In a world where social and environmental credentials are increasingly important one might expect fast fashion to be in decline, but it would seem that many buyers still prize a bargain above all else. After all, when you can buy a Prada re-edition dupe for under £7.50 or a Louis Vuitton lookalike for less than the cost of a latte, it’s hard to say no. Shein and Temu are getting a lot of attention at the moment, and it isn’t just for low-priced fast fashion. Their business model relies on algorithms that directly match consumer demand to dispersed production from a collection of factories across China, which works whether you’re seeking storage solutions for your home or a creative costume for your cat. Almost everything can be purchased on these retail platforms, and although ordering goods from China is certainly nothing new, American and European consumers would historically order through globally recognized brand names, with the majority of the profits going to those brands rather than the manufacturers. With an estimated net worth of $1.53 billion, Temu now tops the shopping charts on both iOS and Google Play – so should Amazon be concerned? Moneyzine.com investigates…
Temu and Shein Both Show Dramatic Growth in the Past Two Years
Shein initially launched as a portal to buy wedding dresses, before branching out into general womenswear in the early 2010s. By 2015, it covered all types of fashion and now leads the market, churning out fast fashion in a way that puts the British high-street to shame. On a typical day, Shein adds 2,000 new items to its store, producing thousands of items to match the trends of the week. In the early days, Shein managed to draw in manufacturers by simply paying on time. Back then there was a high rate of unpaid or late-paid manufacturers in the Chinese manufacturing industry and Shein quickly garnered a reputation for its reliability and punctuality. This strategy paid off and by 2019 it was worth an estimated $5 billion. After entering the US and European markets the company saw its valuation skyrocket, hitting a phenomenal $100 billion in 2022. Nowadays the company is valued at a more modest $68 billion – the reason: its new competitor, Temu.
Temu launched in the United States in 2022 and in selected European countries in 2023. By May 2023, Temu surpassed Shein’s 74.7 million active users worldwide, with 100 million active users from the United States alone. Temu’s gross merchandise volume surged from $3 million in September 2022 to $400 million in April 2023, and is predicted to reach $1 billion monthly GMV by the end of the year.
Both Shein and Temu are Overtaking Fast Fashion Companies in the United States
When looking at data from Google Trends, Shein has surpassed ASOS, H&M and Zara in terms of search volume every week since January 2020. Temu first made an appearance in the search volumes in September 2022, and by November 2022 it had already overtaken ASOS. It then went on to overtake H&M in January 2023 and Zara in March 2023.
The greatest interest for Shein comes from Mississippi, where Shein takes 70% of the volume for searches of these five terms. In comparison, Zara’s largest share is just 35%, which comes from the business-savvy District of Columbia. Temu is slowly gaining traction with its largest share being 17% from West Virginia.
People aren’t just searching for Shein out of interest: a look at the market share of the leading fast fashion companies between March 2020 and March 2022 shows that Shein went from owning approximately 18% of the market to 40% of the market in this short two year window. This increase in market share was gained at the expense of nearly all the other fast fashion companies in the United States, bar Zara. Most notably, H&M’s market share in the United States decreased by 10%.
While this is no mean feat, even more impressive is the fact that Shein was the second fastest growing ecommerce website in the world in 2022, and the only fashion company to crack this list.
Could Shein Take Over from Amazon?
With Shein boasting the title of the second fastest growing ecommerce website in the world and ranking as the second largest online retailer in the Asia Database of Digital Commerce 360, Amazon has every right to be concerned. Shein hopes to expand its marketplace and reach more US consumers, and one of its key strategies is to recruit more third-party sellers to complement its offerings. In a bid to achieve this goal, Shein has begun to offer incentives to Amazon sellers if they migrate to the new marketplace. The perks include a three month window with no commissions or advertising charges, and were offered to sellers with at least $2 million in annual sales.
Like Amazon, Shein sells its own products and operates in a marketplace with other sellers. Both companies also have similar offerings in terms of the products they sell, but while Amazon’s top selling category is home and kitchen (32%), covering everything from air purifiers to cleaning supplies, Shein’s top selling product category is fashion.
Shein and Temu Top the List of Shopping Apps
While Amazon tops the market when it comes to ecommerce, both Shein and Temu overtake the giant when it comes to download figures for their apps on iOS.
As of September 2023, Temu has topped the list of the most popular mobile apps on ios for retail, despite only being launched a year earlier in September 2022. Experts attribute the app’s popularity to the extraordinarily low prices on the platform. Shein takes the second position, and in September 2022 its app had 65 million users worldwide.
If we look at the figures for Android, the picture is even more concerning for Amazon, as while Temu and Shein still top the list, the US-based giant is overtaken by yet another competitor: the Walmart app.
With 197 million people using the Amazon app each month, it certainly isn’t lagging behind its Chinese competitors and it owes much of its popularity to its fast and free shipping, which 80% of customers cite as their primary reason for buying from Amazon. By comparison, Shein and Temu both have the disadvantage of having their goods located in China, leading to significantly longer delivery times.
The average age of an Amazon customer is 36-43 for both male and female users, but customers in this age range only spend an average of 93.6 hours each month using mobile apps. This is less than the 102.4 hours that 25-36 year olds spend on apps, and much less than the 112.6 hours spent by the largest age group, the 18-24 year olds. Apps are certainly big business and 47.22% of US consumers will end up using retail store apps at least once a day.
Retail map statistics show that an average user will view 5.7 products on a browser, but 22 on an app, and while only 13% of customers add a product to their cart on a browser, 24% will begin adding items when using an app. Inevitably, the statistics show that 44% of users will make purchases on a browser, compared to 54% on a retail app.
So should Amazon be worried?
“In many ways, Shein and Temu are more than just retail sites. They use advanced data and software that matches consumer demand to the capabilities of particular members of its manufacturing network. At the same time they monitor manufacturing performance as closely as they monitor customer preferences. This is a game-changer, and unlike their competitors they have the business links in China to make it happen”.Jonathan Merry, Business expert at Moneyzine.com
While it wouldn’t be hard for an e-commerce giant like Amazon to replicate the model, the real question is whether Amazon has burnt too many bridges with Chinese businesses. Back in 2013, it was Amazon that initially began recruiting Chinese companies to sell on its marketplace. However, the relationship quickly turned sour when customer complaints about counterfeits and unsafe products threatened to ruin Amazon’s reputation. Amazon banned many Chinese sellers, while others were left deeply unhappy with Amazon’s demands that they abide by an ever-shifting set of policies, and pay hefty fees for warehousing.
While many would credit Amazon as the pioneer that first created real demand for cheap online shopping, its lifeblood was always the Chinese manufacturing and supply chain, and there can be no doubt that Shein and Temu are coming to the market with a better understanding of how that works. We at Moneyzine think that a little competition can only be a good thing, both for consumers and for innovation, and are intrigued to see how this will play out over the next few years.
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