Online retail’s killer apps might be made in China
This analysis is by Bloomberg Intelligence Analyst John Lee. It appeared first on the Bloomberg Terminal.
Chinese shopping apps are shaking up global retail. Five charts reveal how viral sensation discounter Temu and fast-fashion leader Shein have used a clever mix of bargain prices, a savvy social media strategy, and a gamified shopping experience to power breakneck sales growth. Their swift success signals how upstarts are redefining online retail.
Temu’s gamified shopping experience woos Gen Z
Temu, owned by China’s PDD Holdings, spent a reported $14 million to promote its “Shop like a Billionaire” ad during this year’s US Super Bowl, and sales have gone viral ever since. Temu’s 102 million US downloads so far this year puts it in the lead by far, and more than triple its nearest shopping-app competitor Shein, with 29 million. Media reports suggest Temu’s US marketing budget could easily top $1 billion, some of which is earmarked for games, where consumers can win cash for referring new users.
Temu leads price war in US
Temu’s price proposition may set the pace for US shoppers, based on an Oct. 11 comparison. Beach flip flops cost 67% more on Amazon than for similar products on Temu, according to senior analyst Catherine Lim. Temu has waived all shipping costs for orders on its platform without demanding a minimum spend, which is required by Shein and AliExpress. Temu’s buyers are free of obligation to join any memberships, such as Amazon’s Prime, to enjoy such perks.
Can Shein maintain its breakneck growth?
Shein’s 2022 gross merchandise value (GMV) may have soared to $30 billion, by some accounts. If accurate, that would make it the world’s No. 1 online fashion retailer, implying explosive 82% average annual GMV growth during 2019-22. If Shein can attain its aggressive, $80 billion GMV target by 2025 — implying 40% annual gains — its size could eclipse eBay, making it triple that of Zalando, Asos and Boohoo Group combined, according to our analyst, Tatiana Lisitsina.
Yet, sustaining such heady growth could be a tall order, especially as Temu and other copycats join the fray, and Gen-Z shoppers not being known for their brand loyalty. Higher cost of capital also raises urgency to generate profit. Shein’s latest funding round values it at $64 billion this year, down from a high of $100 billion in 2022.
Shein is the most popular brand on TikTok
Shein has successfully used social media, especially TikTok, for both marketing and also as a barometer of consumers’ preferences. On TikTok, the hashtag #shein has amassed more than 76 billion cumulative views, dwarfing 24 billion for #zara, 2 billion for #Asos and even bigger than #nike. Shein is less dominant on Instagram, where its 30 million followers are about half of Zara’s 61 million. This may reflect visibility on Instagram being driven by social influencers and the brands themselves, while TikTok visibility is primarily user-driven. TikTok users are also younger — similar to Shein’s devotees, and more video-oriented, giving Shein faster, and more organic growth, according to analyst Tatiana Lisitsina.
Amazon still enjoys a clear lead, for now
Shein’s 155 million monthly active users (MAUs) give it commanding stature among Chinese-owned apps, yet they amount to just 46% of Amazon’s. After commencing operations in September 2022, Temu’s MAU has shot up to 121 million, or 36% of Amazon’s.
