Technology
Monday, July 29th, 2024 1:05 pm EDT
Key Points
- Surge of Temu and Shein: Temu and Shein have gained significant traction in the U.S. e-commerce market through aggressive online marketing and offering very low-priced goods, leveraging a trade loophole called the de minimis exception. This loophole allows for duty-free entry of packages valued under $800, which has spurred concern among U.S. e-commerce leaders like Amazon about the competitive impact and potential regulatory scrutiny.
- Impact on U.S. E-Commerce: The rise of these discount platforms has intensified competition for established U.S. e-commerce companies, including Amazon, eBay, and Etsy. As Temu and Shein continue to attract attention with their low prices and extensive advertising campaigns, U.S. giants are adapting their strategies to maintain market share, including potential new discount offerings by Amazon and adjustments in marketing approaches by other platforms.
- Regulatory and Market Concerns: There is growing debate over the long-term sustainability of Temu and Shein’s business models and their reliance on the de minimis exception. U.S. and global regulators are considering whether to tighten trade regulations to address these concerns. Meanwhile, the e-commerce landscape is evolving with companies like Amazon working to enhance their competitive edge through faster delivery services and strategic pricing.
Temu and Shein, two discount shopping apps from China, have surged in popularity in the U.S. by offering extremely low prices on a range of products, from shoes to smartwatches. This rapid growth is partly attributed to a trade loophole known as the de minimis exception, which allows goods valued under $800 to enter the U.S. duty-free. This loophole has sparked concerns among U.S. e-commerce giants like Amazon, eBay, and Etsy, with Amazon’s David Zapolsky labeling it a “concerning trend” and suggesting that Chinese companies might be benefiting from lax enforcement of pricing rules. This issue will be a key focus in the upcoming tech earnings reports from major companies, including Amazon, Meta, eBay, and Etsy.
Temu, which launched in the U.S. in 2022, and Shein, which started in the U.S. in 2017, have utilized aggressive marketing strategies, including high-profile ad campaigns, to capture market share. Shein, valued at $66 billion, has heavily invested in Google and Facebook ads, while Temu’s marketing efforts include notable promotions such as a Super Bowl ad. Despite this, some analysts, like Noelle Acheson, believe these marketing strategies may not significantly impact long-term investment decisions, especially as both companies face potential regulatory challenges and competition from established U.S. retailers.
Amazon, which continues to dominate U.S. e-commerce with an anticipated 40% share of the market, has responded to this competition by emphasizing its delivery capabilities and cost-efficiency. Amazon’s CEO Andy Jassy has highlighted the challenge of lowering prices while maintaining profitability. As part of its strategy to compete, Amazon is exploring the launch of a discount store featuring low-priced, mostly unbranded items, potentially leveraging the same trade loophole as Temu and Shein. Meanwhile, other e-commerce platforms like eBay and Etsy have adopted different strategies to counter the Chinese competitors; eBay emphasizes its unique product selection, while Etsy focuses on its artisanal goods.
The rise of Temu and Shein also comes amid broader concerns about the impact of Chinese competitors on the U.S. market, with discussions about possibly tightening trade regulations to address these concerns. Despite the increasing scrutiny and competitive pressure, Amazon remains a dominant force, with ongoing efforts to adapt to the evolving e-commerce landscape and to address the challenges posed by new entrants in the market.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/29/temu-shein-soaring-popularity-could-hit-amazon-meta-ebay-earnings.html
