Here’s a fun, or perhaps startling, fact: of the top seven marketplaces around the world, six are Chinese*. That statistic should get the attention of marketers and retailers everywhere. The competition isn’t hiding, they’re in plain sight. And we consumers are voting with our wallets!
But there is more. This holiday season, Salesforce predicts that purchases on Temu, Shein, AliExpress and TikTok could be as high as one in five (21%), or about $160 billion in global ecommerce revenue outside of China. No wonder the “Chinese marketplace challenge” is one of my top trends for the holidays.
These marketplaces are serving up what consumers want right now: lower prices on a wide range of goods, with potential trade-offs in quality and slower lead times for delivery. Note, on delivery, you must order now if this is where you are turning for your holiday shopping and you want your presents under the tree on December 24th.
No longer is the power of your brand sufficient in today’s climate – two-thirds of shoppers worldwide point to price as the deciding factor in where they choose to shop, with less than one-third citing quality of goods as the top reason. Same goes for values-based concerns like sustainability and what’s good for the environment. What’s best for the pocketbook is winning out.
The signals for the rise in Chinese shopping apps have been there for some time. In the US, Shein’s market share in fast fashion increased 2x in the two years to March 2022. Temu declared its intent to dominate the US market with $21 million in Super Bowl ads earlier this year, and in the first half of 2024 it was the #1 downloaded app on both the iOS App Store and Google Play Store. Whereas TikTok Shop, which only launched in the US in September last year, has been a huge success – 33% of Americans reportedly have already bought something on the platform.
This is not a case of China dumping cheap goods into Western markets. The model is to use technology to connect increasingly sophisticated Chinese factories directly to consumers – streamlining the supply chain, and often (particularly in the case of Shein) producing small batches on-demand. (Although I will say my own failed experiment of buying cheap bookcases has left my storage space with a heap of toppled over books from a caved in structure not sturdy enough for even paperbacks!)
When you pair process with promotion – using influencers and social media extensively – you have a formula that’s hard to beat. It is evident that much of the playbook is now being copied by Western retail.
However, I believe there are two more secrets to their success. Firstly, the Chinese marketplaces are made for mobile, in a way that we in the West are still figuring out. The VML Future Shopper** survey found that, globally, purchasing on mobile devices rose 4% to 36% in 2024, but at the same time 40% of people said they find shopping on mobile difficult. Secondly, the likes of Temu and TikTok gamify buying – they make shopping fun.
To buy on a Chinese marketplace app is to experience a world of lurid colors, flashing lights, spinning wheels, live spruikers and deals, deals, deals. Try it, I did, and not only were the prices irresistible, but Temu kept trying to tempt me with additional credits to buy again: “Please accept discount balance back”, went the message, as they hurled offers at me.
How do you fight these marketplace monoliths? If you are Amazon, you are building a Temu killer in a hurry. Amazon is getting ready to launch a low-cost storefront with items shipped directly to customers from Guandong, China.
For the rest of us, AI to AI combat may be part of the answer. Use technology to develop a pricing and promotional strategy that tracks and is responsive to the Chinese marketplace apps. And if you have a loyalty program, leverage it to target – and convert – your best customers. Gamifying where you can and experimenting your way to innovation is a must.
My colleague, Tyler Murray, Chief Commerce & Client Officer in the US predicted last year that “TikTok Shop would be the new battleground for brands for holiday shopping.” This year there are at least “four horsemen of the apocalypse” – Temu, Shein and AliExpress as well as TikTok. Make sure you are ready to do battle.
*Source: VTex presentation, New York, October 2024
**Disclaimer: I work for VML in the capacity of Chief Commerce Officer globally, and CEO of the New York office