Amazon’s New Challenge: Bargain Retailers Who Are Playing a Different Game
U.S. e-commerce giant weighing how to respond to growing threat from Shein and Temu, two online shopping competitors
By Sebastian Herreraand Shen Lu
Wall Street Journal
Sept. 21, 2023 11:00 pm ET
Amazon hasn’t moved to match prices on Temu despite the shopping platform’s growing popularity. PHOTO:STEPHANIE KEITH/BLOOMBERG NEWS
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The soaring popularity of shopping platforms Temu and Sheinamong U.S. consumers startled Amazon.com. The e-commerce juggernaut is figuring out how to respond.
While Amazon has for years contended with challenges from rivalssuch as Walmartand Target, Temu and Shein, both of which have Chinese roots, are tapping into demand for low-price items that aren’t delivered quickly.
Amazon hasn’t taken steps to match the prices of items on Temu, people familiar with the matter said, a rare strategy for a company that typically scours the internet with a variety of price-matching tools to ensure its site has some of the lowest prices online.
Inside the tech giant, executives have been weighing how to respond to the two competitors, the people said. Executives have seen there is a market for bargain items that take longer to arrive and have tried to figure out if they should make such offerings on their own site more discoverable and available.
Shein and Temu “aren’t going after two-day delivery or better customer service,” said Steve Tadelis, a former Amazon executive and economics professor at the University of California, Berkeley. “They seem to be hitting the lower end—cheap stuff that people are willing to wait for.”
Inflation-wary American customers have increasingly been willing to try out Temu and Shein. Since launching its U.S. services in September 2022, monthly unique visits from U.S. customers on Temu’s website and app, a measure for how often shoppers are visiting the service, grew by more than 10 times to about 70.5 million by March, according to estimates from analytics firm Comscore
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Since August 2021, Shein’s U.S. monthly unique visitors nearly doubled to roughly 41 million in March.
Amazon’s monthly unique visitors decreased to about 211 million in March from about 217.5 million in September 2022, Comscore estimated. Data firms Similarweband Sensor Tower measured similar web and app traffic trends during recent months to Temu, Shein and Amazon.
An Amazon spokeswoman said the number of customers across its website and apps has grown year-over-year. The company said independent studies have found its prices are frequently the lowest online among major U.S. retailers, and that it works to ensure the prices in its online store are as good or better than at competing retailers.
Reuterspreviously reported that Amazon hasn’t matched prices for certain items on Temu.Temu and Shein’s popularity comes after earlier jolts to Amazon’s e-commerce market share in the U.S.
After rising for years, the company’s share of U.S. online shopping has stayed around 38% since 2021 and is projected to hover at that level through at least the next year,according to research firm Insider Intelligence. Newer entrants such as Temu and Shein have gained customers in the U.S. as other players such as Amazon, Target, eBayand furniture seller Wayfairare seeing their market share stagnate or decrease.
Customers have been attracted to Temu for its bargains. PHOTO:LAM YIK/BLOOMBERG NEWS
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Shein recently opened a marketplace for U.S. customers, creating a channel for independent merchants to sell products through its site. Thousands of Amazon sellers have joined the new platform, including dozens that are based in the U.S., according to research firm Marketplace Pulse. Last month, Shein struck a dealwith Forever 21 that will allow the Singapore-based online fashion retailer to sell the American fast-fashion company’s products on its site and app.
Customers have been attracted to Temu and Shein for bargains. While items may take a week or longer to arrive, the companies can sell items cheaply primarily because they don’t have large inventory stored in U.S. warehouses, eliminating costs that Amazon and U.S. sellers have. They ship many products directly from China based on consumer demand instead of having large inventory sitting in warehouses in advance.
Shein has grown into America’s largest fast-fashion seller, according to Earnest Analytics. The company regularly updates its inventory and is known to consistently be on top of fashion trends, though it has lately looked to expand its product offerings beyond fashion. Temu, meanwhile, sells a diverse assortment of products.
Unlike Amazon, Shein and Temu can’t replace a grocery store run with fast deliveries of household essentials such as toilet paper. But some Amazon customers say the firms are offering similar goods to those found on Amazon but for lower prices.
Lynn Hatch, an Amazon shopper who lives in North Texas, first heard about Temu late last year from a friend. After browsing the website, she found a painting similar to one on Amazon, but for roughly half the price.
Shein has grown into America’s largest fast-fashion seller and entered a partnership with Forever 21 in August. PHOTO:GILLES SABRIE FOR THE WALL STREET JOURNAL
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Aside from Temu’s clothing, which Hatch has tried but hasn’t liked, she has shopped on the site for kitchenware and arts and crafts.
“I find myself now looking at Temu first to see if there is a suitable option before going to Amazon,” said Hatch, 42. “Temu takes a little bit longer to arrive, but the quality so far has been about the same. Most products these days are produced in China anyway.”
Shein and Temu also can’t typically compete with Amazon for the deliveryadvantages built around its Prime subscription service, thanks to a vast logistics network Amazon spent years building.
“It is very difficult to crack Amazon,” said Neil Saunders, a retail analyst at GlobalData. “If Shein says, ‘Well, we want to offer the same delivery services as Amazon.’ I mean, good luck with that.”
Amazon must balance its brand as a reliable retailer versus potentially cheapening its image by mirroring Temu and Shein with lower-priced products, said Tadelis, the former Amazon executive. Customers may be sacrificing quality of products by shopping on Temu and Shein because products are priced so low, he said.
In online reviews and forums, some Shein and Temu customers have expressed concerns after not receiving quality products and said they restrict their purchases to items that are less likely to break in shipping, such as hair clips or laundry bags.
Shein and Temu face regulatory scrutinyin the U.S. Lawmakers and Republican attorneys general from over a dozen states have pressed the companies to address whether they source cotton from China’s Xinjiang region, where the U.S. has accused Chinese authorities of committing genocide and of using forced laborin its repression of mostly Muslim Uyghurs.
Beijing has denied the allegations. Shein has said the company doesn’t source cotton from China and doesn’t work with suppliers in Xinjiang. Temu hasn’t responded to requests for comment.
Write to Sebastian Herrera at sebastian.herrera@wsj.comand Shen Lu at shen.lu@wsj.com
Amazon’s New Challenge: Bargain Retailers Who Are Playing a Different Game - WSJ (archive.ph) |
