no longer Amazon’s growth engine, it’s still the business that accounts for the majority of revenue. Currently, products sold by third-party sellers account for more than 60% of the products sold on the website. This is where Temu and Shein come into play, as merchants now have new ways to deliver products to American consumers. They are able to offer such low prices in part because they cut out the middleman by selling directly from factories in China to consumers around the world, and they use slower delivery methods.
Launched in the US in 2017, Shein has recently become a huge hit Google Facebook drives expansion through advertising. it is Reported valuation $66 billion. Temu, owner Pinduoduo Holdingsdebuting in the U.S. in 2022 and quickly investing billions in marketing, most notably through “Shop like a billionaire” A TV commercial airing during this year’s Super Bowl.
Faced with growing competition from Temu and Shein, Amazon continues to emphasize its delivery capabilities and focus on speed. CEO Andy Jassy noted in February that recent changes to the company’s delivery network have allowed Amazon to invest in faster delivery while expanding its range of affordable products, thereby turning a profit.
“We have a saying, it’s not hard to lower prices, it’s hard to afford to lower prices,” Jassy said on the company’s fourth-quarter earnings call. “The same goes for adding options. Adding lower (average selling price) options It’s not hard, it’s hard to offer a lower ASP option but still like the economy.”
On the economic advantages of Temu and Shein, officials in the U.S., EU and elsewhere In consideration Closing trade loopholes and increasing tariffs on cheaper goods could undermine the continued growth of these platforms.
On Monday, April 22, 2024, in New York, the United States, an Amazon contract worker pulled a cart of packages ready for delivery.
Angus Mordants | Bloomberg | Getty Images
A Temu spokesperson told CNBC in a statement that its growth does not rely on de minimis exemptions. The site’s prices are competitive because the company uses a factory-direct supply model that eliminates “many middlemen and their associated costs,” the representative said.
Shein did not respond to a request for comment.
Will the advertising boom continue?
Meta has other concerns as there are some signs that Temu may cut advertising spending. Barclays data from May noted that the number of new shoppers on Temu peaked in the third quarter of 2023 and has declined annually over the past two quarters. Temu may have been adjusting its marketing efforts to focus on existing shoppers rather than new in-app metrics, the company said.
“Meta investors have been concerned that outbound advertising growth in the U.S. from Chinese advertisers, particularly Temu, may be slowing, and data on new buyer activations suggests some of these concerns are justified and may be factored into the second quarter. guidance, which suggests a deceleration of advertising revenue growth of approximately 6 percentage points,” Barclays wrote in a note to clients in May. The firm recommends buying Meta stock.
In April, Meta released Weaker than expected forecast, causing the stock price to plummet. Finance chief Susan Li said on the earnings call that the company did not quantify China’s contribution in the quarter, but she said advertising revenue in the Asia-Pacific region increased 41% from the same period a year ago, making it the fastest growing region. and gaming are driving this trend.
A Meta spokesman declined to comment for this story.
eBay has dismissed suggestions that Chinese rivals are grabbing market share, with Chief Executive Jamie Iannone telling analysts in May that its differentiation options set the site apart. Meanwhile, Etsy Measures taken Emphasize the role of its sellers in sourcing or creating handicrafts.
Temu and Shein may only be a short-term phenomenon in the United States. 2020 Initial Public Offerings. Then users flee and the business flounderes. hope Be acquired Earlier this year, Singapore-based Qoo10 acquired the company for $173 million.
Bank of America analysts said in a May report that Amazon and Walmart It is the most “insulated” from Chinese competitors.
“Transit time data suggests Temu/TikTok/Shein are lagging industry leaders in shipping speeds, which could limit traction over time,” the analysts wrote. “We believe reduced shipping times will be an important factor in long-term competitiveness ”
Bank of America said Temu’s shipping time averages four to 22 days, while Shein’s items take three to 14 days to arrive. Amazon has increased shipping speeds from two days to one day or less.
According to statistics, Amazon is still the largest online retailer in the United States and is expected to account for about 40% of U.S. e-commerce sales this year. electronic marketer. However, although it is long touted As “America’s lowest-price retailer,” Amazon has shown it’s well aware of Temu and Shein’s growing popularity.
At a June event with Chinese sellers, Amazon say it plans The company will open a discount store selling mostly unbranded items priced under $20, according to a presentation viewed by CNBC.
The storefront will utilize the same minimum rules used by platforms like Temu and Shein, information Reports last month cited a person familiar with the company’s plans.
Amazon’s Zapolsky said the company has not yet taken a position on whether lawmakers should limit micro-volume shipments. No matter what, he said, Amazon has to win over consumers.
“We knew we had to compete with them,” Zapolsky said, “and give customers confidence that they were getting the best quality and best price from Amazon.”
