The Chinese eCommerce platform Temu is taking the digital marketplace by storm. Launched in the autumn of 2022, the app has been downloaded an astonishing 40.5 million times globally within a single year. Similarly, the fast fashion retailer SHEIN has experienced explosive growth, with 208 million worldwide app downloads between January 1 and October 10, 2023.
The secret to their success lies partly in their extremely competitive pricing, which resonates with consumers amidst rising living costs and inflation. However, price alone does not tell the whole story. This article delves into the additional factors that have enabled Temu and SHEIN to disrupt the eCommerce landscape.
Temu’s Winning Formula: A Closer Look
Temu’s primary appeal is its incredibly low prices, with products sold at up to 90% less than other retailers, coupled with free shipping. The app employs unique strategies to drive sales, such as gamification, discovery-based shopping, and social shopping through group discounts, making the buying experience engaging and encouraging repeat visits.
Moreover, Temu’s thriving affiliate programs and aggressive marketing campaigns have fueled its exponential growth. The brand maintains a strong presence on YouTube, TikTok, and in-app advertisements, even investing $14 million in a Super Bowl ad.
The Power Behind Temu’s Triumph
Temu’s distinctive selling point is its discovery-based shopping approach. Upon opening the app, users are presented with a personalized, endless stream of product recommendations, incentivizing them to scroll for entertainment and increasing the likelihood of making a purchase. In-app games further enhance user engagement by offering rewards.
Social shopping and affiliate discounts motivate users to invite friends to the app, with buyers teaming up to purchase items and receive group discounts when certain thresholds are met.
Additionally, Temu employs an innovative reverse-manufacturing strategy, aligning product inventory with real-time customer demand. Initially producing small quantities, production is scaled up for popular items while less successful products are discontinued. This approach allows for rapid product launches while maintaining cost-effectiveness.
Temu’s Controversies
Temu has faced criticism on several fronts. Given the extremely low prices, concerns have been raised about the quality and durability of their products. Consequently, Temu has been criticized for poor sustainability practices and the potential waste generated by their products, raising environmental concerns.
Reports also suggest that Temu strictly controls its merchants, often forcing them to accept price cuts. Allegations of worker exploitation, including long working hours and low wages, have surfaced. Shockingly, a US government investigation found a “very high risk” of Temu selling garments made from forced labor.
SHEIN’s Approach: An Overview
SHEIN’s strategy closely resembles Temu’s in terms of pricing and rapid product launches. All their clothing is inexpensive and produced “on-demand,” with deep discounts and an array of coupons to encourage sales.
Influencer marketing plays a pivotal role in SHEIN’s strategy, collaborating with both micro-influencers and Western celebrities popular among younger audiences, such as Katy Perry and Rita Ora.
Targeting Gen Z, TikTok is a crucial platform for SHEIN. As the number one brand on the app, SHEIN drives users to their platform with a constant flow of coupons and discount codes.
The Driving Force Behind SHEIN’s Success
SHEIN’s influencer collaborations have been instrumental in precisely targeting a young, fashion-conscious audience, significantly contributing to its rapid growth.
On TikTok and YouTube, customers, fashion bloggers, and influencers create “unboxing” videos, showcasing the process of unpacking their clothes, trying them on, and discussing the incredible bargains they’ve found.
While SHEIN compensates celebrities for endorsements, smaller influencers receive free products regularly in exchange for unboxing videos. Some influencers also participate in a referral program, offering SHEIN discount codes to followers and earning a 10% to 20% commission on referral sales.
SHEIN’s Controversies
SHEIN has faced criticism on various issues, including accusations of poor and potentially unsafe working conditions for factory employees.
Like Temu, SHEIN is criticized for allegedly producing cheap, low-quality items, which not only disappoints customers but also raises sustainability concerns. Complaints have also arisen regarding the unrealistic beauty standards promoted in the brand’s advertising and a lack of cultural sensitivity.
Even their proven influencer strategy backfired when SHEIN invited several influencers on an all-expenses-paid “brand trip” to view their “innovation center” in China. The trip and participating influencers were heavily criticized and accused of “greenwashing.”
The Competitive Edge of SHEIN and Temu
Temu and SHEIN’s strategies share significant similarities, to the extent that it has led to a lawsuit. Analysts believe they may begin to cannibalize each other’s customer base. Both target Gen Z and have leveraged influencer marketing to position themselves as affordable, trendy, and exciting, with Temu incorporating gamification to heighten the shopper’s dopamine rush.
The Future of the Chinese eCommerce Giants
Temu and SHEIN have faced heavy criticism for producing vast quantities of low-cost, low-quality items that contribute to waste. Both brands should address the environmental and social impact of their extreme pricing strategies.
Temu, in particular, is burning through cash, investing over $1 billion in advertising in the US in 2023. Their strategy of offering incredibly cheap products with free shipping is costing them money on every order. While effective for short-term growth, this approach may not be sustainable in the long run.
Established Western brands can remain competitive by focusing on their unique strengths, such as quality, sustainability, and ethical practices, which are increasingly valued by consumers.
The success of Temu and SHEIN presents an opportunity for established brands to re-evaluate and reinforce their core values. By emphasizing these values and adapting to changing consumer needs, brands can effectively compete and set new standards in the eCommerce market, balancing profitability with social and environmental responsibility.
