Since COVID-19, e-commerce businesses have undergone significant transformations. Now, more than ever, they are rethinking their operational models to withstand the fierce competition posed by Chinese retailers.

Why spend €30 on high-waist jeans from a renowned brand when you can get a similar pair for just €12, with free shipping? Need to dress up for an upcoming event? With a €10 pair of pointed heels and a €16 off-the-shoulder black dress, you can hit a chic cocktail look without breaking the bank.

People turn to the internet for low-priced goods for various reasons. Amidst the ongoing global cost-of-living crisis, discovering platforms that still offer cheap alternatives can feel like a revelation for those dreaming of “shopping like a billionaire,” even in these challenging times.

But what do we really know about these giants that are spending billions annually to expand their customer bases so aggressively? Should established players like Amazon and Walmart see them as potential threats?

Temu and SHEIN’s business models mirror other Chinese shopping platforms, relying on similar tactics to remain competitive: low prices, mindbogglingly fat discounts, fusing shopping and entertainment, and extensive advertising. Moreover, their interfaces are highly engaging.

Temu’s platform, for instance, offers features like gamification, group buying and social referrals, all of which encourage users to spend more time on the site. Its fun interface seems to push people into purchasing items they never dreamed they need.

According to a GWS survey conducted over the last year with Android users, the average time spent on Temu (22 min) per day was double that of Amazon (11 min).

Temu launched in the US in 2022, starting with a Gross Merchandise Value (GMV) of $290 million. Its marketplace activity increased year-to-year to reach USD$ 14 billion in 2023. According to ECDB forecasts, Temu’s GMV is expected to continue growing, potentially hitting $41 billion by 2025.

However, keeping a low-cost strategy is often linked to the use of cheap, environmentally harmful materials, copyright infringement, and questionable labor practices. As long as Temu and SHEIN keep the origins of their products undisclosed, we can only speculate about the true cost of our “affordable” shopping.

In February 2024, the Toy Industries of Europe purchased 19 toys from Temu and found that none of them complied with the EU safety standards. In fact, only one toy posed no risk to children’s safety.

If that isn’t alarming enough, consider this: Temu and SHEIN have already claimed significant market share in the countries where they operate. In the US alone, Temu has 82 million active users. Despite only launching in Europe in 2023, Temu is already one of the leading shopping platforms.

The Chinese-linked online retail giants have caught the attention of governments worldwide, particularly for dumping the market prices by circumventing customs duties. Under current regulations, goods valued below 150 EUR in the EU and $800 in the US are exempt from duties and taxes.

However, both the European Commission and the Biden administration have proposed measures aimed at closing this loophole, which would prevent Chinese online retailers from benefiting from these customs exemptions.

Sources: ECDB, Tech Report, The Guardian, manager-magazin, Forbes, SCAYLE, CNBC, Euronews

Image credits: LRT, Pexels