Temu and Shein receive investment? E-commerce battle, who will win this war?

According to reports, Facebook is pushing forward its investment in Temu and the two parties are communicating on equity and other matters.

It seems strange everywhere: Temu is clearly using Facebook to advertise, so how can the second party invest in the first party? But if you think about it carefully, it does make sense:

Temu, which just went public last year, has been spending a lot of money to seize the market, spending 500 million dollars on advertising every month. The highest amount is on Facebook, with a daily advertising volume of up to 10 million dollars.

In recent years, Facebook's advertising revenue has fallen sharply due to the IOS privacy protection policy. Temu's advertising investment just makes up for this loss. If Temu's orders fluctuate, it may even affect Amazon's market value. Amazon and Temu prosper together and suffer together, so it is natural for Amazon to pay attention to and invest in Temu's development.

Coincidentally, this symbiotic relationship is not unique in the cross-border circle. Recently, Microsoft has also begun to invest in Shein , and Shein has migrated its central site and US site from Amazon AWS cloud to Microsoft cloud, and is no longer controlled by Amazon.

It can be seen that the alliance between domestic e-commerce giants and American technology giants has become a new development trend. Technology is power, which is fully reflected in the cross-border circle: money means power.

As the cross-border e-commerce market becomes more and more complex and chaotic, and as various platforms mature, frictions and conflicts continue.

First of all, there is Amazon, which has been a leader in foreign markets for many years, and new Chinese platforms such as AliExpress, Shein, Temu, and TokTik. In 2023, each company will continue to adjust its strategy to seize the track that is beneficial to itself.

Especially Shein and Temu, under the attack of the two, the number of daily users of Amazon app has decreased by 8 million since 2023. But in fact, the two did not take advantage of the opportunity to join forces to deal with Amazon, but fought each other first.

On July 14, Temu accused Shein of using its market distribution power to force clothing manufacturers to sign exclusive agreements with it and prevent them from cooperating with Temu to monopolize the market.

But long before that, Shein had already raised his fist against Temu, accusing him of secretly instigating internet celebrities to attack him on social networks.

The two companies are fighting overtly and covertly, trying to push each other down instead of pulling themselves up. They both came from China, and they share the same roots, so why are they so eager to fight each other? To talk about the fuse, we have to start with the operating models of the two companies.

Temu: Buying customers with money

Temu started from scratch by relying on internal competition and burning money, and used "low-price market grabbing and heavy investment" to grab market share. The main focus is subsidies and cheapness. Imagine that socks that sell for ten dollars elsewhere are sold for five dollars for three pairs at Temu. Such prices are bound to quickly capture the low-end and mid-range consumer market. The bottom-price sales model is not suitable for ordinary merchants, who usually sell directly from the factory and make profits by selling large quantities of goods in the form of small profits but quick turnover.

Shein: Small order quick return model

Shein has long been called an "invisible unicorn". As one of the earliest Chinese platforms to go overseas and develop successfully, its core competitiveness lies in its sales model and platform model.

"Shein is not only a platform, but also a chain leader," said Li Mingtao, chief e-commerce expert at the China International Electronic Commerce Center. "Shein's core competitiveness is specifically the front-end consumer insight and the ability to judge consumer trends; the other is the fast industrial chain model of small orders and fast returns."

Small orders and fast returns means reducing time and material costs, producing different styles in small batches, and testing the hot-selling return orders. According to data from Zhongtai Securities, Shein can launch 4-5 new SKUs a week, and the hot-selling rate can reach 50%.

Moreover, Shein has its own stable supply chain, which is deeply connected with the clothing industry in Panyu, Guangdong, with hundreds of core suppliers and more than a thousand ordinary suppliers. Therefore, the price can be kept to the lowest.

Competing on the same stage

Compared to Amazon, which has the widest product and customer categories, Temu and Shein have the same customer base, and there are many frictions between the two in the low-price market and product marketing. For example, Shein's main clothing category is also one of Temu's most important sales categories. The supply chains of the two parties also overlap a lot. It is not surprising that the two companies can fight.