The Marketplace Boom   //   June 10, 2024

Retailers are getting explicit about how they’re staying competitive with Shein & Temu

More retailers are looking to differentiate themselves from the rising crop of Chinese-backed platforms like Temu and Shein that are gobbling up market share in the U.S. as value-driven shoppers hunt for deals. 

In the past few weeks, TJ Maxx, eBay and Etsy have gone into detail during earnings and conference presentations about how they’re staying competitive against the likes of Shein and Temu. To be sure, retailers aren’t rushing to name-drop Temu or Shein. It’s analysts who are pushing the C-suite executives to say more. One way companies are doing that is by touting how they’re not like the competition. 

During its first-quarter earnings call last month, TJ Maxx’s CEO Ernie Herrman said Shein and Temu weren’t a threat to the company, in part because the customer base is too different. “We see very little issue with them taking market share from us,” said Herrman. “They’re so commodity-driven, and so not the brands that we would carry. Very much not the good, better, best type of branded mix that we would go after.” 

Similarly, Etsy’s CEO Josh Silverman told analysts, “If I had to pick the polar opposite of Etsy, it would probably be Temu. I can’t think of a brand more different than ours.” 

At a conference hosted by JPMorgan in May, eBay CEO Jamie Iannone shrugged off concerns that players like Temu and Temu were dampening the online site’s profits, despite a disappointing revenue forecast in the most recent quarter. 

“It hasn’t impacted our business to see some of the Chinese competitors,” Iannone said, citing the site’s organic traffic. “When another big paid player comes into the market, it just impacts us less.” Iannone also said the company has worked to move away from the kind of lower-priced inventory that distinguishes sites like Shein and Temu. “It has been a differentiated strategy that’s worked out well for us.”

The rising focus on Temu and Shein comes as e-commerce platforms with Chinese origins woo price-conscious American shoppers with rock-bottom prices and trendy products. Many American shoppers are tightening their belts thanks to sticky inflation, eroding profits at some of the biggest stores in the country. Last month, Macy’s, the largest department store chain in the U.S., said sales fell from the same quarter a year ago. Grocery store giant Target also reported a dip in sales, saying discretionary spending would likely be pressured in the near term.

The more Temu and Shein grow in popularity, the more industry experts say analysts will continue to demand that retailers explain their strategies. More importantly, retailers will need to – or risk going extinct in an increasingly crowded marketplace. 

“If you’re not growing sales, someone is stealing market share from you,” said Neil Saunders, managing director at GlobalData Retail. “That competitive narrative is making some retailers address this.”

While Shein and Temu seem similar — both are online shopping platforms that rely on their extensive manufacturing operations in China to mass produce ultra-cheap, trendy products at huge volumes and fast speeds — the two companies have different business models. 

At its core, Temu is a digital flea market where independent sellers hawk their goods — everything from headphones to jeans to Halloween decorations. Shein, on the other hand, produces and sells its own branded line of apparel and accessories. The fast-fashion retailer launched a marketplace in the U.S. about a year ago, bringing it closer to the likes of Temu and Amazon.  

Even as they wage legal battles with each other, Shein and Temu have rapidly gained market share. Since it was founded in 2008, Shein has surpassed fashion giants such as H&M and Zara in U.S. sales. In January, the CEO of Authentic Brands Group, one of Shein’s retail partners said the fast-fashion retailers’ sales were “a lot more” than $30 billion.

Although newer — Temu debuted in 2022 — Temu has become a hit with U.S. shoppers, as well. Temu’s parent company PDD Holdings reported revenue that rose 131% to 86.8 billion yuan (or $12 billion) in the first quarter, powered in part by Temu’s growth in the U.S. PDD’s executives have been tight-lipped about specific sales figures at Temu.

As more companies speak up, it’s a sign that companies know they can’t compete with Shein and Temu on price or speed. Instead, they’re highlighting their competitors’ shortcomings when it comes to certain retail fundamentals, such product quality and curation. 

“It’s not all about low prices,” said GlobalData’s Saunders. “There is a focus on that based on where we are in the economic cycle, and retailers are keen to dispel those myths.”

Naming names 

On its earnings call, Etsy was by far the most explicit when it came to describing its strategy to compete with Temu and Shein. Etsy’s Silverman emphasized the site’s network of 7 million artisanal sellers as its key differentiator. 

“Virtually everyone else is selling you literally the exact same item at what they hope to be a slightly cheaper price or shipped slightly faster,” said Silverman. “That is a race to the bottom that’s difficult to create a sustainable competitive advantage in, and I wish those folks the best.”

Etsy flagged its advances in technological tools that help it maintain product quality by taking down any items that violate the site’s policies, namely non-homemade items. But it’s a double-edged sword, too. As Silverman put it, “We have about a 50 basis point headwind right now, just from all of the things we’re removing.” Despite those efforts, non-homemade items have still managed to flood the site, Modern Retail previously reported. Many of those items are also listed on sites like Temu, and it’s casting a dark shadow over Etsy’s future, The Information wrote. Etsy reported that first-quarter sales fell 3.7% from a year prior to $3 billion.

On the same call, Etsy touted its so-called “Gift Mode” and “Wishlist” tools that rolled out earlier this year as its other unique selling points. 

“When you’re buying a gift for someone, you don’t want to say, ‘Where’d you buy it? Oh, I bought it on Temu’ or ‘I bought it on Walmart.’” said Silverman. “All due respect to those brands, it’s probably not how you want to present yourself.”

Meanwhile, eBay’s Iannone has said that although Chinese-backed sites like Temu and Shein aren’t a threat to its business, live shopping, which is popular on Chinese platforms like TikTok Shop, has become an increasingly valuable part of eBay’s marketplace.

“One of our sellers was doing a live commerce, who sells handbags in fashion, and she had 2,700 people on that live stream,” Iannone said. “It shows you the appeal of giving sellers a new tool that they can use to market what they’re doing on the platform.”

It’s a sign that the former online shopping trailblazer is looking to regain relevance as newer, shinier players like Shein and Temu surge in popularity. 

Whether or not a retailer shares its strategy to stay competitive as Chinese-backed marketplaces muscle their way in, the threat of such sites isn’t going away, according to eMarketer analyst Sky Canaves. 

“Home goods, apparel and clothing and accessories are Temu’s biggest categories now, so any retailer who’s very focused in those categories, especially at lower price points, should be concerned about the impact,” Canaves said. “Whether they want to admit that publicly or talk about it in earnings calls is another matter, and mostly they’ve been fairly unwilling.”