Over the past year, Shane and Temu, two ultra-fast fashion startups known for their $5 dresses and flouting of Chinese traditions, have been locked in an internal legal battle in the United States. Of the two, Singapore-based Shein is better known, but he has thrown down his frilly gauntlets and invaded U.S. territory, stealing trademarks and exploiting social media influencers. He accused the company of slandering the company. Temu, based in Boston but owned by Chinese e-commerce giant PDD, has fought back. The group accused Shein of monopolistic practices, including using its market power to force a network of more than 8,000 suppliers in China to refuse to do business with Temu. Then, on October 27, Reuters reported that both sides had ceased hostilities.
To Western observers, these events may have once seemed like an entertaining sideshow. But they show that China’s e-commerce drama is now coming to America. The fate of Mr. Shein and Mr. Tem depends, not to mention the physical, fate of some of America’s largest technology companies, including social media empire Meta, Google owner Alphabet, and American e-commerce giant Amazon. are intricately connected. Retail stores such as Walmart and dollar stores are ubiquitous in America’s strip malls. No one says this out loud, but despite all the talk of US-China decoupling, China-aligned e-commerce platforms are seeing the same shock and awe response that video app TikTok once did. They are forcibly infiltrating American business with tactics that make them feel like they are. Besiege social media. For digital advertisers, this is also a boon. For discount retailers, that’s a curse. For everyone, it could change the warp and weft of cross-border commerce.
Let’s start with advertising. In its third-quarter results released in late October, Meta revealed that Chinese advertisers, including e-commerce and gaming companies, were having a “significant” impact on revenue growth. Although Meta did not name the companies or quantify their influence, the super detective did the research. One is Brian Wieser, a former advertising man turned analyst who, five years ago, started looking at company data to determine the differences in the geographic locations of the companies that sell ads on Facebook’s platform and the companies that sell them. I first noticed the importance of Chinese advertisers on Facebook after discovering . Using similar location data, research firm Moffett-Nathanson estimates that Shein and Teme accounted for nearly a third of Meta’s revenue growth in the nine months to September. . In the third quarter, Temu became as big a competitor as Walmart in the Google Shopping ad auction, according to marketing firm Tinuiti. A year ago, this startup was nowhere to be found.
Next is electronic commerce. Amazon’s platform has long hosted sellers of cheap goods from China. They rarely advertise their provenance. Nevertheless, Huozas Kajiukenas, founder of e-commerce research firm Marketplace Pulse, has thoroughly researched physical addresses and found that many of the sellers selling on Amazon are based in China. It was estimated that there was. As the popularity of Shein and Temu skyrockets, some of these vendors may switch to their own platforms. For now, Kagiukenas doesn’t expect the price-cutting duo to pose a significant challenge to Amazon’s business. Amazon is much larger, sells a wider range of products, and has much faster shipping speeds than Amazon. But if China’s e-commerce is any guide, startups will not be daunted by the size of their rivals and will not rest until they steal market share from their U.S. competitors. TikTok is also becoming a force to be reckoned with in online shopping, using its live jamboree to attract shoppers, a common practice in China. Moffett Nathanson calls this triple-barreled onslaught “the most disruptive threat” to e-commerce in years.
If the Asian trio looms so large, why are American tech giants so silent about them? For those enjoying the windfall, part of the reason may be the question of whether Shane and Tim’s marketing efforts will last. For mass retailers with razor-thin profit margins, spending billions of dollars on digital advertising is a long-term recipe for disaster. Meta and Alphabet may not want to draw attention to the potential volatility of their revenue streams.
Political headwinds may be growing in the United States as well. China skeptics in Congress are equally excited about Shein and Tem’s TikTok, with the fast-fashion duo exploiting an exception in U.S. law that allows packages under $800 to enter duty-free and with minimal inspection. He is accused of doing so. The companies are estimated to be responsible for 30% of the shipments that enter the U.S. under this rule. Closing the loophole could significantly reduce the discounts offered by the two platforms in the United States. Additionally, their algorithms utilize vast amounts of data about shoppers. This leaves it open to the same attacks as TikTok.
One risk retailers are clearly avoiding is a crackdown in China. By locating their headquarters overseas, they are unlikely to suffer the fate of Chinese tech companies that have succeeded in defying President Xi Jinping’s policies in recent years. Their success may actually be helping Chinese suppliers offset the domestic economic downturn, said Skye Canaves of data collection firm Insider Intelligence. She thinks it will enhance their standing within the government.
the cat came out of the bag
It’s unclear why Shein and Temu settled their legal complaints, but it would certainly be a relief to those in power in Beijing. After all, a common front is better for a country’s image abroad than a catfight on the digital catwalk. It remains to be seen whether the ceasefire means both countries will spend less to outdo each other. But American tech giants are in a new world order. They remain largely excluded from China. China, by proxy, has full control over their homelands. This new competition is sure to frustrate big tech companies. For the customer, it’s a nicely wrapped gift.
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