Low-priced global domination! Faced with Temu and Shein, Amazon also smells danger.

Facts have proven that no matter where it goes, a subsidy of billions of dollars works well.

Shein and Temu, which have been in the United States for a long time, are currently in a fierce competition and are equally popular among American consumers. Even e-commerce giant Amazon has felt the crisis. Just like in China, Pinduoduo's low-price strategy has also threatened the positions of Alibaba and JD.com.

Under inflation, Americans also love cheap goods.

Shein and Temu use ultra-low-price strategies to attract American consumers, but in different ways.

Compared to Shein, Temu offers a wider range of products, including not only clothing but also home goods, automotive parts, electronics, and musical instruments. Shein mainly sells fashionable women's clothing.

Both companies target Generation Z consumers.

Although Temu only entered the US market in September 2022, according to Similarweb data, its web traffic and purchase volume in the US have already surpassed Shein.

According to estimates by UBS analysts, Temu spends nearly $500 million on advertising each fiscal quarter, which also explains the reason for its traffic growth.

At the same time, for American consumers who are troubled by inflation, they are increasingly willing to try Temu and Shein.

According to estimates by analytics company Comscore, since September 2022, Temu's web traffic in the US has grown tenfold to about 70.5 million visits. Shein's monthly unique visitors in the US have also doubled to about 41 million, many of whom come from Amazon.

Data collected by analytics company GWS shows that in recent months, the number of Amazon users has "significantly declined." From April to July this year, the daily number of Amazon users in the US dropped from 54 million to 46 million.

According to research firm Insider Intelligence, Amazon's market share in the US e-commerce market is about 38% and has remained at this level for many years.

The stagnation of the giants is an opportunity for new players.

It is still difficult to surpass Amazon at the moment.

Steve Tadelis, former Amazon executive and economics professor at the University of California, Berkeley, believes that unlike Amazon, Temu and Shein do not pursue two-day delivery or better customer service. They seem to focus on the low-end market, namely consumers who are willing to wait for cheap goods.

Temu and Shein have significant differences from Amazon. The biggest difference is that they do not need to stock up like Amazon. Because all the goods are shipped from China and it takes at least a week or longer to reach American consumers. And Amazon, rooted in the United States, has spent a lot of money building a logistics and warehousing system throughout the United States to ensure delivery efficiency. It is almost impossible for budget e-commerce platforms like Temu and Shein to imitate, and they cannot imitate because their only weapon is low prices.

But low prices already have enough killing power. According to media reports, executives within Amazon have been nervously studying strategies to counter Temu and Shein. Currently, the price comparison tool provided on the Amazon website does not include these two budget e-commerce platforms, indicating that the giant has some tricks up its sleeve.

However, despite its rapid growth, Temu's conversion rate (the ratio of users who actually make purchases after visiting the online store) is still lower than Amazon's.

Temu and Shein still have a long way to go to surpass Amazon in the e-commerce field. According to Similarweb data, 93% of users who visit Temu also use Amazon, while 8% of Amazon users also use Temu. Amazon's conversion rate is close to 12%, compared to only about 5% for Shein and Temu.

JD.com and Alibaba Seek Change and Shift Focus to Pursue Low Prices

Even before Amazon, Chinese e-commerce giants Alibaba and JD.com had already felt the impact of billion-dollar subsidies.

According to media estimates, the combined GMV (Gross Merchandise Volume) of Pinduoduo and Douyin e-commerce in 2022 has exceeded 50% of Alibaba's domestic e-commerce business. In terms of revenue, in the first three months of 2023, Pinduoduo's revenue has reached 62% of Alibaba's domestic e-commerce business revenue.

After Jack Ma's return in the first half of the year, he convened a meeting with top executives of Taotian Group, and one of the core instructions at the meeting was to "return to Taobao," which means providing greater support to small and medium-sized merchants.

Many employees speculate that Taobao's traffic mechanism may also change, shifting back from the previous tilt towards Tmall to a tilt towards Taobao.

Meanwhile, JD.com founder Liu Qiangdong openly stated that low prices are JD.com's "killer weapon."

Liu Qiangdong believes that JD.com needs to understand the demands of grassroots consumers, who still pursue the ultimate cost-effectiveness in their consumption. JD.com strives to lower prices and improve services through the efficiency improvement of the supply chain.

In March, JD.com directly targeted Pinduoduo and launched its own billion-dollar subsidy plan.