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Shein’s New Opponent Explained | BoF

A new Chinese shopping app that sells on-trend clothes at rock-bottom prices is shaking up the fast fashion war in the US.

Temu, a subsidiary of Chinese online marketplace Pinduoduo, which sells everything from distressed denim to AirPods cases, has entered the top 10 most downloaded shopping apps on Apple’s app store less than a month after launching in the US, according to analytics firm Apptopia .

It’s a story familiar to fashion insiders and consumers alike: a previously unknown retailer with close ties to Chinese clothing manufacturers is exploding into the U.S. market with seemingly limitless selection and surprisingly low prices. Shane used this formula to become the most downloaded fast fashion shopping app in the US in the first half of this year, and a host of other upstarts have found success by mimicking aspects of this business model.

Like Shein, Temu is an attractive platform that connects Chinese manufacturers with consumers around the world. Pinduoduo sells much more than clothes, and while Temu seems to be more fashion-oriented, it also offers electronics and homewares. This can give customers a reason to stick around beyond ordering an Instagram-ready look.

Temu’s rapid rise is also a sign of how Shein has changed the fast fashion market. New retailers can make a big splash without first engaging consumers with carefully planned marketing campaigns, celebrity endorsements or promotions. At the same time, success is more ephemeral: there is always another faster and cheaper seller trying to grab a piece of the market.

“Shane … has created an environment where consumers are primed for these brands,” said Nora Kleinevelinghofer, associate partner in fashion, luxury and retail at consulting firm Kearney. “There is an incredible amount of consumers willing to try.”

Pinduoduo declined to comment for this story.

To earn a permanent foothold in the US market, Temu needs to build a loyal following among cost-conscious shoppers who are under pressure from high inflation and at the same time are quick to leave the platform if their needs aren’t met. Success not guaranteed: Wish, an online platform that sells a range of goods from sellers in China to consumers in the US at unimaginable discounts, built a strong customer base only to see its user base dwindle as shoppers lost faith in its service quality . .

What are Temu and Pinduoduo?

Temu is an American app created by Pinduoduo, a digital shopping giant in China. Along with its main competitors, JD.com and Alibaba, Pinduduo sells various products at deep discounts. The company, which went public on the Nasdaq in 2018, generated nearly $5 billion in revenue in its most recent quarter, which ended in June. Pinduoduo has more than 700 million monthly active users in 2021.

Pinduoduo’s pivot to retail allows “teams” of users to buy items at lower prices than they could individually. Merchants sell their goods directly to buyers, and sellers bear the cost of shipping those goods.

Temu strives to offer a more curated selection of products by hand-picking the merchants’ products to be featured on its site and keeping those products in stock. When customers enter Temu’s site or app, they are greeted with vertical slideshows that display products grouped by promotional categories, including flash sales and items under $3.99 that visitors can click to buy. The app does not offer the “team” buying feature that Pinduoduo does.

Items from Temu are shipped by international suppliers, mostly from China, and may take a week or more to arrive.

Who are Temu’s biggest competitors?

Temu is the biggest threat to Shein’s dominance.

By leveraging Pinduoduo’s existing vendor relationships, Temu can quickly add new items to its platform. Currently, the company uploads thousands of items to the site every day. This was a key advantage for Shein, which was able to offer many more styles than fast fashion leaders such as Zara or budget online stores such as Boohoo or Asos.

Temu also has one key advantage that most of Shein’s competitors would lack: the support of her massive sire. Pinduoduo has a market cap of about $80 billion (Shein was valued at $100 billion after raising about $1 billion in April, according to media reports, though startup valuations have fallen across the board since then).

Temu’s strategy is along the lines of “if Shane can do it, so can we,” said Robin Zhu, a senior analyst at AB Bernstein, a research firm that focuses on Chinese Internet companies.

But Shein’s focus on selling clothes and accessories has allowed it to tap into social media with influencers who create interesting content, such as the ever-popular “Shein hauls,” where creators create different outfits from large packages they order from the retailer, Zhu said. .

Temu will have to create content for a wider selection of product categories it offers, which could make it more difficult for the retailer to gain similar brand recognition, he added. He has a ways to go to match Shane’s cultural influence: Temu’s Instagram account has just over 1,000 followers; Shein is approaching 26 million.

What will determine if Temu succeeds?

Temu noticed an early craving. According to Apptopia, its app was downloaded more than 400,000 times in September on Google’s Android app store, Google Play and Apple’s app store.

To become more than just another fad, it needs to give early adopters a reason to come back, Kearney’s Kleinewillinghoefer said.

It’s proving to be difficult, given that it can be hard to tell which of the countless fast-fashion retailers online has produced a gorgeous $4 dress or a $6 graphic t-shirt.

Online marketplace Wish was hugely popular in the late 2010s, with monthly active users growing 19 percent year-over-year to 107 million in 2020. But many Wish shoppers have stopped using the site, frustrated by longer-than-expected delivery times and products that didn’t live up to what sellers promised on the site. It reported 74 million active users last year. Shares have fallen since the company went public in late 2020, and are currently trading below $1 on the Nasdaq.

Because Temu chooses which products end up on its site, rather than simply connecting buyers and sellers, it is better equipped to ensure that the products on offer meet customers’ expectations, Bernstein’s Zhu said.

For its part, Temu has implemented a number of quality control measures. First, the company currently refunds customers for products that arrive later than originally promised, are damaged, or look different from their website image. Temu also prefers to work with merchants who have previous experience selling their products to customers abroad.

“It’s their responsibility to make sure the quality control is right,” Zhu said.

https://www.businessoffashion.com/articles/retail/sheins-new-rival-explained/ Shein’s New Opponent Explained | BoF

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