Cross-border e-commerce competition in European and American markets

01 Cross-border e-commerce competition in the US market

The Rise of SHEIN and TEMU and the Challenge of Amazon

Since 2023, the rapid rise of SHEIN and TEMU in the European and American markets has posed a serious challenge to Amazon, causing its number of daily users to drop by 8 million.

At the same time, TEMU has performed particularly well in the US market, adding nearly 10 million daily active users this year.

Such an increase or decrease reveals the fierce competition in the European and American cross-border e-commerce markets.

Still, Amazon has demonstrated strong market power. The recently concluded Prime Day sales event set a new record and became the best-selling big sale.

According to statistics, during this two-day promotion, Prime members around the world purchased 375 million items, an increase from 300 million in 2022; through millions of transactions, consumers have saved more than 300 million items. $2.5 billion.

Third-party data further confirmed the upsurge in consumption. American consumers spent as much as US$12.7 billion in these two days, a year-on-year increase of 6.1%, which also hit a record high. This data reveals that Amazon is still able to maintain a certain advantage in the market in the face of challenges from emerging competitors.

However, behind the bustling big promotions, more and more obvious industry trends are gradually changing the pattern of Amazon and the entire cross-border e-commerce market.

According to data from the General Administration of Customs, the scale of China's export cross-border e-commerce will reach 1.44 trillion yuan in 2021, a year-on-year increase of 24.5%.

In this wave of overseas expansion of China's cross-border e-commerce, as a leader in the global e-commerce market, Amazon has received the most direct challenge.

On the one hand, TIKTOK has entered the market strongly with its hot traffic advantage; on the other hand, TEMU has reshaped consumer perception through a low-price strategy. Recently, SHEIN has announced that it will be open to third-party sellers.

Together with AliExpress under AliExpress, these four e-commerce platforms with the theme of "going overseas with domestic products" have formed the core strength of China's cross-border e-commerce, and are nicknamed "the four little dragons going overseas" by domestic sellers.

Under the competition of these four tigers, international platforms such as Amazon and eBay began to experience a decline in the number of users.

Especially since the beginning of this year, eBay has lost nearly 2 million daily active users in the UK, from nearly 6 million at the beginning of the year to about 4.2 million now.

Not only that, but Amazon is also facing a mass exodus of sellers. According to a survey by Gartner's Capterra, as many as 99% of Amazon's small and medium-sized sellers plan to open stores on other e-commerce platforms in 2023.

Among them, the market competition between TEMU and SHEIN is well known. Now, TIKTOK has also joined the positive competition with Amazon. All these together describe a new pattern of cross-border e-commerce market, full of opportunities and challenges.

Last month, TIKTOK began to cooperate with local logistics companies in the United States to store goods and handle packaging and transportation services for sellers, instead of building its own warehouse and logistics system. According to an insider, TIKTOK has signed a relevant logistics agreement and is testing it with American sellers.

At the same time, according to a report by the US news website Semafor, insiders revealed that TIKTOK plans to launch a self-operated online shopping service in its US version of the application in the shortest month, thereby directly competing with e-commerce platforms such as Amazon.

There's no question that Amazon's carefree good old days are becoming a thing of the past as competition in the industry intensifies.

In this highly competitive market environment, how to find a new balance has become a common concern and consideration of all participants, including Chinese e-commerce giants and Amazon.

02 TEMU, SHEIN, TIKTOK

The Big Three challenge Amazon

In recent years, the competitive landscape of the cross-border e-commerce market has undergone significant changes. Different from the past competition that was mainly concentrated in the Southeast Asian market, since this year, more cross-border e-commerce giants have begun to enter the European and American markets and compete head-on with Amazon.

Among them, SHEIN, which is low-key but powerful, can be said to be the vanguard of this wave. It not only opened up the path for itself to enter the European and American markets, but also provided the possibility for subsequent competitors to replicate their success.

Observing carefully, the three giants of TEMU, SHEIN, and TIKTOK seem to be inseparable from three key strategies on the road to expansion in the European and American markets: low-price competition, supply chain optimization, and high-profile marketing.

The low-price strategy has attracted a large number of consumers who are looking for cost-effectiveness; the refined operation of the supply chain has ensured product quality and delivery speed; the high-profile marketing has successfully aroused the attention and discussion of consumers. These three strategies complement each other and jointly promote the rapid rise of these three companies in the European and American markets, and at the same time bring unprecedented challenges to Amazon.

Especially in the expansion process of TEMU, these three strategic elements have been used more and more proficiently. TEMU has never slowed down when it comes to keeping prices low, maintaining some of the lowest prices on the web.

Since TEMU burst onto the scene last September, prices on its website can be two to three times cheaper than Amazon's. For example, the socks are only $2.29, and the Lenovo headphones are $8.99.

According to the sample survey conducted by Zheshang Securities, the price of TEMU’s single product is even lower than that of SHEIN by more than 30%, and the price of some products is only half of that of Amazon. Such a pricing strategy is expected to continue to occupy consumers' perception of "low price".

Today, TEMU will continue to advance the low-price competition strategy. In early July, the platform launched promotional activities such as "10% off clothing, shoes and kitchen supplies" and "sales within $1". Recently, TEMU has also launched a series of advertisements on foreign social media, in which the price of a pair of sandals is even as low as $0.64.

Let’s look at supply chain management again, which is also the key support for TEMU to provide low-priced products. TEMU has adopted a self-operated model: TEMU is responsible for commodity pricing, marketing promotion, and contract fulfillment services, and merchants as suppliers only need to prepare goods to the warehouse, thus constructing a "supply chain-platform-overseas consumer" transaction link.

In supply chain management, the more links, the higher the cost. TEMU's strategy is to shorten the supply chain as much as possible and achieve direct supply from the source.

In short, TEMU's supply system directly connects with factories. The factory does not need to worry about anything other than supply, and TEMU is responsible for the whole process of putting on shelves, marketing, logistics and after-sales service. This model not only effectively reduces costs, but also provides a solid foundation for TEMU's low-price strategy.

Throughout the development process, TEMU has firmly grasped the pricing power. The platform has implemented a strict price review mechanism, requiring sellers to quote prices for commodities on TEMU not to be higher than the prices of similar commodities on the domestic wholesale e-commerce company 1688. If there is a violation, the platform will require the seller to re-determine the price.

As a company under Pinduoduo, TEMU does not have to worry about supply issues at all. Pinduoduo has accumulated more than 11 million suppliers in its years of operation, and has incubated more than 1,000 factory brands since 2015. Some of them are even suppliers of well-known global brands.

In addition to low prices and supply chain management, another strategic trick of TEMU is its superb marketing skills.

In the early days, SHEIN shaped the brand image in the minds of consumers around the world through the use of influencer effects and various social media marketing methods.

TIKTOK, the traffic leader of social media, is naturally familiar with marketing strategies. TEMU, who came from behind, also quickly mastered this skill.

On social media channels, TEMU has launched a "credit Giveaway" campaign on Facebook, which not only allows platform users to earn rebates, but also uses the opportunity to promote their brand. In the field of short videos, TEMU has successfully attracted the attention of a large number of young users by cooperating with Internet celebrities to launch various interactive activities such as try-on haul.

In addition, TEMU has also made full use of traditional channels. In February this year, Pinduoduo spent US$14 million to run a 60-second commercial on the Super Bowl, the top event, which impressed more than 208 million American viewers with the emerging brand TEMU.

Through these three strategic elements - low price, supply chain management and brilliant marketing, TEMU not only quickly emerged in the global market, but also successfully challenged the status of e-commerce giants such as Amazon, demonstrating its ambition and unique business wisdom.

Driven by these three strategic tricks, TEMU, TIKTOK and SHEIN have gradually emerged, not only becoming household names around the world, but also increasing the number of users and revenue growth.

As of February this year, the average daily order volume of TEMU has reached 200,000 orders, and even reached 500,000 orders at the peak; at the same time, the average daily order volume of SHEIN in the United States has also reached about 300,000 orders.

According to the data from Sensor Tower, SHEIN's global monthly active users are about half of Amazon's, and the number of TEMU is about one-fifth of Amazon's.

Another shocking survey shows that by 2023, as many as 99% of small and medium Amazon sellers plan to open stores on other e-commerce platforms for sales. Turning to Amazon, we can see that in the face of such a series of sharp competitive offensives, Amazon has also begun to respond.

In recent months, the Amazon platform has undergone several adjustments one after another, and these changes seem to be closely related to TEMU, especially in terms of low prices and subsidies.

At the end of June, Amazon’s US station issued an announcement announcing the cancellation of the small and light product program, and starting from August 29 this year, it will introduce lower FBA rates for all products priced below $10. This adjustment makes the delivery fee for products under $10 less than before, and it will not pay the holiday peak delivery fee.

This series of adjustments shows that Amazon is actively guiding sellers to sell low-priced products under $10, so as to compete with competitors such as TEMU at the same price level. These strategic changes of Amazon are obviously a positive response to the challenges of emerging e-commerce giants, implying that the competition in the global e-commerce market is intensifying.

Not long ago, many sellers found that their products were attached with a 20% discount code. Amazon’s official customer service explained that this is a discount automatically set up for sellers at Amazon’s own expense, and will not charge sellers any fees.

This subsidy measure is very similar to Pinduoduo’s 10 billion subsidy strategy.

The core purpose of Amazon’s new changes is to enhance the delivery efficiency and service quality of low-priced and light commodities through more favorable prices, and compete with platforms such as TEMU, SHEIN, and TIKTOK to compete for more users.

It must be admitted that Amazon is still the undisputed leader in the mid-to-high-end e-commerce market. The recently concluded "record-setting" prime day once again demonstrated the strength of this e-commerce giant.

However, it is also undeniable that in the low-price e-commerce market, TEMU, TIKTOK, and SHEIN have entered strongly and occupied a place in the cross-border market. With their competitive prices and flexible marketing strategies, they have gradually established themselves in the hearts of users. Although Amazon maintains a leading position in the high-end market, it has already felt strong challenges from these emerging e-commerce platforms in the low-price market.

03 The future of cross-border e-commerce

a possible protracted war

Just as Pinduoduo stimulated the trend of competition in the sinking market, the rapid expansion of companies such as TEMU and SHEIN is also promoting a wave of Internet giants' cross-border e-commerce layout.

However, after carefully examining the "three axes" strategy of companies such as TEMU, we have gradually discovered the flaws of this model: huge investment in exchange for market expansion.

A netizen who spoke on the Xueqiu Forum said: “The possibility of TEMU challenging Amazon is not great, but it does have a chance to occupy a place in certain market segments. However, I am still confused about this business model, and it is hard to imagine five What will it look like in a year, ten years from now?"

This view reflects the reality that the future of cross-border e-commerce may turn into a protracted battle. In different segments of the global market, emerging companies and existing giants will compete for a long time. In this competition, not only the use of strategy and resources is crucial, but also the sustainability and long-term planning of the business model will become the key factors that determine the outcome.

Judging from the latest competition situation, TEMU and SHEIN have indeed won the recognition of consumers and a certain market share in the low-price market segment.

However, unlike the battle of "fighting against Amazon together" imagined by the public, the competition among these domestic cross-border e-commerce giants is also full of "friction".

Pinduoduo's TEMU filed a lawsuit against SHEIN, which is a vivid portrayal of this competitive situation.

The two platforms have similar target user groups, so the price war and litigation battle between the two are essentially fighting for control of the supply chain.

Similarly, the rise of TIKTOK in the low-price market has also enabled it to compete with Ali for market share. The latest news shows that TIKTOK Shop’s revenue in Vietnam has surpassed that of Ali’s Lazada. This is further confirmed by the e-commerce market report for the first half of 2023, with TIKTOK Shop occupying the second position in the market with huge revenue and sales volume.

In addition, we cannot ignore the overseas strategic layout of the two giants Ali and JD.com.

In fiscal year 2023, Alibaba's international business has achieved significant growth, with revenue reaching 69.204 billion yuan, a year-on-year increase of 13.3%, accounting for 8% of the group's total revenue, second only to Alibaba Cloud's business segment.

While focusing on the development of the Southeast Asian market, Michael Evans, president of Ali's International Digital Business Group, announced Tmall's European expansion plan, including the establishment of local businesses and e-commerce platforms in Europe.

At the end of last year, Ali launched the e-commerce platform Miravia in Spain. According to the statistics of the third-party data agency data.ai, in March this year, the download volume of Miravia has surpassed SHEIN, ranking first among Spanish shopping apps.

These dynamics are revealing a fact: the competition situation of cross-border e-commerce is complex and changeable, not only involves the competition among multiple emerging platforms, but also involves the global strategic deployment of traditional e-commerce giants. In the deep digging of this market, the competition in the future will be more intense and full of uncertainties.

With the increasingly fierce competition among global cross-border e-commerce platforms, JD.com has begun to turn its attention to the direction of international logistics.

According to recent news reports, JD Logistics and the international express company affiliated to La Poste have reached a strategic cooperation agreement. This cooperation aims to jointly promote international supply chain logistics, with a view to achieving the fastest same-day delivery service in multiple European countries.

Europe has always been a market that JD Logistics values, and the company has built a complete and mature independent warehousing and logistics system in this region.

In general, the competition among cross-border e-commerce platforms shows a trend of both homogeneous competition and diversified development. Focusing on supply chain management, building an international logistics system, and constantly expanding new markets have gradually become the common development direction of the industry.

However, from a macro perspective, the expansion of domestic e-commerce giants in the international market is still mainly concentrated in the low-price market.

At the same time, Amazon still occupies a dominant position in the field of mid-to-high-end online shopping in European and American markets. Through the construction of warehousing and logistics in the past ten years, Amazon has ensured an excellent service experience and formed a solid barrier to competition.

In this market segment with higher value, there is still a clear gap between China's Internet giants and Amazon in terms of product positioning, market share, and logistics services.

Therefore, considering Amazon's leading position and the importance of cross-border e-commerce, it is expected that this field will fall into a protracted and possible war of attrition for some time to come.

On the surface, the siege of Amazon seems to be a competition for market share, but the deep-seated problem is how Chinese brands can gain a greater voice in the mid-to-high-end market. This battle is not only about business competition, but also about the improvement of brand image and international influence.

There's no question that Amazon's carefree good old days are becoming a thing of the past as competition in the industry intensifies.

In this highly competitive market environment, how to find a new balance has become a common concern and consideration of all participants, including Chinese e-commerce giants and Amazon.

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